Editor, Investment Strategy. Europe, Middle East and Africa, London
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Feb 6, 2013

Analysis: Euro overshoot will rekindle bloc-wide tensions

LONDON (Reuters) – If the euro zone loses the global ‘currency war’, the price will be paid in growth and jobs and fresh tensions about the future of the bloc.

Whoever wins the ‘war’ eventually, few doubt the euro area has been routed in the latest monetary battles between countries printing and depressing home currencies in part to retain trade advantage in a growth-sapped world.

Feb 1, 2013

Rare dollar renaissance eyed on the horizon

LONDON, Feb 1 (Reuters) – For all the frenetic activity in
2013 so far and in the face of a seemingly endless flood of
newly-minted greenbacks, some of the world’s biggest investors
are already bracing for a rare U.S. dollar renaissance.

It may emerge by the end of the year.

To look at the 15 percent rise of the dollar against Japan’s
yen over in just three months, it’s tempting to say the revival
is already underway.

Jan 31, 2013
via Global Investing

Weekly Radar: Glass still half-full?



Wednesday’s global markets were a pretty good illustration of the nature of new year rally. The largest economy in the world reported a shock contraction of activity in the final quarter of 2012 despite widespread expectations of 1%+ gain and this month’s bulled-up stock market barely blinked. Ok, the following FOMC decision and Friday’s latest US employment report probably helped keep a lid on things and there was plenty of good reason to be sceptical of the headline U.S. GDP number. Reasons for the big miss were hooked variously on an unexpectedly large drop in government defence spending, a widening of the trade gap (even though we don’t get December numbers til next week), a drawdown in inventories, fiscal cliff angst and “Sandy”. Final consumer demand looked fineand we know from the jobs numbers (and the January ADP report earlier) that the labour market remains relatively firm while housing continues to recovery. The inventory drop could presage a cranking up assembly lines into the new year given the “fiscal cliff” was dodged on Jan 1 and trade account distortions due to East Coast storms may unwind too. So, not only are we likely to see upward revisions to this advance data cut, there may well be significant “payback” in Q1 data and favourable base effects could now flatter 2013 numbers overall.

Jan 29, 2013
via Global Investing

Who’s driving the equity rally?


Does the money match the story?

Perhaps the biggest investment theme of the year so far has been the extent to which long-term investors may now slowly migrate back to under-owned and under-priced equities from super-expensive safe haven bunkers such as ‘core’ government bonds, yen, Swiss francs etc to which they herded at each new gale of the 5-year-old credit storm.

Indeed, some go further and say asset allocation mixes of the big institutional pension and insurance funds are – for a variety of regulatory and demographic reasons – now at such historical extremes in favour of bonds that they may now need rethinking in what some dub The Great Rotation.

Jan 25, 2013

Market ebullience due a reality check

LONDON, Jan 18 (Reuters) – Only four weeks into the new
year, ebullient world stock markets have clocked up gains of
more than four percent, so already there are murmurs about
whether it’s too much, too soon.

Put another way, if global equities were to repeat January’s
stellar performance every month of this year, then we would be
in for returns of more than 50 percent in 2013.

Jan 24, 2013
via Global Investing

Weekly Radar: Managing expectations


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?

Well lots of the much-feared headwinds have not materialized. The looming US budget ceiling showdown keeps getting put back – it’s now May by the way, even if another mini-cliff of sorts is due in March — but you get can-kicking picture here already. The US earnings season looks fairly benign so far, even given the outsize reaction to Apple after hours on Wednesday. European sovereign funding worries have proven wide of the mark to date too as money floods to Spain and even Portugal again. And Chinese data confirms a decent cyclical rebound there at least from Q3′s trough. All seems like pretty smooth sailing – aside perhaps from the UK’s slightly perplexing decision to add rather than ease uncertainty about its economic future. So what can go wrong? Well there’s still an event calendar to keep an eye on – next month’s Italian elections for example. But even that’s stretching it as a major bogeyman the likely outcome.

Jan 23, 2013

The Great Rotation: a flight to equities in 2013

LONDON (Reuters) – One of the big investment shifts of our day may be at hand – regardless of how global markets actually perform this year.

What’s already known as the “The Great Rotation” – a tilting of pension and insurance funds’ strategic, long-term asset preference back toward equity from extreme positioning in bonds – has been one of themes of the new year so far.

Jan 23, 2013

Analysis – The Great Rotation: a flight to equities in 2013

LONDON (Reuters) – One of the big investment shifts of our day may be at hand – regardless of how global markets actually perform this year.

What’s already known as the “The Great Rotation” – a tilting of pension and insurance funds’ strategic, long-term asset preference back toward equity from extreme positioning in bonds – has been one of themes of the new year so far.

Jan 18, 2013

Once wary markets warm to Merkel status quo

LONDON, Jan 18 (Reuters) – As the euro crisis raged at its
peak just over a year ago, few global investors reckoned Angela
Merkel’s re-election as German Chancellor this year was likely
or even desirable.

Now they appear to be assuming both – thanks partly to her
gaffe-prone Social Democrat opponent but perhaps as much or more
so to European Central Bank chief Mario Draghi and his success
in stabilising the teetering currency bloc last year.

Jan 17, 2013
via Global Investing

Weekly Radar: Market stalemate sees volatility ebb further


Global markets have found themselves at an interesting juncture of underlying new year bullishness stalled by trepidation over several short-term headwinds (US debt debate, Q4 earnings, Italian elections etc etc) – the net result has been stalemate, something which has sunk volatility gauges even further. Not only did this week’s Merrill funds survey show investors overweight bank stocks for the first time since 2007, it also showed demand for protection against a sharp equity market drops over the next 3 months at lowest since at least 2008. The latter certainly tallies with the ever-ebbing VIX at its lowest since June 2007. Though some will of course now argue this is “cheap” – it’s a bit like comparing the cost of umbrellas even though you don’t think it’s going to rain.

Anyway, the year’s big investment theme – the prospect of a “Great Rotation” back into equity from bonds worldwide – has now even captured the sceptical eye of one of the market’s most persistent bears. SocGen’s Albert Edwards still assumes we’ll see carnage on biblical proportions first — of course — but even he says long-term investors with 10-year views would be mad not to pick up some of the best valuations in Europe and Japan they will likely ever see. “Unambiguously cheap” was his term – and that’s saying something from the forecaster of the New Ice Age.

    • About Mike

      "Mike Dolan is Reuters' Investment Strategy Editor in Europe. He has been a correspondent and editor for the past 20 years, working for Reuters from London and Washington DC in a variety of roles covering global policymaking, economics and investment trends."
      Joined Reuters:
      Reuters Editor of the Year, 2009. Reuters multimedia journalist of the year award, 2011
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