Share prices and currencies in emerging markets received a boost during April from the news the US Federal Reserve intends to maintain its current near-zero interest-rate policy. Encouraging economic data from the US boosted hopes of a consumer-led recovery that would prove positive for Asian exporters.
However, the European debt crisis triggered a revival in risk aversion that could lead many investors to avoid riskier assets, including those based in emerging markets.
In common with many other indices around the world, the Brazilian Bovespa was affected by growing concerns some European countries might default on their debt. Interest rates in Brazil rose for the first time in over a year during the month, providing a boost for the Brazilian real. Meanwhile, shares in Russian companies fell sharply over the latter part of the month amid fears budget deficits in Europe and moves by China’s government to put a brake on lending activity could derail growth in developing economies.
In India, the Sensex registered its third consecutive monthly gain. The continued strength in the Indian rupee has fuelled hopes foreign investors will be more inclined to invest in Indian companies, attracted by the country’s strong economic outlook. The Reserve Bank of India raised interest rates in an attempt to curb inflation, but warned that the global recovery remains fragile, which could affect India’s exporters.
In China, the Shanghai Composite index fell by 7.7% over April and hit its lowest level since October during the month as China’s government announced plans to cool the domestic property market. The Chinese economy expanded by 11.9% year on year during the first quarter of 2010, having grown by 10.7% during the final quarter of 2009. Speculation grew during the month that China might finally be moving towards a revaluation of the yuan – many commentators believe China’s currency is substantially undervalued.
The International Monetary Fund (IMF) increased its forecast for global economic growth during 2010 to 4.2% and believes that growth will be spearheaded by China. Developing economies are tipped to expand by 6.3% during 2010 and by 6.5% during 2011, while Asia’s economy is forecast to grow by 7.1% during 2010, driven by strong international demand for raw materials and manufactured products. China’s economy is forecast to expand by 10% during 2010, while India’s economy is expected to grow by 8.8%, considerably higher than the IMF’s previous forecast of 7.7%.
Monday, 17 May 2010
Wednesday, 12 May 2010
Japanese companies report strong earnings
Share prices in Japan rebounded towards the end of the month, boosted by strong earnings announcements from leading companies and positive corporate earnings and macroeconomic data from the US. Overall, the Nikkei 225 index fell by 0.3% during the month, while the Topix rose by 0.8%.
Investors in Japan had been unsettled by events in Greece, as the International Monetary Fund (IMF) agreed a €110bn (£95bn) aid package to help Greece tackle its debt crisis and credit ratings agency Standard & Poor’s downgraded the credit ratings of Greece, Spain and Portugal.
The IMF expects Japan’s economy to grow by 1.9% during 2010, compared with its forecast four months ago of growth of 1.7%. Exports are helping the country’s economic expansion, driven by increasing demand from developing economies, and major exporters have benefited from the yen’s ongoing weakness against the US dollar. For example, LCD screen maker Sharp expects net income to rise by more than 1000% this year amid soaring demand for 3D panels.
The Bank of Japan (BoJ) continues to look for ways to support Japan’s economic recovery and is considering additional monetary easing measures to boost growth. The central bank aims to increase credit to lenders in order to ensure they in turn are able to lend to Japanese companies, thereby supporting the economy.
Japan’s economy has been lifted by improvements in overseas economic conditions, but the BoJ remains concerned there is insufficient momentum to support a self-sustaining recovery in domestic private demand. Nevertheless, the Tankan survey of Japanese business sentiment indicated that sentiment continued to improve, particularly among larger companies.
The BoJ maintained Japanese interest rates at 0.1% in April. An improvement in private domestic consumption has been underpinned by loose monetary policy, despite relatively high unemployment. The BoJ expects economic progress to be restrained for some time, but believes that, once the corporate sector picks up, the household sector will follow suit. Household spending, wages and job vacancies appear to be on the rise, although the rate of unemployment increased to 5%.
Prices fell for a 13th consecutive month during March. Cheap imported products from China and India are helping to keep prices down, although the effects are being offset to some degree by higher commodity prices. The BoJ expects the problem of deflation to abate once demand improves, but warned that high commodity prices might eventually lead to a larger-than-expected rise in inflation.
Investors in Japan had been unsettled by events in Greece, as the International Monetary Fund (IMF) agreed a €110bn (£95bn) aid package to help Greece tackle its debt crisis and credit ratings agency Standard & Poor’s downgraded the credit ratings of Greece, Spain and Portugal.
