Germany should heed the call of its deeply worried business community

Speaking in German, the French official apparently struck a chord by pleading for a European response to American and Chinese challenges. After two years of constant prodding, Germany relented last Friday to approve the French project of a euro area budget. In the last two quarters, the beleaguered French government boosted public spending and wage growth to calm an ongoing public unrest. As a result, the rate of French economic growth during that period was double that in Germany. That could ha


Speaking in German, the French official apparently struck a chord by pleading for a European response to American and Chinese challenges. After two years of constant prodding, Germany relented last Friday to approve the French project of a euro area budget. In the last two quarters, the beleaguered French government boosted public spending and wage growth to calm an ongoing public unrest. As a result, the rate of French economic growth during that period was double that in Germany. That could ha
Germany should heed the call of its deeply worried business community Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-06-17  Authors: dr michael ivanovitch
Keywords: news, cnbc, companies, germany, deeply, worried, business, economic, german, growth, budget, public, france, heed, european, gdp, french, community


Germany should heed the call of its deeply worried business community

A worker at the Siemens gas turbine factory on January 8, 2010 in Berlin, Germany. Sean Gallup | Getty Images

Germany accounts for nearly 30% of a monetary union consisting of 19 European economies. That’s how dangerous it is to see the world’s fourth-largest economy stuck in a virtually stagnant quarterly pace during the 12 months to March. And here’s more: Measured at annual rates, the German economy at the beginning of this year was moving along at less than half the capacity of its potential and non-inflationary growth rate — a monumental waste of the country’s human and physical capital. The German business community is blaming the government for high corporate taxes (31% compared with a European average of 22%), high energy costs, inadequate digital infrastructure, lack of high-speed fiber optic connections in most of the country’s industrial parks, unclear economic and political orientations, and more.

Exports should not be the only way out

At their meeting earlier this month, the members of a powerful Federation of German Industries (Bundesverband der Deutschen Industrie – BDI) voiced their declining confidence in government policies at a time when they were facing increasing pressures from Chinese and American competitors. That’s what they told an uneasy audience of 1,500 people, headed by German Chancellor Angela Merkel and her economic and finance ministers. German businesses wanted no “national champions” and bureaucratic meddling. They asked for effective economic and financial policies to support small- and medium-sized companies — the country’s celebrated Mittelstand — that represent 99% of German companies, generate about three-quarters of all jobs, and account for more than half of the nation’s GDP. They probably knew they were asking far too much of a moribund governing coalition, trashed in recent European parliamentary elections and facing a certain demise if the wishes of 52% of German voters were met for new national elections. That should be an urgent consultation because, according to the latest opinion polls, Germany has a minority government with the center-right parties — Merkel’s Christian Democratic Union (CDU) and its sister party, Christian Social Union (CSU) — polling 24%. The junior coalition partner, Social Democrats, polled 13%. That was a gloomy business meeting in Berlin. But suddenly, and very curiously, people cheered up to give a standing ovation to the French Economy and Finance Minister, Bruno Le Maire. Speaking in German, the French official apparently struck a chord by pleading for a European response to American and Chinese challenges. France and Germany, he said, should act together in the spirit of “complementarity” rather than “rivalry” to stay ahead in emerging new areas of top technologies. The French were also pleased with a call for revival of a wobbly French-German partnership. After two years of constant prodding, Germany relented last Friday to approve the French project of a euro area budget. But instead of calling it a budget and agreeing to hundreds of billions of euros demanded by the French, Paris had to settle for the new “budgetary instrument for competitiveness and convergence” with only 17 billion euros ($19.08 billion) over a period of seven years. A Pyrrhic victory of sorts, because that will get new votes for the eurosceptic Marine Le Pen’s National Rally (RN) to see Paris acting as Berlin’s junior partner subservient to German interests.

