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Weekly Focus

A little light in all the dark

Fri, Feb 6 2009, 15:59 GMT
by Danske Research Team

Danske Bank A/S  |  View company's profile


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The past week offered continued mixed news but recently the surprises have been more balanced rather than systematically on the downside. A positive surprise came from the global PMI, which is one of the best indicators of growth developments. The data showed an increase in most countries following the very steep decline in the second half of 2008. The rise in PMI has come sooner than expected, although we have been looking for this to happen in the US during the first half of 2009 (see Research USA: Manufacturing recovery ahead). The development offers hope that the massive decline in production is coming to an end. The levels of PMI still point to falling production but the pace at which it is falling seems to slow down.

Commodity prices have also stabilised recently which points in the same direction of bottoming in production. Metal prices are very cyclical and after a steep fall in the past six months they now seem to have found a base.

The past week also offered more positive news out of China (see Flash Comment: Signs of the economy bottoming out). First, the Chinese PMI data showed a decent further rise in January. Second, lending growth has risen strongly recently suggesting that investment spending is picking up. Third, shipbrokers have seen signs of stronger freight demand which has also led to a rise in the Baltic Dry Freight index during the past week, albeit from very low levels. A recovery in China is very important for stabilising the world economy and hence this is encouraging news.

There is no doubt that 2009 will be a very difficult year and it is too early to draw any firm conclusions. How-ever, the recent signs are at least on track with the ex-pectation of a gradual recovery and thus provide hope that the global economy can recover once the massive stimulus works its way through.

Published on  Fri, Feb 6 2009, 16:05 GMT


Danske Bank http://www.danskebank.com/ | danskeresearch@danskebank.com

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This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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