Archive forJanuary, 2013

Spain’s economic recession deepens in Q4 2012

The Spanish GDP shrank 0.7% q-o-q in Q4 2012, its sharpest contraction in a year, owing to government spending cuts and stubbornly high unemployment rates, the statistics institute INE said yesterday. On y-o-y basis, GDP fell 1.8% in the fourth quarter. Following the news, Prime Minister Mariano Rajoy pledged stimulus measures, including tax breaks for entrepreneurs, shortly.

US housing prices rise in November

The S&P/Case Shiller composite index for 20 metropolitan areas rose a seasonally adjusted 0.6% in November, the 10th successive monthly increase and the longest string of gains since the market downturn in 2006. On y-o-y basis, prices across the 20 cities increased 5.5%.

EU could ease Spain’s budget target

European Union’s Olli Rehn indicated the EU could ease Spain’s budget deficit target next month after assessing its budget consolidation process. Bank of Spain said the country’s austerity programme needs to be intensified if it is to meet this year’s target of lowering the budget gap to 4.5% of GDP. It also mentioned the economy probably shrank 0.6% in Q4 2012, twice the rate of contraction vis-a-vis the previous quarter.

Japan forecasts economic growth of 2.5% for 2013-14

Japan’s real GDP is estimated to grow 2.5% during fiscal year 2013-14 starting April, the Cabinet Office said today. Prime Minister Shinzo Abe’s bold fiscal and monetary measures are expected to boost domestic demand, while a rebounding overseas economy would aid exports. For the current year, the growth forecast has been lowered to 1% from 2.2% earlier. The consumer price index is expected to rise 0.5% in the next fiscal, after an anticipated 0.1% fall this year.

CNBC Investing Edge Interview – ‘2013 View’ with Mike Franklin

CNBC Investing Edge Interview – ‘2013 View’ with Mike Franklin

Apple shares fall 12% on growth fears

Apple shares have tumbled 12% as investors fret over whether the company could lose its dominance in the smartphone market. About $50bn (£32bn) was wiped off Apple’s value after the biggest daily drop in the firm’s stock in four years. Flat profits and record quarterly revenue of $55bn were not enough to overcome disappointment over sales of the company’s new iPhone 5. Analysts said the firm was in danger of becoming a victim of its own success. Earlier, shares in some of Apple’s key Asian suppliers also fell. LG, which provides displays for Apple products, fell 3.1%, and Hon Hai, which assembles iPhones and iPads, dropped 3.2%.

IMF: Global economic recovery ‘weakening’

The International Monetary Fund (IMF) has warned again of a weakening global economic recovery despite government efforts to stimulate growth. The global economy is likely to grow at a slower rate than previously forecast over the next two years, the organisation said in its latest report. It said it now expected the eurozone to remain in recession in 2013, having previously predicted growth. The UK’s growth forecasts have also been revised down.

Spain could cover 13% of its 2013 funding in January

The Spanish Treasury aims to raise almost 13% of its funding target for 2013 in January, after investors purchased its new 10-year bonds (worth €7bn) through a syndicated sale which witnessed a record demand. The Treasury could end the month with a total issuance of €27bn, the Economy Ministry said. However, the European Commission said yesterday Spain probably missed its deficit reduction target for 2012, although it is broadly on track with its economic reforms programme.

Bank of Japan sets inflation target at 2%

Bank of Japan doubled its inflation target to 2% and has committed to an open-ended purchase of assets in its bid to fight deflation. The bank would start purchasing assets worth ¥13tn ($145bn) per month, starting January 2014. This includes the purchase of Japanese government bonds (¥2tn) and Treasury bills (¥10tn).

Bank of Italy cuts GDP forecast for 2013

Italy’s central bank expects the economy to contract 1% in 2013, sharply higher than the 0.2% contraction forecasted in July. As per the bank’s estimates, GDP shrank 2.1% in 2012; it forecasts the economy to grow a mere 0.7% in 2014. Given the growing economic challenges, the bank expects unemployment to reach 12% by 2014 from 8.4% in 2011. The central bank’s report also estimated public deficit declined to around 3% of GDP in 2012 from 3.9% in 2011.

