Markets a little sticky today, in fact the general financial environment and surrounding news is lacklustre all over. There aren’t even any profoundly interesting tidbits to grasp onto to use as an intro to the usual market talk. Things must be slow. Nothing even to complain about in the UAE – that won’t last long.
Markets…
After the falls on Monday, the bounce by the financials yesterday half-way through Geithner’s testimony to congress “banks have adequate funding to see through the crisis” saw a return of some 8% across the financial sector, but a lot of this was down to short-covering. The weight of concern over earnings made for a depressed start to the trading day across Asia, with Japan only managing to close positive at the close as some decent tech performance kicked in towards the end (Elpida announces plans to increase memory-chip prices). Unfortunately for Hong Kong and China markets there fell an avg. of -3%, not on any recent news but more a continuation of concern over the GDP growth rate of only 6% China has been forecasting – there was also confirmation that authorities will begin reigning in some of the increase in liquidity provided over the last few months (CSI down 3.2% today but still returning a lovely 41% YTD).
The China story, as well documented here and elsewhere, is incredibly important to the rest of the world, and it has become an increasingly important indicator for any investor concerned as to the future viability of a strong capitalist system. The more the US deals with its own issues at home and fundamentally alters the financial industry landscape, the more China’s own issues multiply in importance, not least due to its own non-performing loan portfolio – viewed by many as a disaster waiting to (officially) happen. There’s also no forgetting the nest-egg sitting safely for the moment in Uncle Sam’s lap.
European markets are trading up, but not as much as you would like following the decent turn around in the US. Currently seeing the majors return avg +0.6% for the day, with some anticipation in the UK ahead of the Budget statement, and a widening of the UK’s deficit to the largest since WWII (90bn GBP), not to mention highest unemployment rate in 12yrs. If you recall the messages from London a few weeks back it was clear that certain parts of the capital were swinging away without a care to the crunched-world, but the rest of the country which is not merely a larger version of Monaco is suffering greatly as the flood of easy-credit and all things nice ‘an easy seem nothing but a distant memory. The damage done to the economy and the release of such dismal statistics leaves little room for the Chancellor (wonderfully titled Chancellor Darling – anyone that’s a fan of Blackadder will be smiling now) to announce further grand stimulus plans. It will be difficult for the incumbent government to wriggle out of things if the economic situation worsens any further, for Gordon Brown was of course directly responsible for the unprecedented rise in borrowing and the seemingly endless expansion of the bubble from 1999-2007.
US futures are trading lower at present (DJIA -53pts, S&P -5.4pts) but it’s still early and we’re expecting another slew of corporate results throughout the trading day. Also awaiting House Price Index release (MoM, cons -0.7%) – won’t be good if much worse than expected.
Crude has come back a little, now only $1 or so short of $50/brl. Gold again holding steady. Currencies equally stable for now
Mature MENA…
MENA markets have expressed a certain maturity in the last few weeks. First, they saw an orderly and concerted investment effort when risk became less of an evil word and global markets picked up with some decent and thoughtful inflows. Equally, when markets shook some of their gains, there was not a typical stampede for the exit as those investments that had been made were either correctly divested or held on to until the picture was clearer. It is nice to see that these markets have learnt from past lessons, and more importantly that there is a definite improvement in transparency and understanding of the companies that make up the markets in the region. The hope that this will continue is widespread, and all are awaiting the continued opening of Saudi’s market – see previous messages for more.
Tech + surfing
There was talk over the weekend that Nintendo has now surpassed sales of both its rival consoles – selling twice as many as the other two (Playstation and Xbox) combined. This is an extremely impressive performance for a company that had seemingly lost the lead in a business it practically invented (first came playing cards, then their Donkey Kong classic). However, in a worrying sign, demand for its Wii and even its incredibly popular DS consoles (there’s a great game called brain-training on it) has recently decreased in pace in Japan. The Japanese market is normally a pre-cursor for both the European and US gaming market, and it appears that the natural attraction of simple games that appeal to a diverse demographic (particularly those that would not normally be found sitting-up in the dark at 3am playing that “one final round” of Grand Theft Auto 4) is only recession-proof for a while. The stay-at-home-and-play environment that many households have transitioned to with the onset of the credit-crunch can only last a while and now that the human desire to enjoy life has returned to many of those that secluded themselves, the more complicated and rewarding gaming devices are beginning to shine through as the truly sustainable part of the business – only serious gamers will continue to buy games every month that can cost up to $90.
This phenomenon above can be extended to many different industries – when something occurs that is as widely disruptive as the credit-crunch that many inn the western world have experienced, the initial reaction is to retreat and move towards innovative and cheaper solutions. However, the desire and appetite to return to more of a “normal” lifestyle ultimately wins through – the question many are now asking themselves is what exactly is a normal lifestyle given so much of what passed as “normal”, i.e. greed and wanting what you can’t have, is now frowned upon. Expect Wii sales and the new DSI handheld to do quite well for a while in the US I think.
Oh, I suppose we can concede there is one piece of entertaining news out there this morning is talk of how almost 2million PCs have been infected by malicious hackers, after users that have visited certain websites unwittingly download a programme that enables a gang of hackers based in Ukraine to control their systems – simple solution to this one: those 2 million need to stop visiting those types of “certain” websites as they surf the web at night – problem (the tech one at least) solved.
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