France will pay

Yes, President Emmanuel Macron and Le Maire have nothing to cheer about watching the German confusion and disarray that will end up exacting a large cost in terms of French jobs and incomes. France and the rest of Europe — and, incidentally, the U.S., too — should have expected Germany to rev up its economy and buy more goods and services from its main trade partners. With a budget surplus of 1.7% of GDP, public debt of 60.9% of GDP, and a trade surplus on goods and services of 8% of GDP, Germany was supposed to lead the European (and global) economic recovery by stimulating its domestic spending and opening up its markets. But that won’t happen. As always, France, the rest of Europe and the U.S. will foot the bill of German economic revival as German companies step up their sales on external markets to survive. That’s called Germany’s export offensive – big time. Countries like France and the U.S., with a typically low political tolerance for weak economic growth, will suffer the most from the onslaught of German companies’ export sales. Washington can still do something to scare them off, but there is nothing that France can do in a perfectly functioning customs union with its neighbors across the Rhine river.

Here is an example of how that goes. In the last two quarters, the beleaguered French government boosted public spending and wage growth to calm an ongoing public unrest. As a result, the rate of French economic growth during that period was double that in Germany. Predictably, German exports to France picked up at an annual rate of 3% in the six months to April, after virtually no growth during 2018. No wonder German business leaders gave a standing ovation to the French finance minister. That could have sounded like an encouragement to keep up the good work by spending the money he did not have, and messing up the French public finances in the process. Germany will call him out on that later this year. Berlin, and its Brussels sidekicks, are just too busy now setting up Italy for penalties and disciplinary procedures for its excessive public debt and an intolerably high budget deficit of 2.4% of GDP – unless U.S. President Donald Trump tweets to save the day for his Roman friends. Bravely looking at a budget deficit increase of 77% in the first four months of the current fiscal year, Trump could probably scare the Germans with a tweet to lay off the struggling Italians.

Investment thoughts


Company: cnbc, Activity: cnbc, Date: 2019-06-17  Authors: dr michael ivanovitch
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Trade war could wipe $455 billion off global GDP next year, IMF warns

U.S.-China tariffs, that have been both implemented and proposed, could cut global economic output by 0.5% in 2020, the International Monetary Fund (IMF) warned Wednesday. “There are growing concerns over the impact of the current trade tensions. The risk is that the most recent U.S.-China tariffs could further reduce investment, productivity, and growth. “Indeed, there is strong evidence that the United States, China, and the world economy are the losers from the current trade tensions,” she ad


U.S.-China tariffs, that have been both implemented and proposed, could cut global economic output by 0.5% in 2020, the International Monetary Fund (IMF) warned Wednesday. “There are growing concerns over the impact of the current trade tensions. The risk is that the most recent U.S.-China tariffs could further reduce investment, productivity, and growth. “Indeed, there is strong evidence that the United States, China, and the world economy are the losers from the current trade tensions,” she ad
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Company: cnbc, Activity: cnbc, Date: 2019-06-05  Authors: matt clinch
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Trade war could wipe $455 billion off global GDP next year, IMF warns

U.S.-China tariffs, that have been both implemented and proposed, could cut global economic output by 0.5% in 2020, the International Monetary Fund (IMF) warned Wednesday.

Christine Lagarde, the IMF’s managing director, said in a briefing note for G-20 finance ministers and central bank governors that taxing all trade between the world’s two largest economies would cause some $455 billion in gross domestic product to evaporate. This would be a loss larger than South Africa’s economy, it said.

“There are growing concerns over the impact of the current trade tensions. The risk is that the most recent U.S.-China tariffs could further reduce investment, productivity, and growth. The just proposed U.S. tariffs on Mexico are also of concern,” Lagarde said in the blogpost.

“Indeed, there is strong evidence that the United States, China, and the world economy are the losers from the current trade tensions,” she added.

Lagarde on Wednesday called them “self-inflicted wounds” that must be avoided “by removing the recently implemented trade barriers and by avoiding further barriers in whatever form.”

In July last year, President Donald Trump indicated that he was willing to slap tariffs on every Chinese good imported to the U.S. should the need arise. “I’m ready to go to 500,” the president told CNBC’s Joe Kernen.


