Carnivale Tears

As the world’s romantics (and suckers for commercialised holidays) return to their desks content their feelings have been adequately expressed and requited for another year, a busy week awaits ahead: Afghanistan is embroiled in yet another “surge” by coalition forces as they run amok the mountains of a land that refuses to give in to any intruding force, Iran declares itself a veritable “nuclear force” alongside increased calls for pre-emptive strikes from either US or Israeli forces (same thing no?), Hilary Clinton tours some of the world’s largest oil (Saudi) and gas (Qatar) producers in the Gulf region presumably ensuring undisturbed supplies of their most precious exports in events related to the preceding sentence and economic figures suggest Japan’s economy is not quite ready to relinquish its position as the world’s second largest economy to China just yet (despite Toyota’s woes), at the same time as our ever-market-savvy friends here in Dubai briefly stun investors with rumours of a 7yr haircut-debt-deal – since denied but doing nothing to assuage tired/cynical/fed-up investors devoid of patience.

With the Chinese New Year taking us into the Year of the Tiger, most major markets across Asia are shut for the extended celebrations, leaving Japan to fall moderately (Nikkei -0.78%) and little to steer investors on this Monday morning through the usual barrage of upcoming economic indicators: including (from the US) Fed meeting minutes on Wednesday and much-focused on inflation figures via PPI (+0.8% cons) on Thursday, as well as the much-anticipated details of a European (basically German) deal to “facilitate” Greece’s problems – maybe Greece could rein in some of the huge spending they seem to love on advertising their bountiful tourist attractions across almost every major new network every fifteen minutes – seems a strange juxtaposition sandwiched between commentaries on sovereign meltdowns and irresponsible public spending – a lesson Dubai never learnt when deciding to “open” a (since closed) record-breaking-tower in the midst of its own debt issues. It’s quite tough out there for any sovereign spending huge amounts of money whilst simultaneously running out of cash and in the unlucky position of possessing neither a globally used currency nor a globally feared military – well played Uncle Sam.

What about moves in commodities given heightened anxiety across the Gulf region? History would dictate that a short-term spike in the price of oil (currently trading slightly lower today in fact just below $74/brl) will occur the moment aggressive rhetoric inevitably turns into action leading to pain and disgust across motorists at fuel pumps from Berlin through London to Texas (hybrids still not too high on the agenda for the nature-lovers there - a Prius just doesn’t have enough room for all those essential rifles). Oil has in fact hovered around $75/brl since falling at the end of Jan, almost sitting around waiting for something interesting (dangerous also) to happen, or already fully-pricing in any supply disruptions. In conjunction with a renewed desire to hold US$s (Cable 1.56, Euro/US$ 1.36) and a slight return of risk-aversion, a semblance to markets this time last year currently exists. Optimists out there will welcome this as long as a strong period of rising performance prevails somewhere around March…and if not…well..that’s the fun of markets. European bourses are putting in a good performance at the start of the week, the FTSE, DAX and CAC40 all rising more than 70bps as pressure relieves amongst investors preoccupied by Greek, Spanish and Portuguese jitters. US futures are pointing to a less than inspiring open – DJIA -21pts, S&P -2.2pts.

With the geo-political scene immersed in what is looking like the beginning-of-the-end-game vis-à-vis the Iranian nuclear issue (Hillary’s trip as documented above a slight give-away) the Carnivale celebrating Brazilians have been more distracted by the furore created over the choice of a 7-yr old girl to lead the traditional parade in Rio de Janeiro. Disputes over whether a sexually-tinged role should be represented by such a young-girl dominated media there for days on end and spilled over into debates on even Fox News, where some dim-witted conservative said “nothing like this would ever happen in the US!” Really?? What about the 5yr-old dolled-up “junior beauty queens” you endlessly parade around middle-America huh? Anyway, at the crucial moment of her role it seems she broke down in tears when overcome by the pressure of leading the parade. The reason for her succumbing to the intense scrutiny at that precise moment in time a mystery to her father and many that knew her as they were confident in her ability to handle the situation. Commentators were equally saddened but then focused on the crowds filled with celebrities that had attended the festivities and spotted Madonna sitting in the stands – that poor 7-yr old girl must have thought she had come to save her and adopt her to a better home in the US and cried out of fear!


Best Rgds,
Hani