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from Global Investing:

Three snapshots for Tuesday

The euro zone just avoided recession in the first quarter of 2012 but the region's debt crisis sapped the life out of the French and Italian economies and widened a split with paymaster Germany.

Click here for an interactive map showing which European Union countries are in recession.

The technology sector has been leading the way in the S&P 500 in performance terms so far this year with energy stocks at the bottom of the list. Since the start of this quarter financials have seen the largest reverse in performance.

from MacroScope:

“There are human beings involved” in austerity debate

The inventors of democracy and its greatest 18th century champions both go to the polls this weekend. Greek and French voters will try to elect governments they hope will help release their economies from the grips of the euro zone debt crisis.

While exercising their democratic vote, Europeans will also be contemplating another key issue: their basic economic survival.

That is why the debate about austerity versus growth has become so important.

Financial markets see fiscal discipline as crucial to get the euro zone's debt burden back to sustainable levels. They are going into the Greek elections favoring triple-A rated bonds over peripheral counterparts.

The premium investors require to hold French debt over German Bunds has also risen in the run-up to the French vote as Francois Hollande became the favourite to win.

But as economies fall deeper into recession and double-digit unemployment hurts prospects for growth, the view that austerity alone will not solve the euro zone debt crisis, seems to be gradually winning over some investors in the bond market – the heart of the crisis.

Sanjay Joshi, head of fixed income at London and Capital, says:

from MacroScope:

Europe in recession – an interactive map

Spain has become the latest European country to slip into recession joining the Belgium, Cyprus, The Czech Republic, Denmark, Greece, Italy, The Netherlands, Ireland, Portugal, Slovenia and the United Kingdom.

Click here to view an interactive map.

*Updated to include Romania and Bulgaria

from MacroScope:

More Americans find aging is a gateway to poverty

Over the last several years, more Americans have found that aging has left them in the clutch of poverty. Between 2005 and 2009, the rate of poverty among American seniors rose as they aged, as did the number of people entering poverty, according to a new report from the nonpartisan Employee Benefit Research Institute (EBRI).

Poverty rates fell in the first half of the last decade for almost all age groups of older Americans (defined as age 50 or older) but increased since 2005 for every age group. Says Sudipto Banerjee, EBRI research associate and author of the report:

As people age, personal savings and pension account balances are depleted, and as people age, their medical expenditures tend to increase.

Compounding the problem, the odds of suffering a health condition - acute or otherwise - goes up 45-55 percent for those below the poverty line, he said.

Poverty rates, as defined by U.S. Census poverty thresholds, were highest for the oldest of the elderly. Almost 15 percent of Americans older than age 85 were in poverty in 2009, compared with approximately 10.5 percent of those older than 65, EBRI found. Additionally, in 2009, 6 percent of those age 85 or older were new entrants in poverty. Banerjee adds:

The rising poverty rates also correspond to the two economic recessions that occurred during the last decade.

Poverty rates for women were nearly double that of men for almost all years in the survey period. For example, in 2009, poverty rates were 7 percent for men and 13 percent for women. More than 1 in 5 (20.9 percent) single women over age 65 lived in poverty in 2009. The EBRI report found that in 2009, the poverty rate for Hispanics was 21 percentage points higher than for whites. For blacks it was 17 percentage points higher than for whites.

from Global Investing:

Research Radar: Very 20th century

Wednesday's market commentaries are loaded with the buzz around another technical UK recession in Q1 (the first time Britain has suffered what many see as a 'double-dip' since the 1970s); guessing about Wednesday's FOMC outcome; and the European Commission letting Hungary off the hook about its controversial constitutional changes. In aggregate, and probably due to the looming FOMC,  markets are fairly stable - world equities, including euro stocks, emerging markets and even Britain's FTSE are all higher. The US dollar, Treasuries,  volatility gauges, gold and even peripheral euro government bond yields are all down a bit.

