Monday, January 5, 2009

You need to be sitting down for this... Robert Peston offers some good news!!!!!!!!!!!!!!!!

Robert Peston has taken on the role of the "grim reaper" in economic terms over the last few months.

So one is almost tempted to reach for the "trebles all round" icon upon reading his good(ish) news for today:

...for biggish British companies this morning, there's some good news on this, the first proper business day of the new year.
What I mean by this is that there's no news of any significance from them - and that's good news.
If trading by retailers over Christmas had been even worse than investors had been led to expect, there would have been emergency announcements by those retailers (under Stock Exchange rules).
So in the coming few days we can expect the likes of Marks & Spencer, Next and Debenhams to say - in their scheduled trading updates - that turnover per square foot of selling space is falling pretty sharply and that profit margins have been squeezed by heavy discounting and promotions. But we knew that.
And we can be fairly confident that they remain on course to meet much reduced expectations for their profits this year (a bit over £600m in the case of Marks & Spencer, down from £1.1bn last year, or an eye-watering drop of around 45%).
More generally, the question to be asked is whether most of the bad stuff that could happen to companies is already discounted in stock market prices.
Analysts are forecasting that the earnings of European companies will fall fairly sharply this year and that those of US businesses will drop in the first half before recovering. The outlook is more mixed in Asia.
Against that ostensibly gloomy background, stock markets have been rising fairly generally over the past two or three weeks. The FTSE-100 is now more than 20% above its low point of last year. The S&P 500 is 26% off its 2008 bottom. Asian stocks have been rising solidly for the past eight days.
Shome mishtake, shurely?
Not at all.
Stock markets are looking at the prospects for 2010 and 2011. And however rotten 2009 will turn out to be, in the form of companies going kaput and unemployment rising sharply, investors are increasingly confident that armageddon has been avoided.
They look at the way that central banks have slashed interest rates and are - in effect - dropping money from helicopters. They look at Barack Obama's plan to pump something over $700bn into the US economy in the form of tax cuts and public spending. And they conclude that an economic turn for the better must surely come towards the end of 2009.
Here are a couple of almost needless words of caution.
Stock markets aren't always right (we've all learned that painful lesson in the past couple of years, haven't we?).
And, as and when we see the green shoots, they may be fragile, stunted and spotted with a disease called inflation
.

Mark that well. Robert Peston, yes - Robert "The end of the world is nigh" Peston - says "armageddon has been avoided"!

Crikey!

Let's all go out and celebrate!

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