David Rosenberg: Green Shoot Era Over?

In today's Breakfast with Dave, David Rosenberg, Chief Economist at Gluskin Sheff (ex-Merrill Lynch) discusses the sell-off that has begun in global equity markets overnight. Here is the summary from today's letter:

Equities are selling off with the global MSCI index off nearly 1.0% and the losses broadly based (Europe off 1.8%, Japan down 1.0%, Hong Kong losing 2.1%). Bonds are rallying 6 - 7 basis points here and across the pond. Commodities are facing a heavy round of profit-taking — gold down to a three-week low, copper slipping more than 3.0%, oil slipping 2.0%. The U.S. dollar is strengthening right across the board too — back below 1.40 on the Euro and the CAD is back above the 1.13 mark. The Asian FX complex and the commodity-based currencies are taking it on the chin.

There were no data releases today, so what has caused this reversal? More words, than deeds.
First, the G8 meeting ended with emphasis being placed on exit strategies that involve stimulus withdrawal. Investors have no clue how the global economy or the financial markets can operate on their own two feet, so investors are now voting with their pocketbooks. A future without a government subsidy doesn't look so promising for all these once-successful beta trades.

Second, the Russian finance minister Alexei Kudrin went on the wires claiming that Russia sees the U.S. fundamentals as being solid and that there is no replacement for the dollar. Spasiba.

Third, the head of New Zealand's Manufacturer's and Exporter's Association, John Wally, followed in Mark Carney's footsteps and said overnight that "I don't see any green shoots in our markets in New Zealand and the rest of the world." That's all this faith-based equity market rally needed to hear was that the green shoot era was over before the selling settled in.

Hans Heinrich, the President of Germany's Chamber of Commerce, also had the temerity to tell the Telegraph that funding conditions for German business was actually tougher now than it was at the peak in credit spreads. Now who wants to hear that? We're amazed that the comments were published.