Economy requires further monetary action: Ahluwalia (ET)

"The deputy chairman of planning commission, Montek Singh Ahluwalia has indicated further changes in the monetary policy as part of second stimulus package.

"With economy growing below potential and inflation on its way down, there is a scope for further monetary action," Montek Singh Ahluwalia told reporters at the planning commission."

My Comments:Rate cuts on the way. Great for long bond positions. Great for PSU banks with big bond portfolios.

Japan suffers record fall in output (FT)

"Japanese industry suffered a record fall in output in November as unemployment continued to rise and household spending kept sliding, the latest set of gloomy figures from the world’s second-largest economy showed on Friday.

November’s 8.1 per cent month-on-month decline in industrial output, which followed a long series of bad news from Japanese government statisticians, was “particularly striking”, Kaoru Yosano, minister for economic and fiscal policy, told a news conference."

My Comments:The only forward looking message from this data seems to be extreme global competitive pressures and consequent price cutting. Not a good picture for corporate profits - something equities already account for.

Second stimulus may be the last (ET)

"Feedback that government has been receiving has seen industry urging it to deliver a "message of hope" and this lay in managing perceptions of doom and gloom, which have been enforced by news of falling revenues, operational losses and lay-offs. Recognising deepening investor anxiety and hesitancy, government is keen to prevent a "negative cycle" from gathering momentum -- where bad news becomes a self-fulfilling prophesy."

My Comments: Expectations are key. It is undeniable that burgeoning exports drove a large part of the industrial boom in the mid-oughts. Policy stimulus helps, but will not mark the bottom in domestic equities. Global factors assume much greater importance. The impact on markets should prove ephemeral.

Retail Sales Plummet (WSJ)

Source: Wall Street Journal


My Comments: The sustainability of the current rally in risky assets seems suspect. Spending data continues to be dismal in the US. What will convince me that the tide has turned? Improvement in credit markets - both price and quantum.

Money market funds reel as yields near zero (FT)

http://www.ft.com/cms/s/0/813bd074-cf8b-11dd-abf9-000077b07658.html

My Comments: Large cash chests and low yields should support risky assets in 2009.