Post-holiday madness as OECD and monetary data points to eurozone slump

Stocks rallied across the world on Monday with some good US holiday spending over the weekend taken to heart rather than the OECD report claiming that the eurozone and UK are already dipping back into recession and some appalling monetary data.

The Daily Telegraph today points to plunging M1 money supply: down 20.7 per cent in Greece, 16.3 per cent in Portugal, 11.8 per cent in Ireland, 8.1 per cent in Spain and 6.7 per cent in Italy. This is higher than in 2008 and portends a grim monetary squeeze in the eurozone which the OECD says is already back in recession.

Eurozone recession

The data is a reminder of how the eurozone economy is sinking and shrinking while the leaders sound off about the need for action and do nothing coherent about it. The triple-A ratings of France, Britain and Austria are clearly in jeopardy as the regional banking system implodes with a default by Greece still the obvious trigger.

At the same time stock market investors tired of the long fall in share prices yesterday and seized on some quickly rubbished news that the IMF was about to bailout Italy to drive prices higher. There was also the surge in US shopping last weekend after the Thanksgiving holiday.

However, this particular retail indicator could well be as misleading as the IMF/Italy story. Shoppers taking advantage of bargains last weekend my have brought forward purchases to get low prices, a logical thing to do in bad times. The true picture will emerge from US retail sales next month.

Americans would love to believe that the long eurozone disaster could be safely forgotten for the US presidential election year ahead. However, a nasty climax within a month or two is still a far more likely proposition with an aftermath that will overshadow the rest of the year.

Facebook IPO?

Could Facebook get its rumored $10 billion IPO away before the end of 2011 in a pre-Christmas rally? If so that would likely mark another short-term market top but then the market has to get there first.

Facebook has delayed its IPO so long that it seems more of a candidate for the one that missed the boat. Even Fitch just cut its ratings outlook for the US to negative so Facebook ought to get a move on if it wants to cash in on this highly dubious stock market rally.
Posted on 29 November 2011 Categories: Banking & Finance, Global Economics, US Stocks