Let's Just Call it Good News

06/14/2013 5:00 am EST

Focus: MARKETS

Jim Jubak

Founder and Editor, JubakPicks.com

The markets shouldn't have reacted as positively as they did to middling economic data, but players were clearly desperate for reasons to be upbeat, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

So far, better than expected economic numbers from the United States have been enough to stem the overnight rout that started in Asian markets.

Nothing better exemplifies this "finger in the dike role" than the difference between the overnight close for the Nikkei-225 index in Tokyo—a loss of 6.35%—and the gains on the ADRs of Japanese stocks trading in New York today. Overnight:

  • Toyota Motor was down 4.61%, but in New York, the ADRs (TM) closed up 1.82%.
  • Mitsubishi UFJ Financial fell 4.47% in Tokyo, but the ADRs (MTU) were up 2.45% in New York.
  • Sumitomo Mitsui Financial fell 3.96% in Tokyo, but the ADRs (SMFG) climbed 2.7% in New York.

(Toyota Motor and Mitsubishi UFJ are both members of my Jubak's Picks portfolio.)

The good news from the US economy came in the form of better than expected retail sales for May and better than expected initial claims for unemployment for the week ended June 8. Retail sales climbed 0.6% in May, an improvement on the 0.1% growth in April and ahead of the 0.4% gain projected by economists. Initial claims for unemployment dipped to 334,000 for the week ended June 8, from 346,000 the prior week. Economists surveyed by Briefing.com had expected 345,000.

Neither set of numbers was especially strong. Almost all of the upside for retail sales came from a 1.8% jump in auto sales that isn't likely to be repeated. The initial claims number continues a pattern of hovering on either side of the 350,000 mark that's compatible with monthly job gains of 175,000 to 200,000.

But coming (as these numbers did) after markets had been spooked by a World Bank report that cut the forecast for global economic growth in 2013 to 2.2% from the previous 2.4%, the US good news was good enough to stem the rout.

There is nothing in this data, however, to produce a longer-lasting recovery in global stocks, bonds, or currencies. I think that will have to wait until after the Federal Reserve meets next Wednesday...and, in all probability, takes no action on tapering or anything else. In its current mood, financial markets could well regard Fed inaction as a disappointment.

I think we're still looking for markets, especially emerging markets, and the market for the dollar to find a bottom.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of Mitsubishi UFJ Financial and Toyota Motor as of the end of March. For a full list of the stocks in the fund as of the end of March, see the fund's portfolio here.

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