Editor, Investment Strategy. Europe, Middle East and Africa, London
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Feb 20, 2013

Analysis: Squaring investor optimism with tighter euro credit

LONDON (Reuters) – Investor optimism about the euro zone may actually tally with what at first sight appears to be an untimely credit squeeze within the bloc over the past couple of months.

Although a new year surge in world markets has leveled off this month, February’s survey of investors and analysts by the German ZEW think tank showed sentiment toward Europe’s biggest economy rising to its highest in three years.

Feb 15, 2013

Awaiting proof of the “Great Rotation”

LONDON (Reuters) – The jury’s out on the big investment theme of 2013 – the so-called “Great Rotation” out of expensive bonds back into undervalued equity – and don’t hold your breath for a verdict any time soon.

Only six weeks into a new year is early to judge what many see as a glacial shift that could take more than 10 years to play out, reversing a move into bonds by major pension and insurance funds that itself took a couple of decades.

Feb 8, 2013

Currency sparks rekindling volatility

LONDON, Feb 8 (Reuters) – Sudden swings in currency rates
are refiring measures of future global markets volatility,
pushing these risk gauges back towards what some will see as
more realistic and even healthier levels.

Many blame fresh talk of “currency wars” between the world’s
major trading blocs, which have been implicitly or explicitly
depressing currency rates for trade and export gains to give
themselves an edge in a growth-starved world.

Feb 7, 2013
via Global Investing

Weekly Radar: Currency warriors meet in Moscow



Hiccup. February has so far certainly brought a more sober, if healthier, perspective to world markets. Global stocks are off about half a percent this week, letting the air out gently from January’s over-inflated 5 percent surge. The focus is back on Europe, where the threat of a euro FX overshoot (in the face of LTRO paybacks and rising euro interest rates alongside stepped-up “global currency wars”) has fused with a plethora of unresolved national debt conundrums and a stream of ‘event risks’ on the region’s calendar. Euro stocks have retreated to December levels as the currency move and fresh political angst has taken the wind out of earnings and growth projections after such a steep rally over the past six months. Name anything you want – the tightening race for this month’s Italian elections and Monte di Paschi scnadal there, a delayed Cyprus bailout and elections there this month, the Irish promissory note standoff with the ECB etc etc – when things turn, they all these get amplified again even if none really are likely to be systemic threats in the way we’d become used to over the past two years. The slight backup in Italian/Spanish yields to December levels shows sentiment turns still pack a punch, the European earnings season has been mixed so far, there are political murmurs about capping the euro and the political calendar over the next six weeks is a bit of a minefield for nervy markets. All the issues still look resolvable – the tricky Irish bank debt rejig looks on the verge of a resolution; few still believe Berlusconi be the next Italian PM (only 5 percent on betting website Intrade think so, for example); and Cyprus is expected by most to get bailed out eventually. Today’s ECB will be critical to most of those issues, but next week’s euro group gets a chance to update everyone on its role in them aswell). The issue likely to gnaw deepest at investors is the regional growth outlook  and,  in that respect, the euro surge is about as welcome as a kick in the teeth at this juncture. (Euro Q4 GDPs out next week). The French clearly want to rein in the currency but don’t have the tools or the German backing. Draghi and the ECB will likely have to come to rescue again, though he will not admit to euro targeting and so may drag his feet on this one until the move starts to burn. Interesting times ahead and interesting G20 finance meeting in Moscow next week as a result.

Feb 6, 2013

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 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.

    • 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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