“Sovereign-International”– China/US GDP Revisions Spook Rally …

“Sovereign-International”: Investors are beginning to question the legitimacy of the recovery.

“Sovereign-International” apparently believe that investors are beginning to question the legitimacy of the global economic recovery after two sets of GDP data were released within 24 hours of each other.

The first, from the US Federal Reserve, showed that the Federal Open Market Committee (FOMC) revised its forecast for US GDP growth downwards from 3.2-3.7% to 3-3.5% and the rate of unemployment upwards to 9.2% from 9.1%. The second saw China’s GDP slowed to 10.3% against expectations of 10.5%. Both numbers saw mining stocks and financial sell off before trading flat into the day.

“Sovereign-International” analysts said that the drop in China’s GDP was not a major issue in and of itself because the country was deliberately trying to cool the pace of growth is certain markets including real estate. The US GDP figures, they said, were more of a problem because they come against a backdrop of record stimulus and loose monetary policy that is unsustainable over the medium term.

One “Sovereign-International” analyst said, “One has to remember that the US has pumped trillions of dollars into its economy but it hasn’t got a lot in return for that expenditure whereas China has grown at an impressive clip since their stimulus implementation”.

The firm said that there is an inevitable retrenchment in equity values on the horizon and urged its clients to remain in cash or short the equity markets.