The IMF expects Japan’s economy to grow by 1.9% during 2010, compared with its forecast four months ago of growth of 1.7%. Exports are helping the country’s economic expansion, driven by increasing demand from developing economies, and major exporters have benefited from the yen’s ongoing weakness against the US dollar. For example, LCD screen maker Sharp expects net income to rise by more than 1000% this year amid soaring demand for 3D panels.
The Bank of Japan (BoJ) continues to look for ways to support Japan’s economic recovery and is considering additional monetary easing measures to boost growth. The central bank aims to increase credit to lenders in order to ensure they in turn are able to lend to Japanese companies, thereby supporting the economy.
Japan’s economy has been lifted by improvements in overseas economic conditions, but the BoJ remains concerned there is insufficient momentum to support a self-sustaining recovery in domestic private demand. Nevertheless, the Tankan survey of Japanese business sentiment indicated that sentiment continued to improve, particularly among larger companies.
The BoJ maintained Japanese interest rates at 0.1% in April. An improvement in private domestic consumption has been underpinned by loose monetary policy, despite relatively high unemployment. The BoJ expects economic progress to be restrained for some time, but believes that, once the corporate sector picks up, the household sector will follow suit. Household spending, wages and job vacancies appear to be on the rise, although the rate of unemployment increased to 5%.
Prices fell for a 13th consecutive month during March. Cheap imported products from China and India are helping to keep prices down, although the effects are being offset to some degree by higher commodity prices. The BoJ expects the problem of deflation to abate once demand improves, but warned that high commodity prices might eventually lead to a larger-than-expected rise in inflation.
Monday, 10 May 2010
Demand for corporate bonds continues to slide
In the UK, demand for corporate bonds continued to flag during April as credit-rating downgrades in Greece, Spain and Portugal exacerbated concerns that corporate borrowers might find it harder to fulfil their obligations to lenders.
Ratings agency Standard & Poor’s cut its credit rating for Greece to “junk” status, and downgraded Spain and Portugal. Nevertheless, high-yield bonds remained relatively unscathed by Greece’s predicament –probably because high-yield investors tend to be more accustomed to market volatility.
The UK economy expanded by 0.2% during the first three months of 2010, compared with growth of 0.4% in the final quarter of 2009, and this slower rate of growth was attributed to weakness in the services sector. The International Monetary Fund (IMF) expects the UK economy to expand by 1.3% during 2010 – a figure unchanged from its January forecast.Meanwhile, investors were heartened by a report from the Organisation for Economic Co-operation and Development, which expects economic growth in the UK to outpace most of its G7 colleagues during the second quarter of 2010.
However, the British Chambers of Commerce warned that, although the UK had managed to avoid falling into a “double-dip” recession in the first quarter of 2010, the UK’s economic recovery remains fragile and vulnerable to setbacks. Meanwhile, the National Institute of Economic & Social Research expects the UK economy to “crawl” during 2010, hampered by anaemic consumer spending. The institute forecasts the UK economy will grow by just 1% this year, compared with UK Treasury forecasts for growth of between 1% and 1.5%.
UK inflation accelerated more rapidly than expected during March, rising by 3.4% year on year, according to the Office for National Statistics. Prices were pushed higher by rising costs for transport, fuel, food, clothing and footwear. Sterling’s weakness has increased prices for commodities and other imported goods.
During April, UK house prices registered their first double-digit annual growth since July 2007, according to the Nationwide Building Society. Meanwhile, the British Bankers Association reported that UK mortgage approvals had been 20% higher in March 2010 than in March 2009.
Among UK retail investors, bonds proved the most popular asset class during March, representing approximately half of all net retail sales. The best-selling sector during the month was Sterling Strategic Bond, followed by Global Bonds. Among institutional investors, meanwhile, the Sterling Corporate Bonds sector was the best-selling Investment Management Association grouping, while the Gilts sector experienced substantial outflows.
Link to sterlings website
Ratings agency Standard & Poor’s cut its credit rating for Greece to “junk” status, and downgraded Spain and Portugal. Nevertheless, high-yield bonds remained relatively unscathed by Greece’s predicament –probably because high-yield investors tend to be more accustomed to market volatility.
The UK economy expanded by 0.2% during the first three months of 2010, compared with growth of 0.4% in the final quarter of 2009, and this slower rate of growth was attributed to weakness in the services sector. The International Monetary Fund (IMF) expects the UK economy to expand by 1.3% during 2010 – a figure unchanged from its January forecast.Meanwhile, investors were heartened by a report from the Organisation for Economic Co-operation and Development, which expects economic growth in the UK to outpace most of its G7 colleagues during the second quarter of 2010.
