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Prieur Perspective: Stock Uptrend Resumes as Economy Rebounds


Investor confidence in the recovery of the global economy gains traction.


The Recession Status Map below, courtesy of Dismal Scientist, aggregates growth statistics from around the world and allows one to see at a glance which economies are in recession, at risk, or beginning to recover.

"Global business confidence remained positive last week for the second straight week. The last time confidence was consistently positive was nearly a year ago," said the latest Survey of Business Confidence of the World by Moody's (The chart below uses a 4-week moving average and is therefore not yet reflecting the break above the zero line.) Businesses are responding most positively to broad assessments of the current economic environment and the outlook into early 2010; they're as strong as they've been since the financial crisis first hit in the summer of 2007. The Survey results suggest that the global recession is coming to an end, but isn't quite over yet.

According to MarketWatch, Olivier Blanchard, the top economist for the International Monetary Fund, said on Tuesday the global recession was over and a recovery had begun. "The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come," Blancard wrote in an article released by the IMF. He said growth was still highly dependent on government stimulus from fiscal and monetary policies and sustainable growth "will require delicate rebalancing acts, both within and across countries."

Japan last week emerged from recession (not yet reflected on the map above), with its economy growing by 0.9% in the 3 months to June, marking the first expansion in 5 quarters on the back of private consumption, net exports and government stimulus spending. After the worst quarter on record, Hong Kong also returned to growth in the second quarter of 2009, expanding 3.3% quarter on quarter.

The eurozone composite Purchasing Managers Index rose to a 15-month high of 50 in August from 47 in July -- the biggest monthly increase on record. The 50 level separates expansion from contraction and the strong improvement seems to indicate that the eurozone could emerge from recession in the third quarter.

A snapshot of the week's US economic reports is provided below.

August 21

Sales of existing homes advance, inventories flat, and prices falling less rapidly

August 20

Initial jobless claims edge up for second consecutive week -- it's not unusual

August 19


August 18

Home construction is recovering, albeit at a slow pace

Wholesale prices of food, energy and core items fall in July

August 17

Senior Loan Officer Opinion Survey -- small positive signals but several aspects remain bothersome

Housing Market Index shows noteworthy improvement

Japan -- the end of the latest recession
No positions in stocks mentioned.
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