Markets still not where investors want them to be
Economic engines still stalled
ctober saw the UK record GDP growth, come thirteenth in the World Prosperity Index, currency wars, a new leader for Brazil, strong manufacturing data from China and the US, and the possibility of the implementation of QE2 (quantitative easing part two) from the US Federal Reserve inter alia.
O One of the main stories in corporate
earnings, particularly in the UK, this month, was Ryanair, who announced a 15% increase in profits due largely to increased passenger numbers, according to the BBC. The airline made a pre-tax profit of €482m and recorded passenger numbers of 40.1 million up 10% on last year. The CEO attributed the increase in profits to the robustness of its business model. Stock markets gained very little momentum for the month and closed largely positively. Perhaps a gradual return to bullish performance up to the end of the year? Certainly worth monitoring for sure. As such and according to Bloomberg, the MSCI World index was up 3.6% at 1,222.2. The FTSE 100 closed the month 2.3% higher at 5,675.2. Most analysts and chartists for certain are watching whether this can reach or pass the 6,000 mark. The S&P was also up slightly at 3.7% to close at 1,183.3 with the Nikkei 225 closing down slightly 1.78% at 9,202.4. The FTSE-EuroFirst 300 was also up 2.4% to close at 1,086.6. The Shanghai Stock Exchange closed up
12.2% at 2,978.83 in local currency terms. The Bombay Sensex closed down circa of 2/10ths of a percent in local currency terms at 20,032.3. Brazil’s Bovespa closed up 1.8% higher in local currency terms to close at 70,673.3. In the space of a day at the end of the month it moved 1.2% higher having priced in the news of the country’s first female president and crucially the heir(ess) and endorsed candidate of the
30 November/December 2010
successful and popular outgoing president, Lula. MICEX, Russia’s stock index, was 5.8% in rubles to close at 1,523.39 With regard to currencies, the war of words between China and the US heated further as the US treasury secretary accused China of their unwillingness to allow the yuan to rise, according to the Economist. He believed that excess accumulation of reserves was leading to serious distortions. The Chinese responded by saying that the biggest distortion came from the expectation that the US would soon engage in QE2 and that such liquidity creation, would swamp emerging economies with destabilising capital inflows. The yuan to the US$ barely moved for 2009 and then depreciated strategically giving the advantage to Chinese exporters, see Chart A. At the end of October, the yuan closed 3/10ths of a percent lower against the dollar at 6.6705. For
Global mergers and acquisitions (M&A) surged 21% in the last quarter
the same period, the euro rose 2.4% against the dollar to close at $1.3901. It fell circa 1.4% against the yen at ¥112.12 but rose 3/10ths of a percent against sterling at £0.86927. With respect to commodities, WTI crude oil closed the month 6/10ths of a percent at $81.4 per barrel, according to Bloomberg. It rose to a six month high a few days later at $83.45 having been encouraged by positive manufacturing data from China and the US as well as conciliatory words from Saudi Arabia’s oil minister, who stated that producers, consumers and companies were all happy with the price and that it would be unlikely that no drastic measures would be taken on price unless it were to surpass $90, according to BBC reports.
Business Money
Jonathan Chambers
Copper closed the month up 2.3% higher to $8,200 per tonne with a high of $8,518 per tonne being recorded a few days earlier as one trader believed that with expectations of the second round of quantitative easing rising, investors naturally would choose to buy into commodities, especially ones like copper that have good fundamentals, according to a Reuters quote. Platinum was up 2.9% for the month to close at $1,706 per troy ounce. City AM ran an article to say that buying physical gold was back in fashion for the wealthy as they were purchasing gold bars in numbers to safe guard against economic worries such as the perceived double-dip. UBS has recommended that their clients hold 7-10% of their assets in precious metals as has the Swiss private bank, Julius Baer. The precious metal was up 3.9% to close at circa $1,359.4 per troy ounce. Global mergers and acquisitions (M&A)
surged 21% in the last quarter, something not seen since 2008, according to City AM. The third quarter of 2010 recorded a total of $676.9bn worth of deal and the number of deals was up 3.8% year-on-year. Adviser fees also increased, jumping 39% at $19.8bn. The largest deal was reported to have been GDF Suez Energy’s acquisition of International
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