However, the British Chambers of Commerce warned that, although the UK had managed to avoid falling into a “double-dip” recession in the first quarter of 2010, the UK’s economic recovery remains fragile and vulnerable to setbacks. Meanwhile, the National Institute of Economic & Social Research expects the UK economy to “crawl” during 2010, hampered by anaemic consumer spending. The institute forecasts the UK economy will grow by just 1% this year, compared with UK Treasury forecasts for growth of between 1% and 1.5%.
UK inflation accelerated more rapidly than expected during March, rising by 3.4% year on year, according to the Office for National Statistics. Prices were pushed higher by rising costs for transport, fuel, food, clothing and footwear. Sterling’s weakness has increased prices for commodities and other imported goods.
During April, UK house prices registered their first double-digit annual growth since July 2007, according to the Nationwide Building Society. Meanwhile, the British Bankers Association reported that UK mortgage approvals had been 20% higher in March 2010 than in March 2009.
Among UK retail investors, bonds proved the most popular asset class during March, representing approximately half of all net retail sales. The best-selling sector during the month was Sterling Strategic Bond, followed by Global Bonds. Among institutional investors, meanwhile, the Sterling Corporate Bonds sector was the best-selling Investment Management Association grouping, while the Gilts sector experienced substantial outflows.
Link to sterlings website
UK Equities turn south
The FTSE 100 index fell by 2.2 % during April as investor sentiment was negatively affected by the imminent election amid widespread fears of a hung parliament.
These concerns were exacerbated by the news that ratings agency Standard & Poor’s had downgraded the credit ratings of Greece, Spain and Portugal, as investors became increasingly worried a hung parliament could hamper the UK’s chances of adequately addressing its budget deficit.
The oil sector moved back into the spotlight during the month following a report from the Automobile Association that the cost of petrol in the UK had reached a record high. Petrol prices have been driven, so to speak, upwards by rising oil prices, and this has been exacerbated by sterling’s weakness, and a rise in fuel duty.
Looking ahead, the International Monetary Fund expects oil prices to average $80 (£53.40) per barrel in 2010 and $83 per barrel in 2011. Later in the month, shares in BP fell amid fears a massive oil spill in the Gulf of Mexico could cost the company dearly. Elsewhere, the mining sector was hit by concerns that Australia might decide to introduce a tax on mining profits.
The eruption of the Eyjafjallajokull volcano in Iceland proved disruptive for travellers and costly for UK businesses. Airport operator BAA, which is owned by Spanish transport firm Ferrioval, said the disruption would cost the company between £5m and £6m per day.
For its part, British Airways said the effects of the eruption would cost the company between £15m and £20m per day. Meanwhile, tour operator TUI Travel, which owns Thomson and First Choice, estimated the disruption would cost the company between £5m and £6m per day.
According to the CBI Distributive Trades survey, retail sales have continued to pick up. Sales growth among food and footwear retailers has been strong; however, growth at clothing and furniture retailers has been slower. Trading at hardware and home-improvement retailers steadied after falling for the previous three months. M&S reported stronger-than-expected sales growth during its first quarter that were boosted by improving sales of clothing and food in its UK stores.
After proving more popular than bonds for the past six months, equities fell out of favour during March, according to the Investment Management Association. The UK All Companies sector was the least popular fund grouping during the month, experiencing net retail outflows of £689m.
Link to sterlings website
These concerns were exacerbated by the news that ratings agency Standard & Poor’s had downgraded the credit ratings of Greece, Spain and Portugal, as investors became increasingly worried a hung parliament could hamper the UK’s chances of adequately addressing its budget deficit.
The oil sector moved back into the spotlight during the month following a report from the Automobile Association that the cost of petrol in the UK had reached a record high. Petrol prices have been driven, so to speak, upwards by rising oil prices, and this has been exacerbated by sterling’s weakness, and a rise in fuel duty.
Looking ahead, the International Monetary Fund expects oil prices to average $80 (£53.40) per barrel in 2010 and $83 per barrel in 2011. Later in the month, shares in BP fell amid fears a massive oil spill in the Gulf of Mexico could cost the company dearly. Elsewhere, the mining sector was hit by concerns that Australia might decide to introduce a tax on mining profits.
The eruption of the Eyjafjallajokull volcano in Iceland proved disruptive for travellers and costly for UK businesses. Airport operator BAA, which is owned by Spanish transport firm Ferrioval, said the disruption would cost the company between £5m and £6m per day.
