In a note out today, Citi’s Steven Englander asks a simple question to those who are fretting about a big global trade slowdown.
If the world is so bad, why are freight transport equities up?
MSCI equity indices of world air freight and world marine firms are both up smartly since Q4, in line with, or more sharply than, the S&P. In fact Q4 was a local trough for both equities and global freight shares. Equity indices are attractive as an indicator of the state of global trade, because they would not be pushed up by higher energy prices, as shipping rate would be. I f anything, equity values would seem to be sensitive to the combination of slowing growth and higher energy costs. Overall along with the China manufacturing and non-manufacturing PMIs in recent days, which also show a moderate Q1 recovery from a Q4 trough, the indications are that trade and growth were in a mild upswing in Q1, in contrast to more pessimistic assessments of a sharp downturn outside the US.