Editor, Investment Strategy. Europe, Middle East and Africa, London
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Nov 8, 2012
via Global Investing

Weekly Radar: Cliff dodging and Euro recessions

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Most everything got swept up in the US election over the past week but, for all the last minute nail biting  and psephology, it was pretty much the result most people had been expecting all year. So, is there anything really to read into the market noise around the event? The rule of thumb in the runup was a pretty crude — Obama good for bonds (Fed friendly, cliff brinkmanship, growth risk) and Romney good for stocks (tax cuts, friend to capital/wealth, a cliff dodger thanks to GOP House backing and hence pro growth). And so it played out Wednesday. But in truth, it’s been fairly marginal so far. Stocks were down about 2 pct yesteray, but they’d been up 1 pct on election day for no obvious reason at all. But can anyone truly be surprised by an outcome they’d supposedly been betting on all along. (Just look at Intrade favouring Obama all the way through the runup). Maybe it’s all just risk hedging at the margins. What’s more, like all crude rules of thumb, they’re not always 100 pct accurate anyway.  Many overseas investors just could not fathom a coherent Romney economic plan anyway apart from radical political surgery on the government budget that many saw as ambiguous for growth and social stability anyhow.  Domestic investors may more understandably wring their hands about hits on dividend and income taxes, but it wasn’t clear to everyone outside that that a Romney plan was automatically going to lift national growth over time anyhow.

That said, it was striking on Wednesday that even though global funds were mostly relieved the Fed won’t now be shackled after 2014, nearly everyone still expects the fiscal cliff to be resolved by compromise. Whether that’s wishful thinking or the smartest guess remains to be seen. But, just like in Europe, it means they are at the very least going to have endure a barrage of political noise in headlines and endless scaremongering before any deal is ultimately forthcoming. Some say the nature of the GOP defeat, even with an incumbent saddled with an 8 pct unemployment rate, will force enough moderate Republicans to seek distance from Tea Party and seek compromise. But others point out that post-Sandy relief  spending may also bring the dreaded debt ceiling issue forward sooner than expected now too. All in all, the overwhelming consensus still betting on an eventual cliff dodge may be the most worrying aspect of market positioning and may be the best explanation the slightly outsize and sudden stock market reaction.

Nov 7, 2012

For global investors, Fed relief trumps fiscal angst after U.S. poll

LONDON (Reuters) – The world’s biggest investors expect a modest fillip for global bonds and stocks from the re-election of President Barack Obama, as anxiety eases over White House policy toward the Federal Reserve and China.

Even though Obama, who beat Republican challenger Mitt Romney to win a second term, now faces a stiff battle with a Republican-controlled House of Representatives over the looming ‘fiscal cliff’, investors reckon dissipating uncertainty over Fed policy should be the dominant reverberation worldwide.

Nov 2, 2012
via Global Investing

INVESTMENT FOCUS-Bond-heavy overseas funds want Obama win

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Overseas investors, many of whom are creditors to the highly-indebted U.S. government, reckon a re-election of President Barack Obama would be best for world markets even if U.S. counterparts say otherwise.

For the second month in a row, Reuters’ monthly survey of top fund managers around the world was evenly split when asked whether a win for incumbent Democrat Obama or Republican hopeful Mitt Romney in the Nov. 6 presidential poll would be good for global markets.

Nov 2, 2012

Bond-heavy overseas funds want Obama win

LONDON, Nov 2 (Reuters) – Overseas investors, many of whom
are creditors to the highly-indebted U.S. government, reckon a
re-election of President Barack Obama would be best for world
markets even if U.S. counterparts say otherwise.

For the second month in a row, Reuters’ monthly survey of
top fund managers around the world was evenly split when asked
whether a win for incumbent Democrat Barack Obama or Republican
hopeful Mitt Romney in the Nov. 6 presidential poll would be
good for global markets.

Nov 1, 2012
via Global Investing

Weekly Radar: Leadership change in DC and Beijing?

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Any hope of figuring out a new market trend before next week’s U.S. election were well and truly parked by the onset of Hurricane Sandy. Friday’s payrolls may add some impetus, but Tuesday’s Presidential poll is now front and centre of everyone’s minds. With the protracted process of Chinese leadership change starting next Thursday as well, then there are some significant long-term political issues at stake in the world’s two biggest economies.  Not only is the political horizon as clear as mud then, but Sandy will only add to the macro data fog for next few months as U.S. east coast demand will take an inevitable if temporary hit — something oil prices are already building in.