For its part, British Airways said the effects of the eruption would cost the company between £15m and £20m per day. Meanwhile, tour operator TUI Travel, which owns Thomson and First Choice, estimated the disruption would cost the company between £5m and £6m per day.
According to the CBI Distributive Trades survey, retail sales have continued to pick up. Sales growth among food and footwear retailers has been strong; however, growth at clothing and furniture retailers has been slower. Trading at hardware and home-improvement retailers steadied after falling for the previous three months. M&S reported stronger-than-expected sales growth during its first quarter that were boosted by improving sales of clothing and food in its UK stores.
After proving more popular than bonds for the past six months, equities fell out of favour during March, according to the Investment Management Association. The UK All Companies sector was the least popular fund grouping during the month, experiencing net retail outflows of £689m.
Link to sterlings website
Global economic outlook improves
One year after global equity markets plumbed their depths, most major indices ended the month – and the first quarter of 2010 – in positive territory.
In the UK, the FTSE 100 index rose by more than 60% from its lows of March 2009, fuelling speculation during the month the benchmark index might move closer to the 6,000-point level. News during March was dominated by the announcement of the last Budget before the General Election. The Chancellor expects the UK’s massive budget deficit to fall from 11.8% of GDP to 4% by 2015, although some commentators criticised his Budget for a lack of detail as to how this could actually be achieved.
According to the Investment Management Association, UK retail investors’ appetite for mutual funds recovered during the first quarter of 2010, and net retail sales experienced their best-ever January in 2010, notching up sales that were 55% higher than in January 2009. In contrast to that period, equities proved more attractive to retail investors than bonds as the idea of risk regained its appeal.
In the US, share prices continued to make upward progress as investors became more confident in the sustainability of the economic recovery. In particular, US stocks received a boost during the month after the Federal Reserve confirmed that it intends to maintain interest rates at their current near-zero level in order to support the economic recovery. Meanwhile, US retail sales posted an unexpected rise during February, increasing by 0.3%, month on month, despite February’s unusually snowy weather.
In Europe, the euro continued to wobble against other key currencies amid worries that Greece might not be able to obtain financial support from the European Union – a possibility that might force Greek leaders to approach the International Monetary Fund for aid.
Elsewhere, Asian stocks experienced some volatility during the month amid fears that central banks within the region might decide to increase measures to cool inflationary pressures. In China, surging export activity led to renewed calls for the government to increase the value of the yuan.
According to a recent survey conducted by the Japanese government, optimism among large manufacturers in the country increased for a third consecutive quarter, suggesting that its economy has been helped out of recession by growing export activity. However, falling prices have meant that service companies have not benefited from the export-led recovery and deflationary pressures remain a concern.
Link to website
In the UK, the FTSE 100 index rose by more than 60% from its lows of March 2009, fuelling speculation during the month the benchmark index might move closer to the 6,000-point level. News during March was dominated by the announcement of the last Budget before the General Election. The Chancellor expects the UK’s massive budget deficit to fall from 11.8% of GDP to 4% by 2015, although some commentators criticised his Budget for a lack of detail as to how this could actually be achieved.
According to the Investment Management Association, UK retail investors’ appetite for mutual funds recovered during the first quarter of 2010, and net retail sales experienced their best-ever January in 2010, notching up sales that were 55% higher than in January 2009. In contrast to that period, equities proved more attractive to retail investors than bonds as the idea of risk regained its appeal.
In the US, share prices continued to make upward progress as investors became more confident in the sustainability of the economic recovery. In particular, US stocks received a boost during the month after the Federal Reserve confirmed that it intends to maintain interest rates at their current near-zero level in order to support the economic recovery. Meanwhile, US retail sales posted an unexpected rise during February, increasing by 0.3%, month on month, despite February’s unusually snowy weather.
In Europe, the euro continued to wobble against other key currencies amid worries that Greece might not be able to obtain financial support from the European Union – a possibility that might force Greek leaders to approach the International Monetary Fund for aid.
Elsewhere, Asian stocks experienced some volatility during the month amid fears that central banks within the region might decide to increase measures to cool inflationary pressures. In China, surging export activity led to renewed calls for the government to increase the value of the yuan.
According to a recent survey conducted by the Japanese government, optimism among large manufacturers in the country increased for a third consecutive quarter, suggesting that its economy has been helped out of recession by growing export activity. However, falling prices have meant that service companies have not benefited from the export-led recovery and deflationary pressures remain a concern.
Link to website