Euro Area Slightly Less Firmly Lodged in Thomas Crapper's Invention, China Has New Broom Bounce

It is that time of the month when Markit and its assorted collaborators grace us with PMI updates. As has been the case for most of this year, the euro area remains a litany of woes, and in the so-called 'core' it is once again France that   seems to have performed the worst, as new orders have gone over the cliff.

By contrast, Germany at least boasted fairly robust services data, which follow on the heels of a better than expected ZEW survey. It must be kept in mind here that Germany is one of those places in the world where interest rates have become near extinct, due to the combination of the ECB lowering its administered rates as close to zero as it dared and 'safe haven' flows doing in the yields on German government debt (which, as it were is slightly bizarre considering the debt mountain under which the country groans and its dire demographic outlook; but then again, Germany no doubt has its qualities as well).

When the price of capital is at the pretend level of 'near zero' due to numerous central bank interventions, then economic activity becomes automatically suspect. Entrepreneurs are robbed of the possibility to engage in proper economic calculation; the entire system of prices is revolutionized and disrupted. It is no longer possible to tell which investments truly make sense. In Germany, we see incipient signs of a real estate bubble forming, as for instance the so-called 'Plattenbauten' of the communist era in the country's East have become 'hot items' among investors, seeing their prices rise sharply. As of yet, there is obviously still a lot of caution among businessmen overall. The crisis in the rest of the euro area keeps people on their toes, muting the response to the incentive emanating from artificially lowered rates. However, this is merely a concrete historical circumstance of the moment; it does not alter what was said above regarding the effects of the ECB's policies on the economy, although it may affect leads and lags.

In any event, the better performance seen in Germany's PMI has affected the euro area data as a whole (it will be of little consolation to people in the periphery).

According to Markit's chief economist:

“The eurozone downturn showed further signs of  easing in December, adding to hopes that the  outlook for next year is brightening. It looks like the  downturn reached its fiercest back in October, since  when the PMI has turned up steadily by no means spectacularly. 

“The survey is still consistent with euro area GDP  falling for the third successive quarter and, as the  official data lag the PMI, the downturn is likely to  have steepened compared with the 0.1% decline  seen in the third quarter. However, a return to  growth is looking like an increasing possibility in the  first half of next year, barring any surprises, if the  recent improvements in the survey data can be  sustained.  

“The turnaround is being led by Germany, for which  the PMI has already returned to positive territory.  However, the rates of decline in France and the rest  of the region remain worryingly severe.”

 

Here are the the links to the reports (all in pdf format):

the euro area flash PMI, Germany's flash PMI and to France's flash PMI

 

China Expands Slightly

he HSBC China flash manufacturing PMI came in at a slightly expansionary 50.9, which is actually a 14 month high. It is difficult to tell from afar to what extent various measures by the central government have influenced the data, but given the recent leadership handover, there is at least some reason to suspect that a few steps were taken to boost activity.

We are mainly interested in the possibility of the stock market (inscrutable as it is) to produce a bounce worth playing. We have previously pointed to the growing gap between the FXI ETF and the $SSEC index in Shanghai, which essentially reflects two things: the growing gap between H and A shares (foreign and domestically traded Chinese shares) and the stronger yuan.

It is however a good bet that such gap will close over time; similarly, the growing performance gap between the Hong Kong and Shanghai markets is likely to close.

 


 

H-shares versus A-shares

Shanghai vs. Hong Kong – a growing gap – via Sovereign Society – click for better resolution.

 


 

After making a marginal new low in early December, the Shanghai stock market has actually taken off like a scalded cat lately, finally providing a bit of vindication for our slightly early technical call (although FXI actually did rally well ahead of it, so we felt slightly less foolish in November than we might have otherwise).

How far will this rally go? As always,we have no idea, but we note that the market has finally broken through resistance. The next significant resistance level is provided by the April low at 2350 – but that is only 100 points away, a distance the market just covered in a single trading day.

 


 

SSEC

Shanghai takes off – via BigCharts – click for better resolution.

 


 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold Price Skyrockets in India after Currency Ban – Part III
      When Money Dies In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.   Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...
  • Gold Price Skyrockets in India after Currency Ban – Part IV
      A Market Gripped by Fear The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state. The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.   Indian jewelry...
  • A Note on Gold and India – What is Driving the Gold Price?
      Hidden Motives It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.   Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious! Photo via thenewsminute.com   In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...
  • Gold Price Skyrockets in India after Currency Ban – Part V
      A Brief Recap India's Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes will no longer be legal tender. Linked are Part-I, Part-II, Part-III, and Part-IV, which provide updates on the rapidly encroaching police state Expect a continuation of new social engineering notifications, each sabotaging wealth-creation, confiscating people’s wealth, and tyrannizing those who refuse to be a part of the herd, in the process destroying the very backbone of the...
  • Attaining Self-Destruct Velocity
      Bad Monday Some Monday mornings are better than others.  Others are worse than some.  For one Amazon employee, this past Monday morning was particularly bad. No doubt, the poor fellow would have been better off he’d called in sick to work.  Such a simple decision would have saved him from extreme agony.  But, unfortunately, he showed up at Amazon’s Seattle headquarters and put on a public and painful display of madness.   Good-bye cruel world! On this our planet,...
  • India's Currency Debacle – An Interview with Jayant Bhandari
      A Major Crisis Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).   Banned 500 rupee banknotes   The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...
  • Will the Swamp Swallow Trump?
      Permanently Skewed TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.   Lieutenants in Trump's army: Bannon, Flynn & Sessions Photo credit: Drew Angerer / AFP   Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...
  • All Aboard! Trump’s Express Train to the Future
      Free Money! BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.   Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...
  • There Are Two Types of Credit — One of Them Leads to Booms and Busts
      Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.   What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
  • Gold Bull Market Remains Intact – Long Term Fundamentals Outweigh Short Term Market Gyrations
      A Strong First Half of the Year, Followed by Another Retreat In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.   Initially, gold rallied sharply...
  • Too Early for “Inflation Bets”?
      The Trump Trade After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”   The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc.  We have...
  • Putting an End to the Regulatory Industry
      Gross Regulatory Overburden Corporate life in America these days is fraught with tedium.  First the MBAs imposed their silly six sigma processes and reduced workers to mere widgets. Then the regulators went through and squashed out any fun that remained. Gone are the days when shrewd eccentrics could get rich using techno-babble to hawk the Turbo Encabulator.  Alas, there are rules and regulations stymieing all creativity.  In fact, as a matter of law, such restrictions are shoved...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com