No Growth in China and Other Outrageous Prophecies
Friday, December 19, 2008
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This year has been marked by astonishing and market-changing events including a
$100 fall in the price of oil, the drop to zero of U.S. interest rates and the
collapse of Wall Street giants such as Lehman Brothers.
Next year could bring more, equally unbelievable, happenings such as another
400 points being wiped off the S&P 500 and a slump in Chinese growth to zero,
according to a report from Saxo Bank titled "10 Outrageous Claims 2009."
1. Iranian Revolution
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If oil prices continue to decline, which Saxo Bank believes they will, the
Iranian society will be badly affected due to the country's reliance on its
number one commodity. The government may not be able to provide the basic
necessities its citizens need, which would lead to widespread social unrest,
according to Saxo Bank.
2. Crude Oil to $25
The ongoing economic crisis will further dent oil demand throughout next year,
sending the price ever closer to $25 a barrel, Saxo Bank said. OPEC production
cuts will be hampered by disagreement and fail to stem the slide, it added.
3. S&P 500 to 500
The S&P 500 will fall to 500 points in 2009 as slowing corporate earnings will
drag on the U.S. index, according to Saxo Bank. Earnings will slow because of a
continued consumer recession, lead by the credit shortage. An increase in
corporate funding costs, falls in house prices and a slowdown in investing
programs will also add to the weakness, the report said.
4. Italy Could Drop the Euro
Italy could make good on threats to leave the European Exchange Rate Mechanism
(ERM) and may drop out in 2009, Saxo Bank said, a decision which would mean the
country effectively gives up the euro. The EU is likely to crack down on
excessive government budget deficits, which could prompt Italy to leave the
currency regulation, it said.
5. Australian Dollar to Slump vs Yen
The Australian dollar will sink to 40 Japanese yen as next year's continued
slump in commodities hurts the Australian economy, Saxo Bank said. The whole
commodity complex will be left dead in the water for the next ten years, the
report said.
6. Dollar to Outstrip the Euro
The euro will fall to 0.95 cents versus the dollar in the New Year, before
shifting direction and rising to 1.30 cents, according to Saxo Bank. The
euro-zone will face a tough year in 2009 as the banking sector will suffer
because of its exposure to Eastern Europe, a region that will increasingly
falter next year, the report said.
7. Chinese GDP Growth to 0%
Export-led China will be hit by the double blow of a slowing U.S. economy and
the souring of commodity-based investments, according to Saxo Bank. Japan will
not actually sink into recession, despite gross-domestic-product growth all but
disappearing, the report said.
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8. Eastern European Forex Pegs to Fail
Several of the Eastern European currencies currently pegged or semi-pegged to
the euro will come under increasing pressure to decouple next year, the report
said. The emerging economies are vulnerable to more credit-market disruptions,
it added.
9. Commodities Prices to Plunge
Commodities are facing widespread weakness next year with the Reuters/Jefferies
CRB Index to drop 30 percent, according to Saxo Bank. The consensus belief that
demand has been outstripping supply for years might not even be true and more
stockpiles could be revealed, the report said.
10. Yen to Become Currency Peg
Asian countries could shun dollar pegs in favor of the Chinese yen next year,
according to Saxo Bank. China's economic, political and cultural influence is
growing and shifts in market re-evaluations will favor the country, the report
added.
