Wimbledon's Sunshine

Sunny Wimbledon…shining markets?
This weekend was full of talk of a “summer lull” in the markets, the implications of a new Middle-East caressed by the charisma and aggression of the Obama/Hilary duo (no guesses for which exhibits what), questions abounding over the sustainability of China’s growth following the IMF’s announcement it was still expanding at a “decent” pace (and still annoying US tech firms by “censoring” Google and similar sites), talk of a narrowing spread on Morgan Stanley and Goldman Sachs debt as they look to repay TARP and obviously rake-in some risk-related profit, as well as focus on Wimbledon’s new retractable roof that will ensure tennis players are able to play a full game without the obtrusive London weather interrupting for a drizzle every few (annoyingly key) games – the irony being this is forecasted to be the sunniest and driest Wimbledon in recent memory! Oh well, they can market it as a (very expensive) anti-UV panel I guess.

This week will see investors focus on the Fed’s monthly meeting on Wednesday – normally to announce latest interest rate decisions. Since rates are at effectively zero, the focus will be on guidance that will continue to filter through from the minutes, enabling investors to determine just how solid the commitment to historically low-interest rates the administration is – especially given the latest volatile moves in US Treasury yields in recent weeks. This sudden rise is a worrying indication for the FED, if you have been listening to Bernanke’s latest testimonies and snippets.
US GDP QoQ figures will also be released on Thursday (-5.7% cons) along with Initial Jobless Claims (600k cons). As the slow-down in the market-recovery shifts into a medium-term outlook for sideways performance, the importance of strong economic releases to avoid another downward trend becomes even more important.

Asia’s main markets managed to put in a very decent performance to get the week going, with good returns in Hong Kong (+2.5%) and across Taiwan (+1.8%) and Korea (+1.2%) – all linked to a surprisingly positive outlook for export-related numbers and inventory levels, as well as an up-tick in confidence across Japan’s manufacturers. It appears that talk of the demise of the US consumer has abated alongside a hope that other emerging economies will continue to pick-up some of the slack.
European markets have gotten the week off to a poor start, despite some big news that Xstrata is in talks with Anglo American to create a mega-merger in the mining world. A World Bank report has dampened any attempt to send markets higher with an admission that the global recession will most likely be deeper than its previous indication back in March (oops). This has also meant US futures are trading a little lower at the moment, with DJIA -44pts, S&P -5.7pts.

Oil prices are surprisingly falling despite the ongoing tensions across Iran. Gold has slipped far below the $950/oz level in recent days, with investors spreading their cash across a greater number of assets despite the continued weakness of the US$. Most major currency cross-rates are holding steady at the moment, once again ahead of the FOMC guidance.

Iran – latest
The bloody killings and extreme show-of-force by an Ayotallah clinging to power has a dramatic and sickening sense of inevitability attached to it, doesn’t it? This scenario has been witnessed many times, where a governing body on its last legs makes a desperate and last-ditch attempt at “dissuading” any reformist and rebellious elements from seeking justice in a cause that has really been self-inflicted.
The decision to allow Revolutionary Guard troops to open fire on the peaceful protesters has pushed what will likely be the final nail in the coffin of Iran’s supreme council – international (read: US) condemnation and an increasingly aggressive tone towards the punitive powers.
With the trickle of information making its way out of Iran – which cannot close itself to the outside world despite its best attempts thanks to technology and the intuitive use of media mediums – watching the “resistance” take shape is almost playing out in a foreboding slow-motion series of events. Once can only hope the end will be swift and decisive without the loss of further lives.