Economic Outlook: Emerging trends

NEW YORK, July 13 (UPI) -- Asian markets were sharply lower Monday, on a day marked by merger news in the airline and food industries in China and Japan.

China Eastern Airlines said it was prepared to purchase Shanghai Airlines in a share swap worth $1.3 billion, The New York Times reported. In Japan, Suntory Holdings said it was in talks to merge with Kirin Holdings, which would form a giant food group by any measure. Last year, the two companies combined to sell $41 billion worth of food and beverages.

On Monday, the Nikkei average in Tokyo dropped 2.55 percent, while the Hang Seng index in Hong Kong exceeded that loss with a 2.56 percent drop. The Singapore Straits Times fell 1.79 percent, while the S&P/ASX in Australia fell 1.49 percent.

In Korea, the Kospi index dropped 3.5 percent. The Taiex index in Taiwan fell 3.5 percent, as well. In emerging markets, the MSCI index dropped 2.22 percent.

As investors contemplate the shape of the recovery -- looking for a straight "V" that signals an unimpeded return to growth -- emerging markets are, well, emerging as the surest bet for a beeline to bull markets. The Standard & Poor's 500 put on a 15.2 percent spurt in the second quarter, but portfolios specializing in emerging markets jumped 35.1 percent in the past three months, Morningstar reported.

Emerging markets were largely held back by poorly performing industrial markets, where the customers and investors reside. The slump that was heard round the world in 2008, pushed the same portfolios down 54.4 percent last year -- placing the charge-ahead recovery shy of a bull market, but raising eyebrows, nonetheless.

In some ways, analysts said, the performance of markets in China, Brazil and India are like excited dogs on a short leash. As investors in super rich markets pulled back a year ago, "you had to sell what you owned … and that's what everybody owned," John Maxwell, manager at Ivy International Core fund, told the Times.

Everybody, in other words, divested their portfolios of promising stock, not out of choice, but desperation. Nonetheless, the undertow was palpable.

At this point, investors are comparing styles, wondering which market can get back on its feet the quickest. In Germany and Japan, the Times said, industrial production is at 40 percent to 60 percent of capacity. In Japan, factories where robots make robots are sitting idle, the robots frozen in place. It would seem a recover there only requires flipping a switch. But recovery may be fastest where labor is cheap and plentiful or where commodities are a sizable portion of the gross domestic product.

In Europe, markets tipped marginally higher. In midday trading, the FTSE index climbed 0.49 percent, while the CAC 40 in Paris rose 0.29 percent. The DAX 30 in Frankfurt rose 0.73 percent, while the broader DJStoxx 600 rose 0.11 percent.

Investors will look at U.S. retail sales Tuesday and keep an eye out for the Bank of Japan's interest rate decision Wednesday. A U.S. consumer price report is also due Wednesday, while on Thursday an increasingly important weekly report on U.S. jobless claims is due.