Euphoria on global stock markets might give the impression that the financial crisis is a thing of the past, but for unemployed workers or idling companies the effect of the turmoil is still keenly felt.
On the main equity markets last week, the Dow Jones Industrial Average hit its highest level this year during the week, Tokyo’s main index added 5.8 percent over the week and the London FTSE rose 4.28 percent.
For many, there seems a disconnect between the optimism sweeping financial markets and the hardship felt in industry and the labor market where job losses, pay cuts and factory closures continue.
On Thursday, the Dow Jones gained 2.12 percent on a day when the US Labor Department said first-time claims for unemployment benefits rose to 554,000 the previous week.
“The general rule of thumb is that the equity market leads the economic cycle by six-to-nine months,” said Daragh Maher, an analyst at investment bank Calyon.
In other words, investors are anticipating blue skies ahead and they are adjusting to the first signals of better weather. Companies are much less responsive, meaning most people will continue to live under the thunder clouds of the financial crisis for some time — or at least until the final quarter of this year if equities bottomed in March.
“The initial phase of any downturn is that you fire people, then you stop firing people, then you start hiring again,” Maher said. “Companies are still in the phase where they’re still firing, but not quite as large as they were three months ago.
“I think it’ll be the middle of 2010 before you’ll see businesses being confident enough to begin rehiring in any great scale,” he said.
A survey released on Friday backed up this view.
The poll, a Eurobarometer released by the European Commission, showed that two thirds of Europeans believed that worse job losses were to come and a third of those working said they were “very worried” about their job.
The good news for everyone — not just those who own shares or work in finance — is that there are genuine causes for optimism about the so-called “real economy” that underpinned the swing in the market mood last week.
An avalanche of company reports in the US showed most firms delivering generally better-than-expected results, with a recovering financial sector meaning credit should become easier to get. Other signs of stabilization in the US housing market — the source of the problem via the subprime mortgage sector — also prompted optimism, as did economic indicators and comments in other countries.
Japan’s economy, the second in the world in size, has been showing “signs of recovery,” the government said in an annual report, adding that the slump had been “extremely deep.”
The Asian Development Bank said it saw economies in its region bouncing back next year led by China, which managed to report annual growth of 7.9 percent in the second quarter despite the difficulties elsewhere.
In Europe, surveys showed a brighter mood among eurozone firms, particularly in powerhouse Germany where the closely watched monthly Ifo survey showed sentiment among companies brightening for the fourth month running.
“Firms are not so unhappy with the current business situation as they were the previous month ... It looks as though the economy is gaining traction,” the Ifo research institute said.
But there are still plenty of reasons for caution. Since the eruption of the financial crisis, stock markets have staged a number of rallies that have faltered and only weeks ago the talk was of a weaker-than-expected recovery.
“The overall picture suggests that the road ahead won’t be bump-free and that the market may change moods with little notice,” analysts at Goldman Sachs said.
British Prime Minister Gordon Brown, who had to contend with data on Friday showing the British economy contracted by 5.6 percent in the three months to the end of last month, urged everyone to stay on his or her guard.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat
RSS