Hold on to your hats!
Published: Monday, 4 Jun 2012 | 6:18 AM ETThe Tokyo market slumped to a 28-year low on Monday as Asian shares dived on fears of a nightmare scenario of euro-zone breakup, U.S. economic relapse and a sharp slowdown in China.Investors hedged against global financial and economic crisis, heading for havens such as the benchmark 10-year Japanese government bond whose yield fell below 0.80 percent to its lowest since July 2003. Ten-year JGB futures prices jumped to a 19-month high.
The FTSE CNBC Asia 100 Index [.FTFCNBCA 5546.94
-111.29 (-1.97%)], which measures markets across Asia, shed 2.1 percent.
Japan’s shares fell sharply, with the broader Topix index hitting a 28-year low, as investors rushed to sell riskier assets on disappointing U.S. jobs data, deepening debt woes for the euro zone and slowing Chinese growth.
The more tech-heavy Nikkei index also slid and has now dropped 19 percent from a one-year high marked on March 27, flirting with a fall into bear market territory, often defined as a slide of 20 percent within two months.
The broader Topix index lost as much as 2.4 percent to 692.18, a level not seen since late 1983. Last week, it fell for a ninth straight week, marking its longest such run since 1975.
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Deflation:
The window of opportunity offered by US recovery is slamming shut again. America’s dire jobs data for May – and the downward revision for April – confirm the fears of cycle specialists that the US economy has slipped below stall speed. America risks tanking back into recession as the “fiscal cliff” approaches late this year, unless the Fed comes to the rescue again soon.
Brazil wilted in the first quarter. India grew at the slowest pace in nine years. China’s HSBC manufacturing index fell further into contraction in May, with new orders dropping sharply and inventories rising.
We face the grim possibility that all key engines of the global system will sputter together, this time with interest rates already near zero in the West and average public debt in the OECD club already at a record 106pc of GDP.
“The world’s largest emerging economies are no longer in a position to carry the global economy through tough times, as they did during the ‘recovery’ years of 2009-2011,” said China expert Andy Xie.
The warnings from the bond markets could hardly be clearer. German 10-year Bund yields closed at 1.17pc. The two-year notes turned negative. British Gilts closed at 1.53pc, the lowest in 300 years. US Treasuries fell to 1.45pc, lower than at any time during the Great Depression.
The debt markets are pricing in for a global deflationary bust. Europe will have to restore shattered trust in the worst possible circumstances.
And
The weakest U.S. hiring in 12 months erased the Dow Jones Industrial Average’s advance for 2012 and pushed valuations in the Standard & Poor’s 500 Index 19 percent below last year’s level.
The increase in the American jobless rate to 8.2 percent in May compounded signs that the economic recovery is stalling and sent the benchmark gauge for U.S. equities down 2.5 percent to 1,278.04 on June 1, almost 37 points below its level a year earlier. The S&P 500 is trading at 12.9 times profits in the last 12 months, compared with 15.9 times in February 2011, data compiled by Bloomberg show.
June 4 (Bloomberg) — Uwe Parpart, chief strategist and head of research at Reorient Financial Markets Ltd., talks about the outlook for the U.S. economy, Europe’s debt crisis and its implications for global markets. He speaks with Rishaad Salamat, Susan Li, Zeb Eckert and David Ingles on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)For bears, the decline in valuations shows the weakest recovery from any recession in seven decades has exhausted buyers and signals investors expect the economy to slow further. Bulls say buying when payroll gains slow has made money in the past and that record earnings will support share prices as the Federal Reserve holds rates near zero.
But, fear not. If America can get its act together, cut taxes and regulations and let us work we can be back in good times. This collapse can be cathartic IF Romney is the turn around artist that he has been proclaimed to be and IF he gets elected (I believe he will). See, CEO’s all have large egos, and that is a good thing because you need that kind of mind set to take the risks. He has all the tools in place, there is pent up capital everywhere just waiting to move. Cut the taxes and regulations and we will be back.
morning CW hope you had a nice weekend.
A caution: Yes, our jobs picture can get better if Romney gets in, kills Obamacare, etc. BUT if the euro-zone collapses -- and I think there’s a good possibilty it will -- our export markets are going to get leveled. We’re seeing it in our dairy exports now.
off to work……..
@ eaglesoars:
Not to mention that if the Eurozone collapses, here comes QE3. Bastards!
Certainly not all, but much of economics is based on confidence and Romney’s election in and of itself could partially restore that confidence. We’ve had presidents that were philosophical capitalists but I can’t think of one who was a capitalist by profession. He’s not a conservative ideologue, but he is a capitalist ideologue. Devine providence has always delivered us the right man at the right time and I pray His hand is at work now.
I don’t see the failure of the Eurozone to be that great of a calamity as the doomsayers fear. Sure, some of our (both Canada and USA) export markets will dry up, but there will also be some tremendous investment opportunities to be had, cherry-picking the good stuff slung off as the Euro spins up to self-destruct RPM.
And Europe may become a cheap place to take a vacation again.
People will always need oil. My work opportunities may become less frequent as the price slides, but I doubt they will go to zero.
This is not good…
This is the week Europe stopped pretending. Euro countries are readying for currency controls and other means of coping with a CRISIS.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9309669/The-week-that-Europe-stopped-pretending.html
Soros warns Euro will disintegrate in 3 months. Soros is a disinformation specialist, however if this actually happens he will just shrug his shoulders and say “I warned you”.
http://www.cnbc.com/id/47642499
Emergency, so let’s have a meeting!
http://www.reuters.com/article/2012/06/04/us-eurozone-idUSBRE8530RL20120604
@ yenta-fada:
The first thing to do when you r country (is the EU a country?) has a currency crisis is stop pretending everything is fine…
(The EU is, technically, fucked. I don’tsee how they pull out of this unless Germany is willing to be pilliaged every three to five years to bail out the PIIGS)
Iron Fist wrote:
Merkel is holding firm. Soros was quoted on Bloomberg whining about that fact. Truly, one country cannot hold up against this tsunami of debt.
@ Iron Fist:
EU is an ECONOMIC block run by unelected technocrats. aka hot mess.
@ yenta-fada:
No, sooner or later the Germans will get tired of it. Maybe they’ll repossess the Mediterranean coast? Wouldn’t that be fun to watch…
Iron Fist wrote:
Sadly, all Western nations are pretty much joined at the hip vis a vis the Central Banking system. imo of course. CONGRATS on your new job.
Iron Fist wrote:
Like they did last time using the Waffen SS? Actually Germany looted the 2012 equivalent of around 600 Billion Euros and facilitated the starvation of 300,000 Greeks around Athens. Perhaps the Greeks could call it ‘dibbs’ and say we’re even now and the slate is clean, so forget about expecting to bet the debt repaid.
Well it ‘could’ work! LOL
@ yenta-fada:
Thanks so much! I am very excited. This one looks like it will have lots of oppertunity for me to grow professionally. Of course, when the economy collapses, I’ll be as broke as everyone else