Just chillin’

As Britain shivers under an extensive coating of snow this morning, the drop to sub-zero temperatures is but an hors d’oeuvre for this hapless investment commentator. Barring weather-related delays at Heathrow tomorrow, there is a week in prospect of business at minus 30 degrees Celsius (including wind chill) in the former Manchurian region of north-east China, equidistant from China’s borders with Mongolia, Russia and North Korea. Fortunately, these airline pilots always know where they are. Such is the price we intrepid investors must pay to break into new frontiers ! Thankfully, the return leg takes in the familiar turf of Hong Kong, where temperatures tend to be slightly less life-endangering, offering a welcome opportunity for some pulse-taking.

Chinese economy rebounds in Q4; rise in industrial output and retail sales

China’s GDP expanded 7.9% y-o-y in Q4 2012, rebounding from seven straight quarters of a slowdown, the National Bureau of Statistics said today. However, growth for the full year was lower at 7.8%, the weakest year of economic expansion since 1999. Separately, industrial output rose 10.3% y-o-y in December, while retail sales increased 15.2% y-o-y vis-à-vis the estimate of 14.9%. Fixed-asset investment grew 20.6% in 2012.

Apparently, Apples can rise as well as fall

It seems there has been at least a touch of the Sir Isaac Newton’s about the share price action of Apple Inc. in recent days. While a fruit tree may have been a source of inspiration for the great mathematician’s reflections on planetary motion, the shares of Apple have certainly encountered a pronounced gravity hot spot since the start of the year with a fall of 11% – down 31% since the September 2012 peak – before yesterday’s 4.2% death-defying bounce back to $506.

IMF approves Greek aid disbursement

After months of uncertainty over Greece’s debt sustainability, the IMF agreed to disburse €3.2bn to Athens under the country’s €240bn international bailout, after Greece enforced structural reforms, budget cuts and a bond buyback.

Currencies take centre stage

Having played catch-up on Tuesday after its ‘coming of age day’ holiday on Monday to celebrate those reaching their 20th birthday, the Japan’s Nikkei 225 Index has hit an air pocket today, falling 2.6%, apparently on concerns that the recent weakness of the yen – good news for Japanese exporters – could translate into import price inflation – not such good news depending on your level of reliance on imports.

World Bank cuts global growth forecasts for 2013

The World Bank estimated global growth at 2.4% in 2013, a sharp reduction from the forecast of 3% in June. It lowered forecast for developing countries to 5.5% in 2013 from 5.9% earlier. The bank projected growth in advanced economies to be 1.3% this year, strengthening to 2% in 2014 and 2.3% in 2015.

Shanghai sunset?

Just eight or nine trading days into the new year, depending on which market you look at, there are signs that the Brave New Year mentality may be starting to reveal a few cracks. A particular case in point, after its sharp 3% rally yesterday and 0.6% follow-through gain today, is the Shanghai Stock Exchange Composite Index which, at 2,326, is now looking distinctly overbought and poised for a correction.

Japan faces risks from excessive decline in yen

Japanese Economy Minister, Akira Amari, told reporters in Tokyo today the country faces risks from any excessive decline in the yen. Separately, Bank of Japan Governor, Masaaki Shirakawa, said the central bank would continue with monetary easing to revive the world’s third-largest economy from technical recession. The bank would be holding a meeting on Jan 21-22 to decide on raising the stimulus.

Chinese equities sparkle through the haze

Last week left global equity markets broadly higher against a background of media headlines suggesting that a mass migration from bonds to equities may have started. We have speculated on when this might happen for several months but recognise that the transition, if it is underway, may not occur in a straight line. One view being promulgated is that investors are moving their funds to ‘riskier’ assets but, as some commentators have begun to recall the bond market crash of 1994, it is appropriate to ask which assets actually are riskier, barring a slip back into depression mode. Do historically low bond yields of around 2% represent a reasonable reward for risk for investors who typically hover between bonds and equities if world economies such as the United States and China are on the point of a sustained upturn?

German economy shrinks in Q4 2012

According to the Economy Ministry, lower factory output and weak investment climate due to subdued demand for exports and lingering uncertainty in the Eurozone impacted Germany’s GDP in Q4 2012. Economic indicators indicated a significant decline during the last quarter; however, the ministry is optimistic growth would pick up in 2013.

