IMF: European Economies To Contract Sharply This Year

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The IMF released it Regional Economic Outlook for Europe on May 12th. Some of the key takeaways from this release are:

IMF Economy Projections

Source: IMF

  • Europe’s current deep recession there is a risk that it could worsen further
  • Western Europe is projected to see their economies shrink by 4.0% in 2009
  • Output in Emerging European countries would fall by 4.9% in 2009
  • Modest decline for Western Europe and modest recovery for Emerging Europe in 2010
  • Demand for goods fell sharply in 4Q,2008 leading to 26% annual rate decline in trade
  • Domestic real estate crash has severely affected the Baltic economies, Ireland, Spain, and the United Kingdom
  • Large public debt and current account deficits have been the cause of collapse for some countries such as Hungary and Greece
  • IMF suggests more strong actions in the financial sector
  • Better policy co-ordination among countries and more support for emerging eastern Europe is needed

A Look at the Latest US International Trade Data

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The latest US trade data show a small improvement. The trade balance for February 2009 stood at -$26.0B  from $36.2 in January.

Canada, China and Mexico remained the top three countries with which the US trades. Trade with Canada, the largest trading partner of US, stood at $33.02B but that is still 32% less than the figure in February 2008. Similarly trade with Mexico and China are also down as well.

Chart (click to expand):

ustrade.gif

Source: Census.gov

The above chart shows that exports increased in February.However total imports are higher than exports. Total imports of goods were $121.5 billion in February while goods export was just $84.7B. This is understandable since we import lots of cheap goods from overseas. Another observation is that the gap between exports and imports(trade balance) is shrinking since mid-2008.

Emerging Markets Rose Sharply From March Lows

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Emerging market indices have outperformed developed markets since the lows reached on March 9 this year. The following table lists the performance of select indices:

[TABLE=149]

The top markets in the global recovery were Singapore and Hong Kong with both rising over 50%. During the same period the S&P 500 is up 37%. Latin American emerging markets such as Brazil and Mexico were up around 40% and 42% respectively. Among the major European markets, the UK’s FTSE 100 is the laggard with a gain of just 26% in the same time.

Many Foreign Utilities Are Up Nicely Off March Lows

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Foreign utility stocks have performed well similar to the financial sector off the lows attained in March this year.While the financial sector gets most of the media attention due to the stress-tests in the US, bailouts and other events, I wanted to find out how the foreign utility sector was performing since the March lows. The results of my research is displayed below in a simple table below.

Performance of Foreign Utilities since March lows:

[TABLE=148]

As shown in the listing above, many of the stocks are up in double digit percentages.Seven of the stocks have dividend yield of over 5% even after the rise. It must be noted that though Brazilian utilities such as CPFL Energia S.A. (CPL) pay over 7% in dividends, they can be volatile and do not follow consistent payment patterns.However utilties in the developed world such as Veolia Environnement (VE) of France, TransAlta Corp.(TAC) of Canada, National Grid plc(NGG) etc. have relatively safer yields and have great business models.

Knowledge is Power: US Savings Rate Rises Edition

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1.The economic downturn is forcing a return to a culture of thrift that many economists say could last well beyond the inevitable recovery.Shift to Saving May Be Downturn’s Lasting Impact

US Savings Rate

Source: New York Times

Related: China Consumer Spending vs. Savings

2. The market is a cruel mistress indeed. Compounding the pain of big swoons, it kicks investors when they are down by luring them into sucker’s rallies – typically sharp but fleeting bounces in the middle of a bear market.On Wall Street: Beware of the sucker’s rally

3.The largest 25 managers of mutual funds most used by defined contribution plans ended 2008 with assets off by more than a quarter, but the year’s market vortex didn’t drag down all boats equally. Top-performing mutual funds

4.Spanish Solar-Power Subsidy Seduces Florida’s FPL Group, Scorches Consumer Spain has turned itself into the world’s biggest builder of solar-energy plants, attracting developers from the U.S. and France by guaranteeing prices that weigh down Spanish consumers.

5.US banks Wells Fargo, Morgan Stanley and Bank of America unveil plans to boost reserves after failing ‘stress tests’.Banks unveil cash-raising plans