"Breakneck" China Growth Fails To Excite Bulls ...Again

Societe Generale says these are "BREAKNECK" growth figures in China today. Latest reports on China miracle by Danske Bank available here, here and here. Continental Europe is still weak with hard economic data, but the Michigan Consumer Confidence data in the US were rather interesting today, the excerpt from Dow Jones report below:

NEW YORK (Dow Jones)--Consumer confidence levels ticked slightly higher in the middle of June, a report said Friday. The Reuters/University of Michigan preliminary consumer sentiment survey moved to a reading of 69.0, from 68.7 in May. It had been expected to move to 69.8. Consumer confidence surveys have been on the mend of late as signs the recession is ending have mounted. Households have also been cheered by gains in stock markets. In the report's other findings, the current conditions index hit 74.5, from 67.7 in May, while the expectations index was 65.4, versus 69.4 the prior month. On the prices front, the one year inflation expectation was 3.1%, from 2.8%, while the five year expectation was also 3.1%, from 2.9% in May.

Interesting that current conditions were much better than expected, but expectations component tanked far below estimates. Well, but these survey data have been drifting ...

Well, the US stock market got its usual last hour buying, but the gain was only 0.14% for the S&P500 index and the Nasdaq "family" closed even in the red slightly. So the the very short term technical picture from yesterday (see the chart from yesterday below) is still very much in force. Just the one question - which way there will be a decisive break of those blue lines?




A bit longer "technical picture" by Societe Generale below. Chart courtesy of Societe Generale, click to enlarge!

Well, the ECRI WLI points ever higher, so the fundamentals would suggest the recovery quite soon in the US. ECRI reported today:

In recent weeks, the group has forecast that the U.S. recession will end sometime during this summer, as its yearly economic growth reading rebounds from late-2008 lows.

The index's annualized growth rate spiked to a one and a half year high of minus 4.7 percent from the prior week's rate of minus 7.1 percent.

It was ECRI's highest yearly growth reading since the week ended December 7, 2007, when it stood at minus 3.9 percent.

"With WLI growth rising to its best reading in a year and a half -- namely, since the recession began -- economic recovery prospects are brightening rapidly," said Lakshman Achuthan, managing director at ECRI.

So, what is my take?

China is blowing something, US may see a growth very soon, but short and anemic? I am most worried about continental Europe and Japan. There are some pundits pointing to a strong cyclical correlation. Well, in my view:

• equities have priced in the near term economic recovery and are priced slightly above fair value, especially in the U.S.
• there is a huge gap between the expectations and reality, so we risk the miss on the expectations side
• technically the picture looks rather shaky,
• but we are approaching the end of month and the quarter very soon
• we have to see what is stronger - the end of quarter greed, or the rather fragile fundamentals and technicals
• if we move higher into the end of quarter, I would be seeking the "emergency exit" for cyclical exposure by the end of month ... quite strong correction should be expected?

Consider as a probability!