Are we seeing the 'Green shoots' finally??

Recently, there has been some revival in the global market. So the question is that are we really beginning to see ‘green shoots’ of recovery?

People like Ben Bernanke of Federal Reserves and Baroness Vadera, the Business Minister and one of Gordon Brown's closest allies are some of the optimists. Well, Baroness Vadera was criticized and was accused of being "out of touch" and "living in a parallel universe" as thousands of jobs were lost every week in UK. Mr Bernanke predicted in a television interview that America's worst recession in decades likely will end this year, and that the economic recovery would gather steam next year. However, his remarked was once again drawn parallel with more job losses looming on the horizon, and some experts have predicted that the Fed chief's 'green shoots' of revival may yet be a false dawn. Predicting that no more big banks will fail, Bernanke also called on Washington's wrangling politicians to show the will needed for economic recovery as he pointed out how close the world came to financial meltdown last autumn .Bernake underscored the severity of the economic crisis and was of the view that depends on fixing the crisis-hit US banking system.

So what is the reason for such optimism? Well, US Treasury bill prices have been falling and yields rising, an indication that some of the money that had rushed to this safe haven is venturing out again. The US TED spread, or the difference between the three-month dollar Libor (London interbank offered rate) and three-month treasury bills, a measure of risk aversion, is now down to levels last seen in the middle of August. Fund tracker EPFR Global says investors are pulling out of US money-market funds and heading to emerging-market equities, high-yield bonds and US growth funds. Junk bond yields have declined.

There have also been some recent positive signs among the “fundamental” indicators. Chief among them are the purchasing managers’ surveys, which show that although the global economy continues to contract, the pace of contraction has slowed. In China, government bond prices have declined for the third week running on hopes of an economic recovery after the country’s banks lent record amounts in January. The UBS Bloomberg Constant Maturity Commodity Index has been bumping along at the 850 level for the last month, off the depths it plumbed last December. There has also been a surge in the Baltic Dry Index (BDI), which has more than doubled from its December lows. Shipments of iron ore to China have resumed and prices have moved up. Chinese steel prices are up smartly from their lows. Back home, too, there is some encouraging news. Automobile sales, for instance, seem to have picked up. Cement dispatches are robust. Tata Steel recently reported its steel sales were up 26% year-on-year in January. Even Indian stock markets have rallied hard and the BSE has finally crossed 10000 mark.
In the US, the Obama administration is taking radical measures to free the banking system to add to the Fed's historic untying of knots monetary policy and the recent one being the 1 Trillion dollar Budget amidst heavy criticism. Central banks in the United States and the United Kingdom are pumping billions of dollars into the economy. Even the Bank of England, which was ultra-cautious for the first year of the crisis, is now is at forefront to offer aid to the stricken banking sector and measures to boost the money supply.
So considering the aforesaid trends, could the worst be over? Have we finally seen the ’bottom’ and the Bull is ready to take on the Bear? Well, it is too early to comment on the ‘Green shoots’ and the global endeavours are the need of hour to avert this financial Armageddon. The crisis is looming large and the onus is upon the statesmen world over to work in a direction to deal with this crisis to ensure the nullification of the same to be a matter few years instead of decades. I agree with when Neil Cumming, who manages the PSigma UK Growth Fund, said: "It is too early to declare the presence of the green shoots of recovery, but the frosts are at least receding."