Spread betters have drastically cut their expectations of a U.S. or Israeli air strike on Iran since Barack Obama’s re-election earlier this month.
This week’s interest rate meetings in the developing world are highlighting that despite slower economic growth, inflation remains a problem for many countries. In some cases it could constrain policymakers from cutting interest rates, or least from cutting as much as they would like.
We’ve wondered before about the validity of the British ‘shareholder spring’ narrative. A few high-profile casualties gave the story drama, but as we showed back in the summer, evidence of a widespread change in thinking was hard to find. KPMG has arrived at a similar conclusion this week.
It’s been another rum old week market-wise, with global stocks off another 2 percent or more and recording seven straight days in the red for the first time since August. Throw any spin you like at the reasoning, but the pretty predictable post-election hiatus on U.S. fiscal cliff worries now seem to be front and centre of everything. And that will just has to play itself out now, leaving markets stuck in this funk until they come up with the fix. The running consensus still seems to be that some solution will be reached, but no one wants to be too brave about it. And given the cliff is one of the few good explanations for the sharp divergence between the equity market and still rising US economic surprises, you can see why many feel the US fiscal standoff is merely delaying a resumption of the rally.
Frontier markets have an air of adventure and unpredictability about them. One is tempted to ask: Who knows what will happen next?
Global funds are having a good year.
According to a report by financial services lobby TheCityUK, pension funds, insurance funds and mutual funds are on track to finish the year with $21 trillion more of assets under management than when they hit rock bottom in 2008 with the Lehmann collapse.
Most everything got swept up in the US election over the past week but, for all the last minute nail biting and psephology, it was pretty much the result most people had been expecting all year. So, is there anything really to read into the market noise around the event? The rule of thumb in the runup was a pretty crude — Obama good for bonds (Fed friendly, cliff brinkmanship, growth risk) and Romney good for stocks (tax cuts, friend to capital/wealth, a cliff dodger thanks to GOP House backing and hence pro growth). And so it played out Wednesday. But in truth, it’s been fairly marginal so far. Stocks were down about 2 pct yesteray, but they’d been up 1 pct on election day for no obvious reason at all. But can anyone truly be surprised by an outcome they’d supposedly been betting on all along. (Just look at Intrade favouring Obama all the way through the runup). Maybe it’s all just risk hedging at the margins. What’s more, like all crude rules of thumb, they’re not always 100 pct accurate anyway. Many overseas investors just could not fathom a coherent Romney economic plan anyway apart from radical political surgery on the government budget that many saw as ambiguous for growth and social stability anyhow. Domestic investors may more understandably wring their hands about hits on dividend and income taxes, but it wasn’t clear to everyone outside that that a Romney plan was automatically going to lift national growth over time anyhow.
All eyes on Poland’s central bank this week to see if it will finally join the monetary easing trend underway in emerging markets. Chances are it will, with analysts polled by Reuters unanimous in predicting a 25 basis point rate cut when the central bank meets on Wednesday. Data has been weak of late and signs are Poland will struggle even to achieve 2 percent GDP growth in 2013.