Following is a selection of some of Wednesday's interesting research ideas:

- Barclays' Barry Knapp reckons US and world equities face a dilemma from the endless distortion to multiples and risk premia from monetary intervention and QE that is artifically lowering the risk-free rate akin to the "financial repression" of the 1950s -- no one is sure now if equity is cheap or bonds just very expensive. He concludes that best thing for equities in the medium to long term is to avoid further QE but the problem is that stocks will almost certainly suffer in the short run if the Fed takes QE3 off the table. What's more, Wednesday's FOMC could be problem for markets initally if the Fed frets about the growth outlook, but a worsening of the economy might bring QE3 sooner than similar bouts in 2010 and 2011.

- ING's James Knightley says UK GDP numbers mask business survey improvements and better March data and expects the economy to return to growth in Q2 as well as upward revisions to Q1. Flagging up improving business sentiment in the April CBI survey, he says the Bank of England is unlikely to do more QE and reckons any post-GDP rally in gilts or fall in sterling should be short-lived.

- However, Citi's Michael Saunders is far gloomier in flagging " the worst recession/recovery cycle opf the last 100 years" and dismisses suggestions that the persistent weakness of the economy since 2008 can be blamed on things like quarterly construction swings. "We expect the economy will continue to underperform, given the headwinds from fiscal drag, high household debts, the EMU crisis and poor credit availability. A less-tight fiscal policy probably would not help significantly, given the likelihood that fiscal slippage would trigger market pressure. A lower pound would help, but the key policy lever is QE and we continue to expect extra QE."

- Standard Chartered reckons it's time to book profits on a short EUR/GBP position, as the market looks primed for a correction. "An unexpectedly weak UK GDP report for Q1 has tempered expectations the economy will outperform"

- Societe Generale's cross-asset team says it remains bullish on crude oil prices due to supply and capacity worries and geopolitical concerns and it targets $135 per barrel for Q3 -- a price they say is not priced into futures markets. They say portfolios should be hedged for the possibility that 20-year-high oil/equity correlations will drop sharply and there several ways to gain exposure to rising crude -- Brent Sept call option spreads, US 5-year inflation-protected TIPS, long global oil services stocks, long Russia's rouble and Mexico's peso and short Thailand's baht and Korea's won. Seperately, SG's Dylan Grice worries about Australia -- "What do you call a credit bubble built on a commodity bull market built on a much bigger Chinese credit bubble? Leveraged leverage? A CDO squared? No, it's Australia."

from MacroScope:

UK recession in charts

Britain's economy slid into its second recession since the financial crisis after official data unexpectedly showed a fall in output in the first three months of 2012:

Starting real GDP at 100 in 2003 for the UK, U.S. and euro zone shows UK GDP flat since mid-2010 and well below the 2007 peak.

Survey data had been suggesting a stronger GDP number and perhaps points to upwards revisions to come.

As this chart shows past revisions have been substantial.

from Global Investing:

Hair of the dog? Citi says more LTROs in store

Just as global markets nurse a hangover from their Q1 binge on cheap ECB lending -- a circa 1 trillion euro flood of 1%, 3-year loans to euro zone banks in December and February (anodynely dubbed a Long-Term Refinancing Operation) -- there's every chance they may get, or at least need, a proverbial hair of the dog.

At least that's what Citi chief economist Willem Buiter and team think despite regular insistence from ECB top brass that the recent two-legged LTRO was likely a one off.

Even though Citi late Wednesday nudged up its world growth forecast for a third month running, in keeping with Tuesday's IMF's upgrade , it remains significantly more bearish on headline numbers and sees PPP-weighted global growth this  year and next at 3.1% and 3.5% compared with the Fund's call of 3.5% and 4.1%.

But its euro zone calls are gloomiest of all. First off, it sees two consecutive years of economic contraction of the bloc as a whole -- a 1.0% shrinkage this year followed by 0.2% drop in 2013. Against this dire backdrop, it expects  Spain to be forced to seek Troika (EU, IMF and ECB) support later this year that will be focussed on recapitalizing and restructuring its ailing banks and it also expects both Portugal and Ireland to need second bailouts from the same source.

And with that sort of pressure from deleveraging, austerity, sovereign debt stress and recession , the ECB will have to bring out yet another punchbowl, it reckons.

We expect that renewed EMU strains will prompt the ECB to launch at least one more multi-year LTRO and continue to pencil in one or two more rate cuts by end-2013.