Company: cnbc, Activity: cnbc, Date: 2019-06-05  Authors: matt clinch
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JP Morgan slashes second-quarter GDP forecast to just 1%

“The April durable goods report was bad, particularly the details relating to capital goods orders and shipments. The J.P. Morgan economists also changed their view on the Fed, and now do not expect the next move to be an interest rate hike. The durable goods report follows Thursday’s PPI manufacturing and services data that was also surprisingly weak. The J.P. Morgan economists said the key risks they see for U.S. growth include the uncertainty from the trade war, impacting business sentiment,


“The April durable goods report was bad, particularly the details relating to capital goods orders and shipments. The J.P. Morgan economists also changed their view on the Fed, and now do not expect the next move to be an interest rate hike. The durable goods report follows Thursday’s PPI manufacturing and services data that was also surprisingly weak. The J.P. Morgan economists said the key risks they see for U.S. growth include the uncertainty from the trade war, impacting business sentiment,
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Company: cnbc, Activity: cnbc, Date: 2019-05-24  Authors: patti domm
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JP Morgan slashes second-quarter GDP forecast to just 1%

A truck hauls a shipping container at Yusen Terminals (YTI) on Terminal Island at the Port of Los Angeles in Los Angeles, California

J.P. Morgan economists said they now see much slower second-quarter growth of just 1%, down from their prior forecast of 2.25% and way off the 3.2% reported in the first quarter.

“The April durable goods report was bad, particularly the details relating to capital goods orders and shipments. Coming on the heels of last week’s crummy April retail sales report, it suggests second quarter activity growth is sharply downshifting from the first quarter pace, ” the economists wrote.

The Atlanta Fed’s GDP Now tracker has GDP growth for the first quarter at 1.3% for the quarter.

The J.P. Morgan economists also changed their view on the Fed, and now do not expect the next move to be an interest rate hike.

“We had previously expected the next move from the Fed would be a hike, albeit at the very end of our forecast horizon in late 2020. We now see the risks of the next move as about evenly distributed between a hike and a cut. We still sense little appetite on the FOMC for an insurance ease to goose inflation, but we see rising odds of ‘your father’s rate cut’: one prompted by downside growth risks,” they wrote.

The durable goods report follows Thursday’s PPI manufacturing and services data that was also surprisingly weak. That data helped fuel a stock market sell off and buying in Treasurys, which sent yields to 2017 lows. Yields move opposite price, and the low yields reflected concern about the economy.

The 10-year Treasury yield was at 2.32% Friday, after dipping as low as 2.29% Thursday. The fed funds futures market is reflecting expectations for more than 25 basis points of easing this year, and at least another cut in 2020.

“Net, net, business investment in the future is sputtering at the start of the second quarter as uncertainty and geopolitical risks are a heavy anchor that appears to be a big drag on companies’ willingness to order up new equipment,” noted Chris Rupkey, MUFG Union Bank chief financial economist. “Business confidence is clearly lacking in the manufacturing sector of the economy.”

Rupkey added that corporate chief financial officers may believe, as some surveys suggest, that the odds are increasing for a recession so they have canceled orders in March and ordered less equipment in April.

The J.P. Morgan economists said the key risks they see for U.S. growth include the uncertainty from the trade war, impacting business sentiment, and global economic slowing.

In the April durable goods report, total orders at manufacturers declined 2.1% last month, due to large declines of aircraft and motor vehicle orders. Beyond transportation, the J.P. Morgan economists noted that orders were flat last month and revised significantly lower in March.


Company: cnbc, Activity: cnbc, Date: 2019-05-24  Authors: patti domm
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The Atlanta Fed’s GDP forecast is sliding, and expectations for rate cuts are surging

A Federal Reserve projection on economic growth just weakened substantially, and expectations for a rate cut over the next eight months got a lot stronger. The Atlanta Fed’s closely watched GDPNow tracker is pointing to a 1.1% gain for the economy in the second quarter, according to a revision posted Wednesday. Disappointing retail sales in April fueled the latest leg down in the Atlanta Fed outlook. The Commerce Department reported Wednesday that sales declined 0.2% for the month against expect


A Federal Reserve projection on economic growth just weakened substantially, and expectations for a rate cut over the next eight months got a lot stronger. The Atlanta Fed’s closely watched GDPNow tracker is pointing to a 1.1% gain for the economy in the second quarter, according to a revision posted Wednesday. Disappointing retail sales in April fueled the latest leg down in the Atlanta Fed outlook. The Commerce Department reported Wednesday that sales declined 0.2% for the month against expect
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Company: cnbc, Activity: cnbc, Date: 2019-05-15  Authors: jeff cox
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The Atlanta Fed's GDP forecast is sliding, and expectations for rate cuts are surging

A Federal Reserve projection on economic growth just weakened substantially, and expectations for a rate cut over the next eight months got a lot stronger.

