Archive for May 2009

Global Stocks Up, Executive Sentiment Up

May 29, 2009

2008 was the year of extremes in the oil market.  In Summer things were soaring, couldn’t stop getting better – the price of a barrel of oil was over $147.

Then September arrived.  The world tumbled down and further down into the downturn, and oil was hit too.  A barrel was worth a mere $30.  OPEC, the main global oil cartel, decided to make production cuts in order to buoy prices.  It worked, and at yesterday’s meeting in Vienna, they decided not to make further cuts – there had been three since September.

Good news then!  If OPEC don’t need to make cuts, and oil is rising steadily then things are beginning to look up aren’t they?

In the Euro‘s 16 nations, things seem to be picking up too.  An index there has shown that executive and consumer confidence is up to a six-month high.  Manufacture is up too and overall global stocks are at a six-month high too.

Calm down though.  We’re still contracting.  Just not quite as much or as fast as before.

Oil Prices Up and Going Higher

May 28, 2009

The markets will be all a-flutter as oil prices continue to rise.  Traders on oil futures will be excited by the fact that oil prices have reached six-month highs, to over $60 a barrel.

Things had been pretty dire on the oil front for a while – after the nearly $150 a barrel in July 2008, it then dipped to $30 a barrel by the end of that year.

Dire indeed, so much so that the output levels were cut three times since September.  The main oil cartel, Opec, had decided said cuts which lowered the amount of oil barrels in circulation, thereby buoying prices.  Now, they are due to meet in Austria to possibly decide more cuts, but this may not be necessary any longer.

Saudi Arabia, the world’s largest oil producer, has even predicted prices will reach nearly $80 before the year is out.

Deflation Still Looms for UK

May 27, 2009

The Office for National Statistics has released data that shows deflation is still a risk for the UK.  The charts show that both the Consumer Prices Index and the Retail Prices Index fell in April  – meaning annual inflation dropped further.

Economists have reacted by saying that there is a higher risk of deflation than a “rapid rise in inflation” – as inflation currently still stands above the 2 per cent target set by the Government.

The main areas being blamed for the rate falls are the lowering food and fuel prices, but also being factored in are lower home insurance prices and mortgage interest payments.

In general, there has been a slow return to confidence in world markets, and today the US even claim their recession will be over by the third quarter.  Indeed, it has been said there is an element of ‘first in, first out’ to this global crisis.  Risk appetites are certainly beginning to show a return to recovery on the currency market, as those ‘safe’ currencies begin to weaken in favour of more risky ones for investors.

Euro Declines on German Bad Debts

May 26, 2009

The euro fell against the US dollar on news that Germany’s banks have a mounting pile of bad debts.

The country’s financial regulator, BaFin, has released its annual report, and this included the advice that if banks there do not take the – heavily criticised – government protection plans, then they face damning from the markets.  The president of BaFin, Jochen Sanio, used harsh terms to describe the dire amount of toxic debts that the banks are carrying on their portfolios.

The IMF has, as reported, called for stress tests to be carried out on Europe’s banks as per those carried out in the USA, and since BaFin’s report it may be yet more necessary to do this.

The currency market showed a decline in the euro to $1.3947, down from $1.4017 on Monday.

Japan Shrinks

May 20, 2009

Japan’s headache shows no signs yet of subsiding.  First quarterly results show that the economy there has shrunk at its fastest pace since 1955.

Exports, consumer spending, company output are all down.  The GDP has shrunk more than expected and by a far greater percentage that other regions – such as the Eurozone and the USA.  Japan shrunk by 15.2 per cent, Eurozone by 2.5 and USA by just 1.6 per cent.  Stark contrasts.

The Prime Minister of Japan, who oft faces strong criticism from opposition parties and from the general public, has said the country needs to take fast action to try and recover the economy.  He plans further fiscal stimulus, and large companies such as Toyota have begun more job cuts and lowering of production levels.

Unsurprisingly, this news will already have affected the foreign exchange market – the biggest liquid global market  -as the confidence levels in Japan decrease.  More will need to be done to lure investors back there.

Investors Shy Away from Derivatives

May 19, 2009

The US derivatives market has suffered in the financial downturn.  This may seem an unsurprising fact given that most financial markets have been affected in one way or another by a global recession…

The data released by the BIS in the USA shows that the derivatives market has shrunk for the first time since data was first compiled ten years ago.  Apparently investors have been less willing to get involved in high-risk assets since the collapse of the Lehman Brothers in September 2008, and the subsequent losses of other banks and financial institutions.

Where other markets have recently seen a slight increase in risk appetite, it may take the derivatives market – that is, commodities, currencies, loans, interest rates, weather, bonds and stocks – a little longer to regain strengths.

US President Obama has called for the derivatives market to undergo tougher regulation.

Lloyds Chairman to Step Down

May 18, 2009

It does bear slight impressions of a huge car crash where you look in the opposite direction..

Sir Victor Blank has announced he will step down as Lloyds chairman next year.  His decision to take retirement has apparently nothing at all to do with the fact that he chose to take over HBOS, a move which has costs billions in its disaster- levels.  The merger has failed so spectacularly but still could iron out to improve say some.  What really begs questions is the fact that the takeover was made in September 2008 – just after the Lehman Brothers nearly collapsed, an event which would have brought down the global banking sector.

Seems like the perfect time to create a “superbank” backed by Gordon Brown?  Or perhaps a little on the risky side?

Blank has been praised by board members who have called him a “first class chairman”.  So was he just unfortunate for having to preside over such a difficult period in the economy, or is he directly to blame for the vast losses?

His announcement has caused a rise in Lloyds shares on the markets.  CFDs traders might enjoy the return of investors in the UK market – or is it too early to say this?