Mint – Bill Blain’s Morning Porridge January 31 2013
Sometimes you have to laugh. We’ve been generally bullish on the US economy for last few months, and had absolutely nothing positive to say about European economic prospects (except for Germany).
Yet.. yesterday’s numbers suggested the US in decline and surprisingly improved European sentiment pointing towards Yoorp recovery. Nonsense of course. US is going to recover, and the only thing that’s changed about Europe in the past year is that markets are now confident the ECB will back their bond purchases. Economically still pants and austerity a bitter pill.
But yesterday does show this market can still be surprised by downside shocks - the difference from a year ago is… it’s no longer as vulnerable to them. When US Q4 GDP fell by an unexpected 0.1%, sentiment rallied pretty quickly once the market realised the combination of lower defence spending, declining inventories, and maybe a bit of Hurricane Sandy, underlay the number.