The Atlanta Fed’s closely watched GDPNow tracker is pointing to a 1.1% gain for the economy in the second quarter, according to a revision posted Wednesday. That comes on the back of a strong first three months that saw a 3.2% gain and is substantially lower than CNBC’s Rapid Update survey, which puts the GDP tracking estimate at 2%.

Disappointing retail sales in April fueled the latest leg down in the Atlanta Fed outlook. The Commerce Department reported Wednesday that sales declined 0.2% for the month against expectations of a 0.2% gain. Along with the retail letdown, industrial production fell 0.5% against Wall Street estimates of a 0.1% gain.


Company: cnbc, Activity: cnbc, Date: 2019-05-15  Authors: jeff cox
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Pre-Brexit rush by manufacturers boosts UK economy in Q1

Year-on-year GDP growth picked up to 1.8 percent in early 2019 from 1.4 percent in the last three months of 2018, Britain’s Office for National Statistics said. This was its highest since the third quarter of 2017 and again in line with economists’ forecasts. “Manufacturers were clearing their order books before March 29,” an ONS statistician said, referring to the date when Britain had been due to leave the European Union. Stock-building had added 0.7 percentage points to GDP growth during the


Year-on-year GDP growth picked up to 1.8 percent in early 2019 from 1.4 percent in the last three months of 2018, Britain’s Office for National Statistics said. This was its highest since the third quarter of 2017 and again in line with economists’ forecasts. “Manufacturers were clearing their order books before March 29,” an ONS statistician said, referring to the date when Britain had been due to leave the European Union. Stock-building had added 0.7 percentage points to GDP growth during the
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Pre-Brexit rush by manufacturers boosts UK economy in Q1

Year-on-year GDP growth picked up to 1.8 percent in early 2019 from 1.4 percent in the last three months of 2018, Britain’s Office for National Statistics said. This was its highest since the third quarter of 2017 and again in line with economists’ forecasts.

“Manufacturers were clearing their order books before March 29,” an ONS statistician said, referring to the date when Britain had been due to leave the European Union.

“That’s been the driver for the last few months,” he added.

Previous private-sector business surveys had shown manufacturers reported building up stocks of goods in case the country left without a transition deal, which they feared could cause chaos at Britain’s borders.

However, the ONS said it had seen more limited evidence of this.

Stock-building had added 0.7 percentage points to GDP growth during the first quarter, but some sectors – such as motor trades, wholesalers and warehouses reported relatively little evidence of this.

Net trade took a record 2.2 percent off the quarterly rate of GDP growth, as businesses sucked in imports.

In the event, with just days to go before Britain was due to leave, Prime Minister Theresa May asked the EU for more time to negotiate a deal. Brexit has now been delayed until Oct. 31 unless there is an early agreement.


Company: cnbc, Activity: cnbc, Date: 2019-05-10  Authors: leon neal, getty images
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BlackRock’s Rieder says Fed shouldn’t be too concerned about low inflation

BlackRock’s Rick Rieder said Wednesday the Fed is unnecessarily concerned about low inflation and is more likely to raise interest rates before it cuts them. Rieder, BlackRock’s global CIO of fixed income, said the way the Fed discusses weaker inflation Wednesday afternoon following its two-day meeting could impact markets. “They should target nominal GDP,” he said, noting that first-quarter real GDP was 3.2% and core inflation was 1.6%. “If you’re running at a nominal GDP that is above trend wi


BlackRock’s Rick Rieder said Wednesday the Fed is unnecessarily concerned about low inflation and is more likely to raise interest rates before it cuts them. Rieder, BlackRock’s global CIO of fixed income, said the way the Fed discusses weaker inflation Wednesday afternoon following its two-day meeting could impact markets. “They should target nominal GDP,” he said, noting that first-quarter real GDP was 3.2% and core inflation was 1.6%. “If you’re running at a nominal GDP that is above trend wi
BlackRock’s Rieder says Fed shouldn’t be too concerned about low inflation Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-05-01  Authors: patti domm
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BlackRock's Rieder says Fed shouldn't be too concerned about low inflation

BlackRock’s Rick Rieder said Wednesday the Fed is unnecessarily concerned about low inflation and is more likely to raise interest rates before it cuts them.

