Global Investing

Three snapshots for Wednesday

This chart shows the wide dispersion in equity market performance so far this year. In local currency terms Korea has a total return of nearly 12% and Germany over 10%, this compares to Italy at-6% and Spain at -16%.

In contrast to last year, this has driven average correlations between equity markets lower.

However, correlations may well pick up if markets move back into ‘risk-off’ mode. The chart below showing the weakness in the Citigroup G10 economic surprise indicator seems to be pointing towards further weakness in bonds relative to equities.

 

Three snapshots for Thursday

Weaker than expected economic data has pushed Citigroup’s G10 surprise indicator into negative territory. The indicator has tracked closely with the relative performance of equities vs bonds:

Italian business confidence fell unexpectedly to its lowest level in two and a half years on Thursday. Business confidence has historically given a good lead on GDP growth suggesting further weakness to come.

An update on currency moves against the dollar this year. Hungary tops the list, the EU opened the way to talks with Hungary on financial aid on Wednesday, ending a five-month dispute over the independence of its central bank. The UK pound and the euro remain positive for the year despite the UK falling back into recession and the continued euro zone crisis.