Japan’s Horrific GDP Spiral Poses Major U.S. Stock Market Threat

Japan's GDP is crumbling, China's housing market is slowing and Germany's exports have stalled. How is the U.S. stock market at record highs?

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The global economic outlook saw another dark storm-cloud brewing on Sunday evening as Japan, the world’s 3rd largest economy, reported an eye-watering GDP number of -6.3% YoY, considerably worse than the already dire prediction of -3.7%.

With China posting its worst housing data since 2018, the question is, how bad do things have to get before the U.S. stock market starts taking notice?

Japanese GDP Shock Fails To Dent U.S. Stock Market Futures

With the S&P 500, Dow Jones, and Nasdaq all rallying overnight, Wall Street continues to prove resilient to geopolitical threats.

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Dow futures rallied on Sunday night even as Japanese GDP collapsed. Source- Yahoo Finance

As most U.S. economic data has been steadily slowing, it is consumer confidence that has proven to be the engine for growth. Seen as the world’s safe-haven stock market, investors appear confident that equities can continue to rise as the Federal Reserve pumps the market full of ample liquidity.

The Trump administration is only just admitting that the coronavirus will even impact U.S. GDP at all.

Despite this, even the most die-hard Dow bulls have to be getting a little nervous.

Starting with Japan and it’s horrendous GDP number on Sunday, we see one of the world’s largest economies utterly stagnating. What is most alarming is that there isn’t one drop of the inevitable coronavirus slowdown in that figure. Instead, a sales-tax hike and some extreme weather was the catalyst.

Hardly the strong showing you want from an economy heading into a major health epidemic. Unsurprisingly, Japan’s main stock market index, the Nikkei 225 dropped over 1% after the release but recovered on the unrealistic expectation that the Bank of Japan can increase stimulus in the economy.

Germany & China Were Already Slowing Before The Coronavirus

Moving over to the world’s second-largest economy, China’s house price data is the weakest since 2018. We are by no means seeing the full extent of the coronavirus impact yet, but an already vulnerable Chinese economy is showing its first signs of creaking.

Confirmed cases of the newly christened SARS-CoV-2, are now above 70,000, and Beijing is doing its level best to get the economy bacl up and running.

Given rampant speculation about the validity of the statistics being supplied to U.S. health authorities, the outbreak remains a source of extreme uncertainty. Not that you would know it looking at the Dow Jones barrel it’s way towards 30,000.

As if this wasn’t enough, the world’s second-largest economic area, the Eurozone is also turning down at precisely the wrong moment.

With the brewing storm of the coronavirus looming, export-reliant Germany, the economic engine of the region started slowing even before global trade ground to a halt.

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