Rieder, BlackRock’s global CIO of fixed income, said the way the Fed discusses weaker inflation Wednesday afternoon following its two-day meeting could impact markets. The futures market is pricing in a partial rate hike for 2019, and some investors believe the Fed could have an “insurance” interest rate cut later in the year to make sure the economy doesn’t lose traction.

“I don’t agree,” said Rieder. “I still think there’s a possibility they get one more rate hike in. But I just think they’re not going to do anything for an extended period of time, and I don’t think they need to.”

“I think this is Goldilocks for the Fed. I think they can go away,” he said.

The Fed releases its statement at 2 p.m. ET, just ahead of Fed Chairman Jerome Powell’s press briefing at 2:30 p.m. ET.

“I think the key is how much they downgrade inflation. I think the press conference is important. I think the statement is important. I also think this event on Friday is important in terms of how they’re thinking about where inflation is relative to growth,” said Rieder, referring to a Hoover Institution conference Friday, where Fed policy will be discussed.

Some market pros are hoping to hear more details from Powell on how worried the Fed is about the lack of inflation and at what point it would consider cutting interest rates.

Rieder said he does not believe inflation measures have the same meaning they once did. “We live in an environment where core goods are going to deflate, just because of where technology and globalization have moved to,” he said.

Instead, he believes the Fed should track GDP.

“They should target nominal GDP,” he said, noting that first-quarter real GDP was 3.2% and core inflation was 1.6%. “If you’re running at a nominal GDP that is above trend with inflation staying low, it’s terrific for the population at large. The whole concept of you having to drive inflation higher, why? As long as GDP is buoyant and it is.”

As for the rates outlook, Rieder said he believes the 10-year Treasury yield will be locked in a range for a longer period of time.

“I could see the 10-year moving back to 2.65, 2.70,” he said. But with the easy policy of other global central banks, like the European Central Bank and Bank of Japan, long-end rates should not move much higher.

“I don’t think you’ll see 3% 10-year this year. One of the things that would have to drive it is global growth would have to pick up more,” he said.

Rieder, who is also lead portfolio manager for BlackRock’s Global Allocation Fund, the firm’s largest mutual fund, sees a good environment now for stocks.

“I think equities are going to [be] higher. I think you have a dynamic now if you keep the discount rate on hold, the Fed has functionally given global guidance. With growth picking up and the equity buybacks are still high, what people are beginning to realize is there aren’t enough financial assets in the world relative to demand,” he said. As long as rates stay stable, he said stocks should go higher.


Company: cnbc, Activity: cnbc, Date: 2019-05-01  Authors: patti domm
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European markets close mixed as euro zone GDP beats expectations; AMS shares jump 21%

European stocks closed in mixed territory on Tuesday, as investors weighed signs of economic growth in the euro zone against weaker-than-expected Chinese data. The pan-European Stoxx 600 dipped just below the flatline at the closing bell, with sectors and major bourses pointing in opposite directions. Looking at individual stocks, chipmaker AMS surged to the top of the European benchmark during morning trade. Elsewhere, Standard Chartered’s shares rose 4.5% after the bank unveiled plans for a $1


European stocks closed in mixed territory on Tuesday, as investors weighed signs of economic growth in the euro zone against weaker-than-expected Chinese data. The pan-European Stoxx 600 dipped just below the flatline at the closing bell, with sectors and major bourses pointing in opposite directions. Looking at individual stocks, chipmaker AMS surged to the top of the European benchmark during morning trade. Elsewhere, Standard Chartered’s shares rose 4.5% after the bank unveiled plans for a $1
European markets close mixed as euro zone GDP beats expectations; AMS shares jump 21% Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-04-30  Authors: chloe taylor sam meredith, chloe taylor, sam meredith
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European markets close mixed as euro zone GDP beats expectations; AMS shares jump 21%

European stocks closed in mixed territory on Tuesday, as investors weighed signs of economic growth in the euro zone against weaker-than-expected Chinese data.

The pan-European Stoxx 600 dipped just below the flatline at the closing bell, with sectors and major bourses pointing in opposite directions.

Europe’s basic resources stocks — with their heavy exposure to China — led the losses, down 1.5%. Glencore was among the sector’s worst performers, trading almost 3% lower at the end of the session.

