From Zacks via Townhall
Thursday, February 14, 2013
Hopes of economic rebound both in the U.S. as well abroad have pushed stocks to new highs, but ground realities haven’t caught on with the soaring sentiment yet. We now have data showing that GDP growth in the entire developed world – Europe, Japan, and the U.S – was in the negative territory in the final quarter of 2012. ….
Fourth quarter GDP reports from Europe this morning show that region’s collective economy contracted more than expected in the final quarter of 2012. This is the third straight quarter of negative GDP growth for the region and the fifth since the region has had any growth. Even Germany, the region’s core and engine, and France were not immune from the forces pulling the region down. The pain in Italy, Spain, and Portugal deepened from the preceding quarter.
The consensus expectation is that the region’s economy will start stabilizing in the second half of the year and produce a modest growth next year. There is some evidence to suggest that the German economy could get out of its slump in the current period, but conditions appear to be worsening for the rest of the region. The outlook for France is definitely not getting better and political instability in Spain and Italy threaten the reform gains of the recent past. The Spanish prime minister’s fast dwindling political capital limits his ability to implement the tough austerity measures demanded by Germany. And the growing popularity of Silvio Berlusconi in the coming Italian polls threaten the reform gains under the technocratic Mario Monti government. Bottom line, the region’s outlook is far from satisfactory. And that’s a major headwind not only for Germany, but also for China and the U.S.
The realities of the global economy may well catch up with the markets, but, I think they’ll be in a holding pattern until the next quarter news. China is having their own reality check.