The world may have bounced back from the last week’s Fukushima-Libya driven chaos, but as David Rosenberg of Gluskin Sheff notes, there are several unknowns still out there about the global macro picture.
There are so many crises playing out right now, that it’s difficult to keep track of all the potential implications.
Rosenberg has outlined 10 you need to monitor, and we have them for your here.
David Rosenberg: Despite the success of the Allied air raids, Libyan oil production is not coming back for at least six months and the situation in Bahrain could hit an acute stage; there are more upside than downside risks to the oil price.
Continuing unrest in the Middle East and increased demand in Japan has driven up oil prices.
David Rosenberg: Japan was already the number-one importer of liquefied natural gas (LNG) and this status will be accentuated as replacements for a damaged nuclear grid is sought.
David Rosenberg: Nuclear energy development takes a near-term hit here by the politics of the Japanese crisis but not a permanent hit (weekend FT editorial was spot on with this file), but in the interim natural gas and coal should really benefit.
David Rosenberg: The aftershock in Japan will be related to contaminated food supply so we can expect to see more inflation on this score too. Looking at the U.S. PPI data, the producers have been successful in passing on the increases to the food retailers.
With global food prices rallying, contaminated food is going to cut supply, with price rises potentially spilling over into core inflation.
David Rosenberg: With Mizuho shuttering 38,000 ATMs due to the crisis, one has to wonder the extent of any fallout on the country's banking system. That said, the Nikkei is the only major market trading at book value, so the market itself would seem to have little downside from here.
Japan's central bank pushed $539 billion into the market to boost the market and the Nikkei has rallied. Investors are drawn to Japan because its stocks are cheap. Whether its banking system is stable is still uncertain.
David Rosenberg: The gold market has a new buyer -- Iran, as it reduces its exposure to U.S. dollars and lifts its bullion reserves (to over 300 tons).
Oil countries trade in dollars and fear having their assets frozen. Political tensions have made Iran and other Middle Eastern countries opt for bullion and increase their gold reserves.
David Rosenberg: Whether QE2 morphs into QE3 will be making the headlines more and more. A CNBC poll showed one-third of portfolio managers positioned bullishly for this. I just cannot see how the Fed can justify doing this as early as June when we will likely be seeing headline CPI inflation in the U.S. at 4.5% and PPI inflation near 8%. Remember, there is an 86% correlation between the movements in the Fed balance sheet and the direction of the S&P 500 over the past two years.
David Rosenberg: U.S. real average weekly earnings are down in each of the past four months (and five of the past six), and at a -4% annual rate. So the problem is that even though the labour market is getting marginally better, wages are not keeping up with prices, which means a big squeeze on real income and spending. The incremental stimulus for the U.S. consumer ends this quarter. Big problem for the consumer discretionary group. Also consider that in the past six months, 90% of the wage gains incurred by the household sector has been absorbed by the food and energy bill.
David Rosenberg: For the first time since last November, we are starting to see real GDP and earnings downgrades in the U.S.A. -- this is a sign to be favouring defensive paper over domestic cyclical securities.
Moody's has been threatening to downgrade the US for a while, but fear of risk may drive the market back into bond and dividend paying stocks.
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