Still a rally – still really?
*Ahead of the Easter weekend holiday a few markets are performing strongly, even as those pesky pirates off the coast of Somalia decide they need to start accumulating more loot ahead of the summer shipping lull – this time they may well have bitten off more than they can chew by taking a US Captain hostage only to now find a US warship bearing down on them in a tense stand-off. In these tough economic times many are doing what they can to make a little “on-the-side” and the allure of immense profit from ransoms paid is still proving far too attractive for the increasingly wealthy, and increasingly daring pirate raiders.
*Asia was pushed higher on the great news that Japan is looking to pump another $150bn in stimulus money (3% of GDP) to help those industries dealing with the environment, education and childcare as well as further assistance to support the job markets. Some talk suggests this figure may in fact rise to $500bn if the economy continues to contract at its alarming rate since last qtr.
*All markets in Asia are positive today (except for a small drop in Vietnam) with the best performance of course in Tokyo (Nikkei +3.74%) pushing the YTD return into +ve territory for the first time this year – a remarkable performance over the last 4 wks. Hong Kong welcomed this rally from its eastern neighbour, embracing the positive sentiment as investors realised the extra spending from Japan would result in greater trade around the region, (Hang Seng +3%). Asia has now outperformed all other markets in the last 5wks of trading.
*China has continued to rise strongly and today saw the CSI300 buoyed by March Car sales rising 10%, as well as an indication China may be opening the currency to the world through the increased issuance of corporate bonds (Credit Suisse latest to sell Chinese bonds) – this is a continuation of the long-standing discussions surround China’s undervalued currency, as well as a belief that China will be the major force of recovery for many of the world’s economies through large sums of money flowing out of the vast savings accounts held around the country directly into foreign companies rather than simply into US Treasuries. The issuance of Chinese domestic bonds to foreign investors will be the largest change here if it takes place.
*We are still a few years away from this, but worth watching for the earliest signs of a warming to the theme. I will be writing more on China and its banks tomorrow following a trip around the region with one of the country’s largest – China Construction Bank.
Standing-room-only?
*Middle Eastern markets have been slightly mixed, with no strong follow-through from Asia’s great display and Europes’s positive open. Even Dubai’s government embarking on the spending of the $10bn fund established a couple of months ago and stabilising the economy failing to light a stronger rally. Across Dubai there is a definite sense that the worst is over and although property prices are still expected to fall another 20% or so (in addition to the 34% avg. decline over the last 6 months) a shift in attitude has taken hold – as you drive along the main motorway, the large advertising billboards heralding the next great project to be completed have retuned in their prominent positions and an ambience of controlled reality that things will remain subdued for some time has now taken hold rather than the sheer panic and multiple rumours so prevalent in the last few months during the depth of the crisis
*The much anticipated low-cost airline service affiliated to Emirates was announced this week, with flights due to commence in early June (bookings now being taken) – I was surprised to discover that the planes the airline will use will be brand-new, next generation 737-800 aircraft in an all-economy configuration. Why they are not using any of the older planes from Emirates’ (vast) fleet is a mystery, but with an estimated 54 additional brand-new Boeings on order there may well have to be a slight re-think here. As for the seating configuration, 189 seats in economy sounds kinda tight – Fly Dubai’s aim to maintain focus on flights below 4.5hrs shouldn’t mean anyone gets too uncomfortable though – unlike the planned airlines in China that (if rumours are to be believed) are looking into creating standing-room-only configurations! I’m not kidding, they have seriously put in some patents for cabin designs where passengers are herded into the sparse cabin, strapped into leaning posts with secure belts for take-off and landing but otherwise stand around the during the (hopefully short) flights – brings a whole new meaning to cattle-class! I wonder if they still serve nuts and drinks as they stand around?
Europe has opened higher ahead of the Bank of England’s rate decision in a couple of hours, with rates at the historic low of 50bps, consensus is for no change. The decision by Germany to essentially nationalise one of its larger banks (the first such move) by making an offer through an offer to its shareholders Hypo Real Estate (offer is 10% premium to legal minimum). The political machinations have meant that the German government has wanted to ensure all necessary steps were taken that may have avoided full nationalisation prior to the announcement. At least they have had the strength of character to go ahead and do what was always a foregone conclusion in many people’s opinion.
*US Retailer reporting March same store sales later today – US futures currently set for a good open with DJIA +60pts and S&P +6.8pts.
*Gold has found a new range around $870-885/oz and Oil is holding its head above $50/brl for now. Currencies have also remained quite calm since Monday, with only cable giving up some recent gains.
Spying-on-the-spies?
*The UK anti-terror Head resigned today for unfortunately holding a top-secret piece of paper in full view of photographers when on his way into a “top-secret” meeting with the Prime Minister in London. The fact the document was on full display and contained details of an imminent raid against a number of suspected terror targets proved fateful in his career and apparently was dangerous in allowing certain terrorist organisations the opportunity to gleam sensitive and mission dependent information - now, I’m not sure how sophisticated these suspected terrorists are, but when you consider they were looking to fashion hone-made explosives out of soda and baking powder I hesitate when assuming they would have had the foresight and technology to sit and analyse the writing on a piece of paper captured for a matter of seconds on a camera from a hundred meters or so away! If some more unsavoury character out there was not constantly watching Sky News in the hope of a minister slipping up on his way into No10 Downing Street, exposing confidential documents to the awaiting cameras, they definitely are glued to their TV sets now!
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