Looking at individual stocks, chipmaker AMS surged to the top of the European benchmark during morning trade. It comes after the Apple supplier reported an upbeat outlook for the second quarter, driven by a rising number of Android smartphones using its 3D optical sensors. Shares of the Austrian group jumped 21% on the news.

Meanwhile, Danske Bank tumbled to the bottom of the index, after the embattled lender posted earnings below expectations and slashed its outlook for the remainder of the year. Shares of Denmark’s biggest bank dipped by almost 10%.

British oil giant BP reported earnings largely in line with expectations Tuesday morning. The London-based oil and gas firm said first-quarter underlying replacement cost profit — used as a proxy for net profit — came in at $2.4 billion, versus $2.3 billion expected in a Reuters poll. Shares of BP were 1% higher.

Elsewhere, Standard Chartered’s shares rose 4.5% after the bank unveiled plans for a $1 billion share buyback scheme. The announcement came as the company posted a 10% rise in quarterly profit.

Shares of Airbus were almost 1% lower after the aerospace group posted slightly higher than expected core first-quarter profits.

On the data front, euro zone economic growth came in stronger-than-anticipated over the first three months of the year, while unemployment fell to its lowest level in more than a decade.

Official data from the EU’s statistics office Eurostat said a preliminary estimate of first-quarter GDP (gross domestic product) rose 0.4%, up from 0.2% in the final three months of 2018.


Company: cnbc, Activity: cnbc, Date: 2019-04-30  Authors: chloe taylor sam meredith, chloe taylor, sam meredith
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S&P 500 and Nasdaq close at record highs after strong GDP report

The S&P 500 and Nasdaq Composite closed at record highs on Friday as better-than-expected economic data offset a mixed batch of corporate earnings. The S&P 500 climbed 0.5% to 2,939.88, an all-time closing high. The tech-heavy Nasdaq ended the day up 0.3% at 8,146.40. The Dow Jones Industrial Average rose 81.25 points to 26,543.33 and closed 1.5% below its all-time high. First-quarter gross domestic product was 3.2%, the Commerce Department said on Friday, topping the consensus economist estimat


The S&P 500 and Nasdaq Composite closed at record highs on Friday as better-than-expected economic data offset a mixed batch of corporate earnings. The S&P 500 climbed 0.5% to 2,939.88, an all-time closing high. The tech-heavy Nasdaq ended the day up 0.3% at 8,146.40. The Dow Jones Industrial Average rose 81.25 points to 26,543.33 and closed 1.5% below its all-time high. First-quarter gross domestic product was 3.2%, the Commerce Department said on Friday, topping the consensus economist estimat
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S&P 500 and Nasdaq close at record highs after strong GDP report

The S&P 500 and Nasdaq Composite closed at record highs on Friday as better-than-expected economic data offset a mixed batch of corporate earnings.

The S&P 500 climbed 0.5% to 2,939.88, an all-time closing high. The tech-heavy Nasdaq ended the day up 0.3% at 8,146.40. The Dow Jones Industrial Average rose 81.25 points to 26,543.33 and closed 1.5% below its all-time high.

First-quarter gross domestic product was 3.2%, the Commerce Department said on Friday, topping the consensus economist estimate of 2.5%, according to Dow Jones. An increase in exports drove the better-than-expected number.


Company: cnbc, Activity: cnbc, Date: 2019-04-26  Authors: fred imbert
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The dollar might be breaking out and that could be bad news for stocks

If that’s the case, stock market strategists say it could start to negatively impact stock prices and threaten earnings gains. Chandler said the dollar started its latest leg higher last week after U.S. March retail sales jumped a surprise 1.6%. U.S. GDP data is reported at 8:30 a.m. Friday, and first quarter growth is expected at 2.4%. Chandler said the dollar also reached its high for the year against the euro. “I do think if this dollar rally stays in tact, what we need is divergence,” said C


If that’s the case, stock market strategists say it could start to negatively impact stock prices and threaten earnings gains. Chandler said the dollar started its latest leg higher last week after U.S. March retail sales jumped a surprise 1.6%. U.S. GDP data is reported at 8:30 a.m. Friday, and first quarter growth is expected at 2.4%. Chandler said the dollar also reached its high for the year against the euro. “I do think if this dollar rally stays in tact, what we need is divergence,” said C
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The dollar might be breaking out and that could be bad news for stocks

The Dollar Index is bucking up against 2-year highs in a run-up that has some strategists wondering if it could be ready to break out.

