Fear of a slack planet
The Chase by Marty Cej:
Asian stocks fell, European stocks are slumping and U.S. index futures indicate a drop at the open. What gives? Some are pointing to a decision by economists at Morgan Stanley to cut their forecasts for global economic growth, saying the U.S. and euro zone were "dangerously close to a recession."
But that's too easy. After all, Deutsche Bank lowered its forecasts for growth earlier in the day yesterday, Merrill Lynch moved its expectations for a rate hike in Canada back to December due to a weakening global economy, TD Securities yesterday moved its forecasts for rate increases in the U.S., Canada and the U.K. farther out into the future and Goldman Sachs has warned clients in recent weeks that while the probability of a U.S. recession sits at one-in-three, the risks are increasing. In other words, the Morgan Stanley report is one of many that have been circulating the markets in recent weeks so let's not overemphasize its importance to the markets today.
Instead, let's get at what led Morgan Stanley to its conclusions, ask what has changed in the last three days of data, policy statements or market moves that prompted the cuts by Morgan Stanley and others. Jim Flaherty and Mark Carney have not been summoned to testify before a parliamentary committee tomorrow because of an economist's report.
We'll get some help with that task today thanks to the release of U.S. initial jobless claims at 8:30 and, more importantly, the Philly Fed index at 10 am. The Philadelphia area remains a key manufacturing district for the U.S. so the report can dictate the market's performance in the short term. Economists polled by Bloomberg expect the index to drop to 2 from 3.2 though the spread between estimates ranges from -6 to 10, one of the widest ever.
Rather than driving stocks lower because of a Morgan Stanley report, markets are more likely pricing in the risk of another report showing a worsening U.S. economy. We'll also get a read on U.S. consumer price inflation at 8:30 as well as Canadian leading economic indicators and wholesale prices.
Our pursuit of the patent story continues today in the wake of Wi-Lan's unsolicited bid for Mosaid after the close of trading last night. Ron Shuttleworth, analyst at M Partners, will take us through the process of finding values in a patent portfolio at 10:10 am while Wi-Lan CEO Jim Skippen joins us at 2:15 to talk about his bid and why Mosaid has been resistant to his overtures so far.
Mickey Drexler will cap off our coverage of the U.S. retailer earnings season this week in a half hour conversation with Howard Green at 1:00. Credited with first saving The Gap by making it relevant to an entire generation and then growing J. Crew into a global brand and online powerhouse, Drexler can provide insight into the U.S. retailing industry that no one else can. Plus, he brought gingham back.
With my help, of course, but he gets most of the credit.
Retail stocks continue to be a focus for the markets this week as we examine numbers from Limited Brands – which sashayed past analyst expectations with an insouciant pout – and Dollar Tree, which beat and raised its forecast. Sears Holdings loss widened and sales fell.
The U.S. Justice Department is investigating whether Standard & Poor's improperly rated mortgage securities in the years leading up to the financial crisis, the New York Times is reporting, citing unnamed sources.
The investigation began long before the U.S. debt downgrade but is still likely to add fuel to the political rhetoric. We're pursuing.
Gold has rallied to a record high in early trading and oil is slumping ahead of the Philly Fed survey.
And that's just for starters.