Yet, just like the euphoric effects of both the binge and "morning after" drink, the problem with LTRO is that it risks causing more problems than it solves by tying the banks of weak peripheral euro states ever closer to their ailing sovereigns.

from The Great Debate:

Let’s stop talking about a ‘double-dip’ recession

Barely a day goes by without some expert publicly worrying whether or not the U.S. economy will fall into a “double-dip" recession. In a CNBC interview last September, investor George Soros said he thought the U.S. was already in one. Earlier this month, the former chief global strategist for Morgan Stanley cited an academic study to argue that “after every financial crisis there's a long period of much slower growth and in almost every case you get a double dip.” Granted, this is a minority view; most economists are predicting sustained modest growth for the near future. Which makes sense, because while few are thrilled with the pace of comeback, the U.S. economy has grown for 11 consecutive quarters, beginning in mid-2009.

But given that the recovery is approaching its third birthday, how far away from the Great Recession do we need to get before another downturn would be considered not a “second dip” but simply a separate recession instead?

For all its ubiquity, there is no uniform definition of what a "double-dip" recession is; even the origins of the term are hazy. One analyst wrote in a 2010 research note that the term dates from about 1994, when there was concern about sliding back into the 1991 recession. But Safire’s Political Dictionary traces the term to a 1975 BusinessWeek article, attributing it to an unidentified economist in the Ford administration. (Tellingly, the "double dip" the government feared back then did not actually materialize.)

Much of what is meant by “double-dip" recession is intuitively clear: It’s what happens when a recovery is so feeble that, soon enough, an economy sinks back into contraction. It’s the “soon enough” part that no one can agree on. Investopedia defines double dip as “when gross domestic product growth slides back to negative after a quarter or two of positive growth.” If that were the case, fear of a double dip would long ago have subsided.

Of course, an imprecise term need not be useless. There can be good conceptual and historical reasons for associating an economic downturn with one that preceded it. Many Americans naturally think of the Great Depression as a single, sustained economic horror that began with the stock crash of 1929 and didn’t end until the U.S. entered World War Two at the end of 1941. Technically, that’s not true; the U.S. economy actually began growing in 1933 and continued to grow until 1937, when a second dip hit. But the economy had shrunk so severely in the first dip that it never got back to its pre-’29 level by the time it began contracting again – which redeems the popular fusion of two recessions separated by a weak recovery into one Great Depression. Some economists have claimed, more contentiously, that nearly back-to-back recessions in 1980 and 1981-82 qualified as first and second dips.

But that’s not what’s happened this time around. According to the Bureau of Economic Analysis (BEA), the American economy bottomed out in the Great Recession in the second quarter of 2009, when GDP sank to $13.85 trillion, a shrinkage of about 3.9 percent from the then-all-time high a year before of $14.42 trillion. Since then, we’ve far surpassed that previous high-water mark, with current GDP at $15.32 trillion. One way to think about this: The distance between where we are now and the previous high of 2008 is greater than the distance between that 2008 peak and the 2009 trough. Even using what BEA calls “chained 2005 dollars” (in other words, accounting for inflation), current GDP is higher now than it has ever been.

Why, then, do we keep hearing about a double dip, instead of a new recession? Part of the reason seems to be psychological, a sense that weaknesses that were manifest in the Great Recession – slow job growth, too much reliance on Federal Reserve activity – have not been fully addressed. As Alan Levenson, chief economist for T. Rowe Price, told me: "A turnaround always looks like a struggle. Each time we live through a slowdown, we feel like the economy can never grow again."

from Unstructured Finance:

UF Weekend Reads

A beautiful spring day in the NYC metro area. Let's Go Mets! Here's this weekend's stories courtesy of Sam Forgione.

From The New York Times: 

Jennifer Medina reports that California's economy is either booming and busting, depending on which city you're in.

From The Nation: 

William Greider has some suggestions on how the Federal Reserve can work with politicians to improve the housing crisis.

From Foreign Affairs:

from MacroScope:

Gimme a P, gimme an M, gimme an I

If you have ever wondered why financial markets and economists are interested in purchasing managers indexes, here is why: