Most stock indexes are now falling into bear markets, which is also an indication that a double dip recession for the global ecomomy is almost a certainty in 2010. This can bee seen with Spot Iron ore prices out of China for April showing an increase in costs, but it is the decline in imports that is the concern. Which points to China slowing in 2010; and output operational costs fro miners are increasing.
A good reference for dry shipping activity is the Baltic dry index, on a two year chart we can see how the global recession in 2008 sent the rate tumbling only to be dragged along struggling to make it over the 4000 point rate (May 2010). Which would indicate that the economic recovery has not been a powered up by an export/ trade recovery, but rather countries self funded stimulus and/or goverment fiscal and central bank monetary intervention.
BDI index (2yrs)
The EU and European central bank will attempt to navigate a severe banking crisis in Europe with more bailouts/intervention/asset support on a 1 Trillion dollar pledge. The problem of course is confidence and it's being eroded dramatically in European financial markets for three reasons. 1. The trillion dollar bailout is to secure the European banks and their exposure to PIIGS junk bonds and decayed credit markets. 2 is to try and underpin the Euro. 3. Austerity measures by goverments and high taxes will decrease consumption and slow growth. The current psychological theory (of central banks) I suspect is that they will keep a line under the EUR (and other currencies), to somehow create an illusion that the ecomomy is stabilizing. It's Smoke and Mirrors by essentially throwing money at the system, the big fear is a currency collapse (in a sense the EUR has already collapsed) which will spill over into equities and deteriorate investor confidence in a complete manner. This intervention will stave this selling on the EUR to a degree, but it wont last. As the markets are dying to de-leverage (with added volatility), we have seen this already with stocks and currency's all being sold that are now close or in bear markets.
The US is able to alleviate it's invertible judgment day on it's debt by printing money with 0% interest rates. The problem of course is that not only we will see inflation spikes on food and oil, the consumer will also be effected by real interest rates on credit, which have already been adjusted for inflation via the interest payment 10yr and 30yr notes. This erodes purchasing power and this could have effected the recently low CPI, although I am speculating here, but I suspect that interest payments of homes/cars and credit cards have not decreased but increased; thus effecting credit purchasing power.
It is the last hurrah of intervention by goverment and their incumbent central banks. This can been seen daily in the FX markets. Japan central bank (BoJ) has indicated that it will intervene on the the rising Yen, South Korea central bank (BoE) has said they will prop up it's falling WON (which they have already started to do), the EUR and high risk currencies such as the AUD and NZD are also showing signs of central bank/s intervention. This is a game of attrition (against preying speculators) to support currencies that are destine to be devalued, as mention it is done to maintain an illusion of confidence.
But we can see markets struggle to maintain liquidity support, the rug at some point will be pulled. And the 'sell' will be brutal.
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