Archive

Reuters blog archive

from Counterparties:

MORNING BID – The Beautiful Game, and Less Beautiful Markets

In two days the World Cup will open in Brazil, with the home country generally believed to be the favorite once again. There are others better placed to look at the odds for every country, though at least this year will avoid the spectacle of seeing thousands of Brazilians hang around after their team has been vanquished (the Brazilians tend to book hotels through the end, assuming they'll be there in the final - hence lots of them out all night in Berlin in 2006 when it was Italy and France going for the cup). For the short-term investing crowd, there's some reason to bet on the winner too - Goldman Sachs, in a report so detailed it makes us wonder about their obsessiveness with the game - points out that the winners tend to outperform in the stock market after the final.

"On average, the victor outperforms the global market by 3.5% in the first month – a meaningful amount, although the outperformance fades significantly after three months," they wrote in a 67-page bit on the World Cup and economics. "But sentiment can only take you so far, in markets at least – the winning nation doesn’t tend to hold on to its gains and, on average, sees its stock market underperform by around 4% on average over the year following the final." Host nations also tend to see outperformance too - about 2.7 percent for the month following, though, again, the glow of hosting a whole load of 1-0 matches tends to fade over time, leaving investors with other things on their minds, like fundamentals, and maybe all the debt the host took on to build a truckload of stadiums.

A man walks near the construction site for the light-rail that was planned to be ready in time for the 2014 World Cup, in Fortaleza. REUTERS/Davi Pinheiro/Files

A man walks near the construction site for the light-rail that was planned to be ready in time for the 2014 World Cup, in Fortaleza. REUTERS/Davi Pinheiro/Files

The problem for the Brazilians at this time is the country's weak growth: between 2011-2014 the country's average real annual growth is about 2 percent, with inflation of about 6 percent. Brazil has elections coming, so that positive glow may fade shortly after the cup ends and investors look to the possible re-election of President Dilma Rousseff in October. Her polling figures have been fading, which has helped the equity market, but Goldman notes that the country has challenges that would stymie the best goalkeeper: the need to disinflate the economy, improve domestic investment sentiment and do a lot of structural reforms. The country has not gotten the infrastructure that it was promised in time for the World Cup while building a whole load of stadiums for the FIFA tournament. Brazil's best efforts will be watched, especially as Rio de Janeiro hosts the Summer Olympics in 2016.

from MacroScope:

ECB – stick or twist?

 

The European Central Bank meets today with emerging market disorder high on its agenda.

It’s probably  too early to force a policy move – particularly since the next set of ECB economic and inflation forecasts are due in March – but it’s an unwelcome development at a time when inflation is already uncomfortably low, dropping further to just 0.7 percent in January, way below the ECB’s target of close to but below two percent.

from The Great Debate:

Democracy emerges in sub-Saharan Africa

The recent re-election of Zimbabwe’s 89-year old president Robert Mugabe, in office for 33 years, resembled a period not long ago when sham elections were the norm in sub-Saharan Africa. Peaceful transitions of power were almost unheard of.

Though the African Union disappointingly endorsed the elections as “honest and credible,” Zimbabwe’s electoral commission has now faced a spate of resignations and international condemnation over allegations of vote-rigging, intimidation and state media control.

from Global Investing:

The Sub-Saharan frontier: future generations

As growth in Sub-Saharan Africa is set to post a steady 5-6 percent per annum to 2017 according to IMF estimates,  investors will be taking notes on the region's growth story not least with the financial sector.

Growth projections have rebounded from forecasts of around a 3 percent rise in 2009 after falling commodity prices have hit one of the region's main revenue sources. Yet, according to the World Bank's recent Global Development Finance report, stronger commodities will firm growth prospects in the coming years. In recent weeks, commodities have dipped, dampening the outlook for some resource-rich countries, but as 76 percent of the region's population do not have access to a bank account, lenders are set to grow their presence in the region.

from Global Investing:

New frontiers to outpace emerging markets

Fund managers searching for yield are increasing exposure to frontier markets (FM) as a diversification from emerging markets (EM), as the latter have been offering negative relative returns since January, according to MSCI data.

Barings Asset Management  said on Monday it plans to launch a frontier markets fund in coming weeks, with a projected 70 percent exposure to frontier markets such as Nigeria, Saudi Arabia, the UAE, Sri Lanka and Ukraine.

from Global Investing:

Ratings more than a piece of paper for Africa

By Stephen Eisenhammer

Does a sovereign credit rating from a glass tower in London or New York impact life in the country being rated? Apparently in Africa it does.

According to research by the rating agency Fitch, sovereign credit ratings significantly boost foreign direct investment (FDI) to Africa.

from Reuters Soccer Blog:

Soccer Break Wednesday

SOCCER-FRIENDLY/Now the international period is over we can focus on domestic issues again, or can we?

Tuesday's matches provided plenty of drama, from the battles Spain and the Netherlands had to fight to get through tricky Euro 2012 qualifiers, to Ghana's lighting up of London, to Australia's World Cup revenge against Germany in a friendly.

from Reuters Soccer Blog:

Soccer Break Tuesday

SOCCER-FRIENDLY/Spring is here and love should be in the air, but instead all we're left with is bickering managers.

Fabio Capello and Jose Mourinho are no strangers to controversy, so it's no surprise to see them at it again, though the timing is odd. Mourinho still has it all to prove at Real Madrid over the next two months, while Capello has yet to truly inspire confidence in England fans.

from Reuters Soccer Blog:

Reuters World Cup 2010 podcast — quarter-finals (II)

Listen!

Join us for a look back at the extraordinary first two quarter-finals at the World Cup and a look forward to Germany v Argentina and Spain v Paraguay. Paul Radford, Felix Bate, Jon Bramley and Kevin Fylan argue over the merits of penalty goals in soccer and consider Ghana's desperate misfortune.

from Reuters Soccer Blog:

Did the punishment fit the Suarez crime?

SOCCER-WORLD

When Uruguay's Luis Suarez handled the ball in the final seconds of extra-time in the World Cup quarter-final against Ghana, the ball was heading across the line for a dramatic winning goal.

The officials did well to spot the offence in a crowded area at the end of what must have been a tiring encounter to be in charge of. But did the punishment of a penalty and a red card for Suarez really fit the crime?

  •