Editor, Investment Strategy. Europe, Middle East and Africa, London
Mike's Feed
May 24, 2013

Dollar builds steam, unnerves emerging markets

LONDON, May 24 (Reuters) – As the dust settles on a volatile
week, many strategists now sense a green light for a
long-brewing multi-year rise of the U.S. dollar – with unnerving
portents for emerging markets.

The U.S. Federal Reserve’s now open debate about the
beginning of the end of its massive money-printing programmes
caused gyrations on stock and bond markets everywhere this week.

May 23, 2013
via Global Investing

Weekly Radar: Central banks try to regain some control

Central banks may be regaining some two-way control over global markets that had started to behave like a one-way bet. After flagging some unease earlier this month that frothy markets were assuming endless QE, the Fed and others look to be responding with at least some frank reality checks even if little new in the substance of their message. In truth, there may be no real change in the likely timing of QE’s end, or even the beginning of its end, but the size of the stock and bond market pullbacks on Wednesday and Thursday shows how sensitive they now are to the ebb and flow of central bank guidance on that score.  Although the 7% drop in Japan’s stock market looks alarming – Fed chief Bernanke actually played it fairly straight, signalling no imminent change and putting any possible wind down over the “next few meetings” still heavily conditional on a much lower jobless rate and higher inflation rate. The control he gains from here is an ability to nuance that message either way if either the data disappoints or markets get out of hand.

The central banks are clearly treading a fine line between getting traction in the real economy and not blowing new financial bubbles. The decider may be inflation and on that score central banks have a lot of leeway right now – global inflation is still evaporating and, as measured by JPM, fell in April to just 2.0% – its lowest in 3-1/2 years.  That said, CPI was also very well behaved in the run-up to 2007 credit crisis – it was asset prices and not consumer inflation that caused the problem. So – expect to hear plenty more cat-and-mouse on this from the central banks over the coming weeks/months.

May 22, 2013
May 17, 2013

Top four central banks may change the tune

LONDON, May 17 (Reuters) – The world’s major central banks
may be shifting their tone subtly from “whatever it takes” to
“we can only do so much”.

Financial markets supercharged this year by the
extraordinary monetary stimuli of the top four central banks are
once again asking how long this can last.

May 16, 2013
May 16, 2013
May 16, 2013
via Global Investing

Weekly Radar: Draghi returns to London

ECB chief Mario Draghi returns to London next week almost 10 months on from his seminal “whatever it takes” speech to the global financial community in The City  – a speech that not only drew a line under the euro financial crisis by flagging the ECB’s sovereign debt backstop OMT but one that framed the determination of the G4 central banks at large to reflate their economies via extraordinary monetary easing. Since then we’ve seen the Fed effectively commit to buying an addition trillion dollars of bonds this year to get the U.S. jobless rate down toward 6.5%, followed by the ‘shock-and-awe’ tactics of the new Japanese government and Bank of Japan to end decades.

And as Draghi returns 10 months on, there’s little doubt that he and his U.S. and Japanese peers have succeeded in convincing financial investors of central bank doggedness at least. Don’t fight the Fed and all that – or more pertinently, Don’t fight the Fed/BoJ/ECB/BoE/SNB etc… G4 stock markets are surging ever higher through the Spring of 2013 even as global economic data bumbles along disappointingly through its by now annual ‘soft patch’.  Looking at the number tallies, total returns for Spanish and Greek equities and euro zone bank stocks are up between 40 and 50% since Draghi’s showstopper last July . Italian, French and German equities and Spanish and Irish 10-year government bonds have all returned about 30% or more. And you can add 7% on to all that if you happened to be a Boston-based investor due to a windfall from the net jump in the euro/dollar exchange rate. What’s more all of those have outperformed the 25% gains in Wall St’s S&P 500 since then, even though the latter is powering to uncharted record highs. And of course all pale in comparison with the eye-popping 75% rise in Japan’s Nikkei 225 in just six months!! Gold, metals and oil are all net losers and this is significant in a money-printing story where no one seems to see higher inflation anymore.

May 15, 2013
May 15, 2013

For all the debt, there’s a shortage of bonds

LONDON (Reuters) – Debt may be everywhere but there’s a scarcity of bonds.

With governments awash with debt and furiously selling new securities to fund bloated budget deficits, the idea of a bond shortage on the marketplace may sound puzzling.

May 15, 2013

Analysis: For all the debt, there’s a shortage of bonds

LONDON (Reuters) – Debt may be everywhere but there’s a scarcity of bonds.

With governments awash with debt and furiously selling new securities to fund bloated budget deficits, the idea of a bond shortage on the marketplace may sound puzzling.

    • 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:
      1995
      Awards:
      Reuters Editor of the Year, 2009. Reuters multimedia journalist of the year award, 2011
    • More from Mike

    • Contact Mike

    • Follow Mike