Equities need ‘a little less conversation’

The National Enquirer may have long given up on reporting sightings of Elvis Presley but it seems that John Maynard Keynes is very much alive and living in Tokyo. It seems he has the ear of recently-elected Japanese Prime Minister Shinzo Abe who has just unveiled a 10.3 trillion yen (US$ 116 billion / £ 72 billion) fiscal stimulus package. About a third of this will be for reconstruction and disaster prevention with a similar amount intended to stimulate private investment.

Japan approves US$117bn stimulus package

The Japanese cabinet announced an allocation of ¥10.3trln for public works, incentives for corporate investment and financial aid for small companies in an effort to boost the economy and end deflation. The stimulus is a part of the ¥13.1trln surplus budget for the current fiscal year which is expected to be approved by the cabinet next week. The government expects the stimulus to spur real economic growth by 2% and generate 600,000 jobs.

Some loss of momentum in prospect

In trying to gauge what represents the dominant picture for markets from the myriad of pixels of information emerging from hour to hour, this observer’s inner small voice is saying that, while there has been a definite improvement in equity investor sentiment since the turn of the year, the quietness around negative themes active last year feels unnatural. Maybe they are about to re-emerge. Certainly, the technical picture is beginning to suggest that, at least, a short term consolidation is imminent in markets though this is unlikely, probably, to be a game-changer for the longer term recovery in appetite for equities that we said we expected in our year-end Outlook for 2013 strategy note.

China’s export growth rebounds strongly in December

China’s exports grew 14.1% y-o-y in December, expanding at the fastest rate in seven months and increasing sharply from the 2.9% gain in November. Imports rose 6% y-o-y in December compared to the zero growth in November. However, despite the rebound, China missed its 10% growth target for trade for 2012. As per a separate release by the central bank, China’s M2 measure of money supply rose 13.8% y-o-y in December, in line with the 13.9% gain recorded last month.

Let’s be careful out there…

According to an old English proverb allegedly rooted in a Greek legend involving a hapless Argonaut, ‘there’s many a slip ‘twixt cup and lip’. And so, it seems, there may have been such a slip in the case of HSBC’s recently-announced sale of a stake in the Chinese insurance group Ping An for US$9.4 billion. The possibility of a problem emerged late yesterday in Hong Kong on news that the private Chinese bank China Development Corp had decided to withhold its share of the funding for the deal on concerns in China about the ‘structure’ of the deal. Cue an element of embarrassment for the ‘worldwide local bank’, left looking not quite so local on this occasion.

German trade data disappoints; Spain plans record bond sales

German imports fell 3.7% in November, while exports declined 3.4%, narrowing the trade surplus, as per data from the Federal Statistics Office. Separately, Spain announced plans to issue government bonds worth a record €121.3bn in 2013, 7.6% more than in 2012. The country seeks to benefit from the recent improvement in investor appetite for risky Eurozone debt.

A cacophony of forecasts for 2013

2013 is turning into the year of the Great Denouement or Unravelling barely into its second week. While some trading-based reversal of the sharp turn-of-the-year rallies that followed temporary resolution of the Fiscal Fudge was to be expected, it is interesting to note how many market commentators are still emphasising a negative outlook.

UK economy to experience a modest recovery in 2013

As per a survey by the British Chambers of Commerce, business sentiment improved markedly in Q4, and the economy is set to experience a modest recovery this year. Manufacturers’ export orders rose to 11% from 8% in the previous three months, and services export orders were up to 18% from 15%. Separately, the British Retail Consortium announced like-for-like retail sales grew 0.3% y-o-y in December, with a 1.5% y-o-y increase in total sales.

New Year, New Opportunities

With one bound, the prisoner was free – allegedly. So far, so good. The 4.6 % gain in the S&P 500 Index between the 28th December and Friday’s close at 1,466.47 has pushed the index just above the down trend line in place since the pre-crash high of 1,565.15 achieved on the 9th October 2007. Ah, 2007, when normal economic principles still appeared to apply!

Japan to spend ¥12trln to stimulate economy

The Japanese government will announce fiscal stimulus worth around ¥12trln (US$136bn) in January to bolster the country’s shrinking economy, the Yomiuri newspaper said today. The surplus budget allocated for the fiscal year through March would include ¥5-6trln of public works spending.