London Special - Part 2

G20 + London Special - Part 2
*The world is happy. Markets are even happier, and if you caught that wonderful image of Obama, Berlusconi and Medvedev posing as if they were three college buddies on a booze-trip around the world, the most powerful men on the planet seem quite pleased with themselves too. The star of the show was always going to be Obama (sorry Sarkozy) and he certainly did not disappoint – easily moving between greeting royalty at Buckingham Palace to immediately warming relations with Russia, and even impressively charming the King of Saudi Arabia in Arabic and exchanging the traditional religious greeting in flawless fashion. Every move Obama makes during his first stop on his first visit outside of the US has been measured and confidence building. Whatever problems he has had back at home in these first few difficult months, the promise that his election itself would ensure a change for the global stage is evident for all to see and enjoy. We are living in a very different world economically speaking, but we are also luckily living in a very different world politically speaking.

*Ahead of the Nato summit at Strasbourg which kicks off today amid even tighter security than London had to provide (and unfortunately for Strasbourg amidst a much greater degree of violence than simply a few smashed windows around the Bank of England) let’s have a look at what has been achieved: – as you are all no doubt aware, there were some exceptionally large sums of money promised: - a total pledge of $1.1 trillion (£681bn) in funding to tackle the crisis, including $750bn to the International Monetary Fund, $250bn to boost global trade and $100bn for international development banks to lend to the poorest countries. Those kinds of headline figures (fast becoming almost mundane to many) still pack enough of a punch to generate a positive reaction for all.

*The conclusion of all this? When asked if he was satisfied with the outcome of the G20, George Soros replied that he had been “greatly impressed” and extremely happy with the manner in which the G20 leaders conducted themselves and came together to put together some truly global economy altering measures – if it’s good enough to put a smile on George’s face, whom am I to disagree!?
*Even Sarkozy who had threatened to walk out of the summit before it had even begun, graced the rest of the delegation with his presence for the gathering’s entire duration – and that was even with the absence of Carla Bruni (leaving the spouse limelight to Queen-hugging Michelle Obama) who surely must have provided a tantalising reason to leave – but it seems Sarky loved being hugged by Obama even more.
* The show-of-force by those that represent almost 70% of the world’s population and 80% of its wealth looked remarkably like a step-closer to a (realistically still very far off) global government – the idea is a beautiful thing but whilst different cultures and varying philosophies can sit happily together for a few days and provide a united front – there is a long way to go before we can honestly declare the formation of any global decision making structure – there are too many nationalistic ideals and goals still at play – yes, I’m talking about China and the US.

Making it to the markets’ summit…
*With all this spending, there was no choice but for markets to continue their rise upwards (after the blip on Monday when General Motors’s tough treatment at the hands of the White House caused the temporary dip) – many markets have now started trading above their 100day moving average, including the S&P500 – first time since May 2007.Even the ECB cutting rates by “only” 25bps yesterday failed to stem the heart warming near 5% avg. rise across all European markets. Investors seemed to turn positive almost 3wks ago, and whilst there is still much that must be discussed and solved, two of the largest obstacles in front of us have now been addressed – whether the world is prepared to spend enough to keep the economy going (yes) and whether politics will not stand in the way of necessary changes to regulatory and accounting rules – also yes, with the relaxation of mark-to-market requirements in the US a long needed and extremely significant change.
*Asian markets today continued the good performance throughout the morning, only giving up some of the earlier gains as we headed to the close. China (CSI300 -0.3%) and Japan (NKY +0.34%) the laggards in fact where India and Vietnam were able to rise +4%. Taiwan’s index (+1% today) is now the world’s 6th best performing market, with China still in 2nd position (behind tiny Peru). Europe has latched on to the low-end of Asia’s close, with mixed markets there (FTSE flat, DAX +1.1%) as they contemplate breathless moves in the last 72hours and anticipate further reaction from the US markets later in the day. US futures so far pointing to a small positive opening (DJIA +6pts, S&P+1.4pts)
*Gold has fallen as global sentiment improves – trading now again at around $900/oz, but when inflation returns as a major concern once more this should return to a move for $1,000/oz. Oil has been trading sideways and is still around $52/brl. There was not much talk around the G20 of future energy requirements and no special side discussions between Saudi Arabia’s King and Obama –nothing the public are privy to at least.

Yen holds…
*We haven’t spoken about currencies in a few days, and when you look at the cross-rate screens today the large move by the USD/Yen in particular is very telling - trying to hold above 100 for the 1st time since April last year. Could we be watching a return to some form of risk appetite as carry-trades get put on?
*Cable has moved an immense +5.2% sine Monday afternoon (almost 1.48 now) when the dip to 1.41 came on the back of the (short-lived) GM news+negative sentiment via some pre-summit jitters. The ECB’s 25bps cut has re-strengthened Euro/USD despite a host of worrying date out of the Eurozone in the last few months. It seems investors are now understanding more and more that the US will continue to print US$ at the expense of inflation and hence a move away from US$ denominates assets is only a natural occurrence. Currency traders are notoriously a smart bunch and normally call market + economic environment moves nice and early (just like the premonition move in August 2008 when US$ saw immense hot-inflows) – worth keeping an eye firmly glued to the currency screens considering Obama’s performance on the international scene will indubitably provide greater ammunition for his reforms on his return to US soil.

*Protestors working for London Boroughs?
*Any time spent in London will warm the hearts of those that believe the world has fallen into a stupor of depression that will cloud people’s lives for many months yet..the atmosphere and vibe around this extremely hard-hit city in the storm of the economic crisis is one of resilience and a definite sense of “we-can’t-remain-depressed-forever”. The fact that the clocks have moved forward and the sun has decided to shine for those rare moments of the UK’s “pleasant-weather” season has added to the general ambience of a thronging capital city that has certainly taken a beating and is bruised but is recovering and picking itself up to continue the fight. The fact that the city is almost 30% cheaper than this time last year is only a good thing – forth and overpricing had prevailed for a couple of years too many. Mid-season sales and a weak sterling are two things bringing much joy to a great number of tourists adding to the vibrancy of the city.
*Even the protests in London seemed destined and engineered to help push forward the immense plan of road-work (stimulus) repairs – the more cynical out there may have been led to believe that the damage caused by the protesting around the G20 was all engineered to allow more excuses for construction teams to unleash upon the ruined tarmac around the Bank of England – watch out for a surfeit of red and white barriers popping-up soon all over the “square-mile” and plenty more unfortunate displays of the not-so-attractive type of “cleavage”.

Have the Grey Geese fled?
A few months ago it was reported that beer sales in Japan were down and that was a shocking admission of trouble in the economy of one of the world’s most beer-loving nations. Now we are hearing news that the premium-brand Grey Goose has been losing market share for the first time in almost 7 years in the US as New Yorkers switch away from trying to impress their friends with their choice of luxury white spirit – could someone please have a word with the bars across the UAE so we can stop paying the equivalent of a double-serving of the stuff for the price of the bottle in duty free!