So, it’s May and time for the annual if temporary equity market selloff, right? Well, maybe – but only maybe. A fresh weakening of the global economic pulse would certainly suggest so, but central banks have shown again they are not going to throw in the towel in the battle to reflate. The ECB’s interest rate cut today and last night’s insistence from the Fed that it’s as likely to step up money printing this year as wind it down are two cases in point. And we’re still awaiting the private investment flows from Japan following the BOJ’s latest aggressive easing there.
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.
India’s finance minister P Chidambaram can be forgiven for feeling cheerful. After all, prices for oil and gold, the two biggest constituents of his country’s import bill, have tumbled sharply this week. If sustained, these developments might significantly ease India’s current account deficit headache — possibly to the tune of $20 billion a year.
Turkey’s ceasefire last month with the Kurdish militant group PKK could boost its trade partnerships multilaterally, as increasing prospects for stability in the region bring economic opportunities in the Middle East and Africa.
There’s cash in that trash.
Analysts at Bank of America/Merrill Lynch are expounding opportunities to profit from the burgeoning waste disposal industry, which it estimates at $1 trillion at present but says could double within the next decade. They have compiled a list of more than 80 companies which may benefit most from the push for recycling waste, generating energy from biomass and building facilities to process or reduce waste. It’s an industry that is likely to grow exponentially as incomes rise, especially in emerging economies, BofA/ML says in a note:
By Philip Baillie
Emerging equities may have significantly underperformed their richer peers so far this year (they are about 4 percent in the red compared with gains of more than 6 percent for their MSCI’s index of developed stocks) , but almost a third of high net-worth individuals are betting on a rebound in coming months.
Despite the early-year rally in equity markets, some hedge funds seem to have had a disappointing start… yet again.