Across the Atlantic, the EU Commission’s autumn forecasts next week for 2012-14 GDP and deficits will likely make for uncomfortable reading, as will a fractious EU debate on fixing the blocs overall budget next year. But the euro zone crisis at least seems to have been smothered for now. Spain seems in no rush seek a formal bailout, will only likely seek a precautionary credit line rather than new monies anyway and needs neither right now in any case given a still robust level of market access at historically reasonable rates and with 95% of its 2012 funding done. According to our latest poll, more than 60% of global fund managers think Spanish yields have peaked for the crisis. Greece’s deep and painful debt problems, shaky political consensus and EU negotiations are all as nervy as usual. But tyhe assumption is all will avoid another major make-and-break standoff for now. More than three quarters of funds now expect Greece to remain in the euro right through next year at least.

Oct 31, 2012

Global funds build up U.S. equity, euro bonds in October – Reuters poll

LONDON (Reuters) – Global investors boosted equity holdings to their highest in six months in October, even as world stock markets wobbled, and slashed cash levels to their lowest since February, a Reuters poll showed on Wednesday.

In the month before the U.S. presidential election and despite some dour signals from the third-quarter earnings season, U.S. stocks were most in demand as macroeconomic data stateside continued to produce some positive surprises.

Oct 31, 2012

Analysis: Investment sponges for a growth-saturated world

LONDON (Reuters) – When paltry growth, systemic risk and resource scarcity are darkening the global horizon, investors must hunt shrewdly to find stocks resilient enough to ride out the storm.

Far from being cathartic, the past five years of credit crisis and the subsequent slow, painful debt paydown has merely nudged the world economy deeper into the dangers posed by dramatic population growth, aging in rich economies and shortages of natural resources and capital.

Oct 31, 2012

Investment sponges for a growth-saturated world

LONDON (Reuters) – When paltry growth, systemic risk and resource scarcity are darkening the global horizon, investors must hunt shrewdly to find stocks resilient enough to ride out the storm.

Far from being cathartic, the past five years of credit crisis and the subsequent slow, painful debt paydown has merely nudged the world economy deeper into the dangers posed by dramatic population growth, aging in rich economies and shortages of natural resources and capital.

Oct 26, 2012

Betting on policies, not their success

LONDON, Oct 26 (Reuters) – Global investors seem happy to
feed off central banks’ reflation policies but not necessarily
their eventual success.

Just a glance at this week’s bout of earnings-related market
angst shows how little conviction there still is in a
sustainable global recovery — or the fabled ‘green shoots’.

Oct 25, 2012
via Global Investing

Weekly Radar: Earnings wobble as payrolls, BOJ, G20 eyed

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Easy come, easy go. A choppy October prepares to exit on a downer – just like it arrived. World equities lost about 3 percent over the past seven, mostly on Tuesday, and reversed the previous week’s surge to slither back to early September levels. Just for the record, Tuesday was a poor imitation of the lunge this week 25 years ago – it only the worst single-day percentage loss since July and only the 10th biggest drop of the past year alone. But it was a reminder how fragile sentiment remains despite an unusually bullish, if policy-driven year.

Why the wobble? t’s hard to square the still fairly rum, or at best equivocal, incoming macro data and earnings numbers alongside year-to-date western stock market gains of 10-25%. There’s more than enough room to pare back some more of that and still leave a fairly decent year given the macro activity backdrop and we now only have about 6 full trading weeks left of 2012. So it will likely remain bumpy – not least with U.S. and Chinese leadership changes into the mix as mood music. The sheer weight of a gloomy Q3 earnings season seems to have hit home this week, with revenue declines or downgraded outlooks  – particularly in “real economy” firms such as Caterpillar, Dupont,  Intel and IBM etc – worrying many despite more decent bottom line earnings. As some investors pointed out, earnings can’t continue to beat expectations if revenues continue to wither and there are still precious few signs of an convincing economic turnaround worldwide to draw a line under the latter.

    • 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
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