Global Investing

Weekly Radar: Question mark for the ‘austerians’

April 25, 2013

One of the more startling moves of the week was the fresh rally in euro government debt – with 10-year Italian and Spanish borrowing rates falling to their lowest since late 2010 when the euro crisis was just erupting and 2-year Italian yields even falling to 1999 euro launch levels. The trigger? There’s been a slow build up for weeks on the prospect of new Japanese investor flows  seeking liquid overseas government bonds  – but it was signs of a sharp slowdown in Germany’s economy that seems to have had a perversely positive effect on the region’s asset markets as a whole. The logic is that German objections to another ECB rate cut will ebb, as will its refusal to ease up on front-loaded fiscal austerity across Europe. If its own economic engine is now suffering along with the rest, significantly just five months ahead of German Federal elections, then a tilt toward growth in the regional policy mix may not seem so bad for Berlin after all. And if euro economies are more in synch, albeit in recession rather than growth, then perhaps it will lead to a more effective regional policy response.

Weekly Radar: Second-guessing Japan flows as global growth slows

April 18, 2013

Figuring out what was driving pretty violent market moves this week was trickier than usual – and that says something about how much the herd has scattered this year, with ‘risk on-risk off’ correlations having weakened sharply. Just as everyone puzzled over a potential “wall of money” from Japan after the BOJ’s aggressive reflation efforts, the bottom seemed to fall out of gold, energy and broader commodity markets – dragging both equity markets and, unusually, peripheral euro zone bond yields lower in the process.  As dangerous as it may be to seek an overriding narrative these days, you could possibly tie all up these moves under the BOJ banner – something along these lines: the threat of a further yen losses pushes an already pumped-up US dollar ever higher across the board and undermines dollar-denominated  commodities, which have already been hampered by what looks like yet another lull in global demand. Developed market equities, whose Q1 surge had been reined in by several weeks of disappointing economic data and an iffy start to the Q1 earnings season, were then hit further by a lunge in heavy cap mining and energy stocks. The commodities hit may also help explain the persistent underperformance of emerging markets this year. What’s more the lift to Italian and Spanish government bonds comes partly from an assumption any Japanese money exit will seek U.S. and European government bonds and relatively higher-yielding euro government paper may be favoured by some over the paltry returns in the core ‘safe havens’ of Treasuries or bunds. The confidence to reach for yield has clearly risen over the past six months as wider systemic fears have receded – something underlined in dramatic style this week by a huge lunge in gold,  now lost almost 20 percent in the year to date.

New frontiers to outpace emerging markets

By Reuters Staff
April 8, 2013

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.

Weekly Radar-”Slow panic” feared on Cyprus as central banks meet and US reports jobless

March 28, 2013

US MARCH JOBS REPORT/THREE OF G4 CENTRAL BANKS THURS/NEW QUARTER BEGINS/FINAL MARCH PMIS/KENYA SUPREME COURT RULING/SPAIN-FRANCE BOND AUCTIONS

Russia’s consumers — a promise for the stock market

February 11, 2013

As we wrote here last week, Russian bond markets are bracing for a flood of foreign capital. But there appears to be a surprising lack of interest in Russian equities.

Emerging Policy-Doves reign

January 28, 2013

Rate cuts are still coming thick and fast in emerging markets — in some cases because of falling inflation and in others to deter the gush of speculative international capital.

Weekly Radar: Managing expectations

January 24, 2013

With a week to go in January, global stock markets are up 3.8 percent – gently nudging higher after the new year burst and with a continued evaporation of volatility gauges toward new 5-year lows. That’s all warranted by a reappraisal of the global economy as well as murmurs about longer-term strategic shifts back to under-owned and cheaper equities. But, as ever, you can never draw a straight line. If we were to get this sort of move every month this year, then total returns for the year on the MCSI global index would be 50 percent – not impossible I guess, but highly unlikely. So, at some stage the market will pause, hestitate or even take a step back. Is now the time just three weeks into the year?

Weekly Radar: Q4 earnings, China GDP and German elections

January 10, 2013

The first wave of Q4 US earnings, Chinese Q4 GDP  and European inflation dominate next week, while regional polls in Germany’s Lower Saxony the following Sunday give everyone a early peek at ideas surrounding probably the biggest general election of 2013 later in the year.

Emerging Policy-More interest rate cuts

December 17, 2012

A big week for central bank meetings looms and the doves are likely to be in full flight.

African growth if China slows

December 11, 2012

The  apparent turnaround in Africa’s fortunes over the past decade has been attributed to the rise of China and its insatiable appetite for African commodities. So African policymakers, like those everywhere, will have been relieved by the recent uptick in Chinese economic data.