Markets are rocking. We’ve got people focused on the ongoing pandemic concern with the WHO raising the level of imminent threat to one notch below the “pray for your life” indication – but at the same time they are forcefully advising us all through the media that it is not that serious a situation – yet. Chrysler is about to change from a brash American character to a suave Italian carattere. We’re all also reflecting on Obama’s first 100 days in office, as well as Michelle’s – those all important questions concerning her choice of outfit and how many times she has been moved to tears during a speech, which are of course paramount to the national security of the nation which her husband is charged with the leadership of, not to mention the effect her colour co-ordination has on the financial markets. I’m sure if someone charted the last quarter they would figure out a way to extrapolate a correlation between positive moves in the US trading day, and her decision to wear a blue skirt that same morning.
*On markets today, well, I’ve picked a great day to turn my screens back on! A sea of green sits in front of me and all those “+” signs are making me dizzy – there haven’t been so many in a looong time. Always good to stop and pause to take in the good moments, so…………………………… .
*Seems our friends in Japan have been one of the catalysts for this morning’s euphoria (pushing the MSCI World Index to one of its best months since 1989) – industrial production numbers out of Tokyo surprised greatly on the upside (1.6% vs 0.8% cons MoM) which of course followed some decent US consumer numbers overnight (markets there had closed +2%). Japan’s central bank kept base rates at practically zero (no surprise). They also suggested Japan’s economy would return to growth by 2010 – many are hoping they are right.
China didn’t want to be left out of the party, so it announced that it would allow companies to invest in businesses in Taiwan, keeping the ball rolling for investors to send markets soaring in Taiwan (+6.7%) and China able to stem some of the losses seen earlier this week (CSI +1%, still a beautiful YTD return of +42%). The reason China is warming to the idea of cross-border investments? Well, if anyone had been following recent articles increasingly focused on China’s waning appetite for the US$ they’ll understand that China is possibly looking to diversify where its vast surplus + revenues are parked.
*All other Asia markets without exception post very impressive gains indeed (ok I lie, it would have been so much easier if just Pakistan’s had not dropped -1%). Avg gains close to +3%.
*Again, I’m in a good mood so I hesitate to allow cynicism back in right now but we have to anticipate a slight amount of disappointment amongst the investor community if economic indicators in the next few weeks do not continue to impress – and with each incremental improvement, it becomes exponentially harder to please the very flaky (and now bear-market cynical/experienced) traders and money managers out there. Pleasing earnings results can disappear as quickly as they pushed markets higher.
*In addition to Japan’s better than expected news, another big industrial producer Germany has provided better jobless numbers than anticipated – markets in Europe all up strongly (+2%) so far today. Again, pleasing earnings announcement across Europe’s majors helping sentiment and ensuring Europe is now in +ve terrirory for YTD returns. This all coming despite a rise in the unemployment rate across Europe as a whole, but markets understand that the larger economies’ recovery will bring about faster stability for the remaining 23 or so across the Eurozone.
*US futures are indicating a strong opening (DJIA +145pts, S&P +17.2pts) at the same time as Gold falls back below $900/oz, and the US$ loses some ground vs GBP and Yen – signs that some of the uncertain money is moving out of the safest asset it can find and seeking some slightly higher yield? Even with oil continuing to hover around the $52/brl level, worldwide investors are clearly putting some of the huge piles of cash they have all been sitting on to work. Notice the BDIY is down again though – shipping has not been playing along when markets have been recovering – why?
*What is slightly worrying is that the economic situation in many parts of the world, not least the US, is still quite precarious. There are most likely a few nasty surprises still to come: stress-test failures, rising unemployment leading to further credit-card defaults, falling consumption after a brief respite through government spending which cannot last forever (feasibly) and a very slow recovery in the housing market. Some predict the recession has reached its nadir, others are not so rosy in their outlook and remain on guard for a repeat of the 1930s – there were many false moment of “recovery” there.
No jogging, nor interest, in GCC
Having been in Abu Dhabi and Qatar in the last couple of days, the activity and sense of growth prevalent across both territories is in stark contrast to continued reports of slow-down in London and New York – sightings of entire investment bank departments out jogging at the same time over lunch a common theme – who’s manning the desk guys and answering all those client calls? – oh, wait a minute, that’s right, what client calls….
At present, the two most impressive locations in the GCC when all is said (there’s a lot of talk in this region at the best of times) done and considered must be Abu Dhabi and Qatar. The reason – both statelets have put together a very transparent and rational 25yr plan – they have clearly expressed their desires in the fields of healthcare, education and finance, and have already put into motion the necessary steps to achieve many of their aims. At a conference on Tuesday, an energetic and impressive COO for Mubadala laid-out the organisations major achievements and the path they intend to follow.The unique attribute to the dynamic and socially-responsible organisation being their unprecedented transparency – the publishing last week of their full-year results. Since Mubadala is 100% owned by the Abu Dhabi government, it was the first time a sovereign entity had ever gone public with its finances. Don’t hold your breath for many others to follow though.
These statelets are busy working to get their populations and various burgeoning industries working. They understand that oil & gas, whilst not disappearing anytime as soon as some conspiratorially suggest, will not be around forever – diversifying investments is the obvious (first) solution. However, the sign of a deeper level of thinking is that unlike in the past, these freshly-intellectual statelets are using their greatest attribute in the eyes of the west/east – cash – to buy their way into new technologies and affecting a transfer of knowledge. The new ventures that are being opened in their back-yards will build new industries and sectors that will furnish their people with resources for many more years to pass after the final drop of oil has been extracted and sold. An intriguing angle to Qatar and Abu Dhabi’s efforts – which aspiring statelet will out-do the other?
While sitting with a good friend and client in Doha yesterday, I was surprised to find that some financial issues are truly global. Seems that one or two local financial institutions had been “misplacing” dividend payment cheques for a number of prominent customers – these cheques were never sent through to the correct address, nor were they deposited in interest bearing accounts for the customer. In fact, when the banks were requested to do exactly that and pay-in to an account they would all-of-a-sudden have some sort of technical issue with their inter-bank systems – for a couple of months.
Despite Qatar being in a very strong financial position, and with its economy chugging along nicely, it seems banks, in a bid to maintain deposit levels and pay out as little interest as possible, are resorting to the oldest tricks in the book – your cheque is in the post Sheikh.
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