While you were sleeping: Confidence not a deterrence
(BusinessDesk) August 31 - Consumer and business confidence in Europe and the U.S. has been hammered this past month,
unsurprisingly, and yet stocks are mixed on Wall Street, a sign that some market watchers say the outlook may not be as
dire as it appears.
Among them is Wilbur Ross, chairman of private-equity firm WL Ross & Co. He told Bloomberg News he expects the U.S. to avoid a recession.
“We don’t think it’s going back into a recession, we think it’s more of a subpression, where you have a slight economic
growth, but a relatively jobless phenomenon,” the 73-year-old billionaire said.
“It’s a new kind of an event for us to be in. It’s not technically a recession, because you’re not having declining
gross domestic product, but it sure feels like one to the people who are losing their jobs.”
Pacific Investment Management Co.’s Bill Gross, however, disagrees. The current malaise may lead to a “developed
economy” recession in the U.S. and Europe, which might be hard to allay, Gross wrote in a commentary published on
Pimco’s website.
Data today showed that consumers on both sides of the Atlantic have little faith in the future - at least for the
moment.
Confidence among U.S. consumers plunged to the lowest level in more than two years this month while sentiment among
euro-zone consumers dropped to the weakest since May 2010.
“There’s more concern at the consumer level,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at
Loomis Sayles & Co., told Bloomberg. “That just affirms an economy which is not in, but closer to, recession levels. Individual
investors are getting their conviction yet again tested on the stock market and the economy.”
Even so, losses on Wall Street were limited today. In late afternoon trading, the Dow Jones industrial average slipped
0.09% and the Standard & Poor's 500 Index fell 0.19%. The Nasdaq Composite Index edged 0.08% higher.
"The rally that we've seen (in recent days) is only gaining further ground," Michael James, senior trader at regional
investment bank Wedbush Morgan in Los Angeles, told Reuters.
"The consumer confidence number this morning was terrible and yet it only had a short-term downside effect on the
market. That is a sign of a market in an uptrend mode. When you're able to get bad news and shrug it off, it's a very
positive sign form the market."
And in Europe, the Stoxx Europe 600 Index closed the day with a 1% gain.
Investors are already positioned for a poor economic climate, market watchers say, and so selective buying is in order.
Underpinning that outlook, Standard and Poor's has tweaked its economic growth forecasts for the euro zone, though the
ratings agency said the shared currency bloc was not headed toward a new recession.
S predicted growth of 1.7% in 2011 and 1.5% in 2012, down from forecasts in July of 1.9% and 1.8% respectively.
"We continue to believe that a genuine double dip will be avoided given the still existing avenues for growth, although
we recognise that downside risks are significant," S said in a report.
(BusinessDesk)