If that’s the case, stock market strategists say it could start to negatively impact stock prices and threaten earnings gains.

“The market is wrestling with whether this is the real breakout or not. We’ve had quite a day today ahead of the big [GDP] number tomorrow,” said Marc Chandler, chief market strategist at Bannockburn Global Foreign Exchange. “I think there will be a bit of ‘buy the rumor, sell the fact.’ They’re already looking past Q1 GDP. What’s really going to matter to the Fed is Q2 data.”

Chandler said the dollar started its latest leg higher last week after U.S. March retail sales jumped a surprise 1.6%. It has gained 1.2% since then. In addition to strong U.S. data, there was a round of weak European PMI manufacturing data, another factor pushing the dollar up against the euro. U.S. GDP data is reported at 8:30 a.m. Friday, and first quarter growth is expected at 2.4%.

Dollar/yen hit a new high for the year of 112.40 Thursday, but then fell back below 112. Chandler said the dollar also reached its high for the year against the euro. The euro was at $1.128 to the dollar late Thursday.

“If we go through $1.10 in the euro, people will be talking about $1.05 and parity coming back,” said Chandler. But Chandler said he believes the rally is getting ahead of itself, for now.

“I do think if this dollar rally stays in tact, what we need is divergence,” said Chandler, meaning the U.S. economy would continue to outperform.


Company: cnbc, Activity: cnbc, Date: 2019-04-25  Authors: patti domm
Keywords: news, cnbc, companies, rally, data, stocks, stock, bad, gdp, euro, chandler, think, breaking, market, strategists, dollar


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Friday’s report of first quarter growth should show economy is strong and no recession in sight

Over the past week, as the late quarter data was released, economists boosted their forecasts. Stanley said he expects that he expects growth of about 3.3% for the second quarter. He expects to see a comeback by the consumer, after sluggish spending growth in the first quarter. He also said there are signs business spending will also pick up in the second quarter. Economists said that first quarter growth has traditionally been weaker because of seasonal factors.


Over the past week, as the late quarter data was released, economists boosted their forecasts. Stanley said he expects that he expects growth of about 3.3% for the second quarter. He expects to see a comeback by the consumer, after sluggish spending growth in the first quarter. He also said there are signs business spending will also pick up in the second quarter. Economists said that first quarter growth has traditionally been weaker because of seasonal factors.
Friday’s report of first quarter growth should show economy is strong and no recession in sight Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-04-25  Authors: patti domm, getty images
Keywords: news, cnbc, companies, spending, economy, data, quarter, fridays, growth, second, forecast, report, gdp, strong, sight, expects, recession, know, fears


Friday's report of first quarter growth should show economy is strong and no recession in sight

Traders are paying closer than normal attention to the data, which is viewed as backward looking, because of the recession fears and what implication it might have for growth heading into the second quarter. Dow Jones consensus forecast is for 2.5% growth, while CNBC/Moody’s Analytics GDP Survey shows economists have a median forecast of 2.4%.

“Almost half the quarter you had the threat of the March 1 tariff hike hanging over everyone. That went away, but it should not be a surprise the quarter started out on a really weak note. The fears were exasperated by the fact we didn’t have data for awhile and we were kind of in a vacuum,” Stanley said.

Over the past week, as the late quarter data was released, economists boosted their forecasts. The GDP report is expected at 8:30 a.m. ET Friday.

“We already know the first quarter is stronger than people expected. We might get some headline affect, but we’re not going to learn a lot we already don’t know,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

Stanley said he expects that he expects growth of about 3.3% for the second quarter. He expects to see a comeback by the consumer, after sluggish spending growth in the first quarter. “Given the blowout retail sales we saw in March, the stage was set for a nice bounce back in Q2,” he said. He also said there are signs business spending will also pick up in the second quarter.

Economists said that first quarter growth has traditionally been weaker because of seasonal factors.


Company: cnbc, Activity: cnbc, Date: 2019-04-25  Authors: patti domm, getty images
Keywords: news, cnbc, companies, spending, economy, data, quarter, fridays, growth, second, forecast, report, gdp, strong, sight, expects, recession, know, fears


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