Posted tagged ‘Financial Stimulus’

4th Quarter GDP Better than Expected

March 31, 2010

Tuesday brought some surprising news for economists: fourth quarter growth figures were revised upwards!  Now, it seems the UK economy grew by 0.4% and what is more, this was the final revision.  Having started with a minute 0.1% , we now know that the country exited the recession faster than had been thought!

However according to another survey consumers are still worrying about the economic outlook for the country.  In March, consumer confidence fell somewhat yet the risks of a double-dip or ‘W’ shaped recovery are still not significant.

Some accused media hype surrounding Alistair Darling’s latest Budget announcement as the reason for consumer fears.  Around his announcement, much was made over Britain’s large deficit and the Chancellor’s lack of drastic plans to clear this debt quickly (he currently plans to halve it in four years).

The pound edged up on the good GDP news.


British Pound Up on MPC “news”

July 10, 2009

Just what is going on?  Usually, when the MPC is due to make an announcement, everybody is pretty sure what they will say, and then they say it.  In simple terms, at least.  But yesterday, they managed to leave the City confused, surprised and perhaps a little disappointed…

The committee had been expected to announce that they intend to extend QE and possibly even request permission from the Government.  However, in their statement they said that they intend to spend the rest of the current programme and then….well, they would see and decide at the next meeting in August.

So what on earth does that mean, asked City insiders and traders on the markets.  Did they intend to spend more come August or is that it?

The opinion is divided.  One thing is clear – the British pound was up by around 1 per cent against the US dollar and the yield on the benchmark 10-year gilt up by over 3 per cent.

Oil Down….Again..

July 8, 2009

Oil prices have hit six-week lows and a barrel is now worth $62.30, down 63 cents.  Now, the question is: is there a general increase in caution in the trading community?  Is everyone worried about what is happening in the global recovery that we were all beginning to see?

Things are getting confusing again.  Ok, so let’s do a quick round-up:

  • Oil prices have risen steadily and (fairly) quickly since the start of 2009
  • The general mood of late has been of ‘bottoming out’ of the recession – things can only get better
  • Overall good news from industry sectors as demand and production increased
  • ‘Green shoots’ becomes the word du jour again
  • V-shaped is the shape of the recession, say analysts
  • Business sentiment is up in the UK and Europe

Things were definitely looking up, weren’t they?  But, now the USA as the world’s most powerful economy, has put a couple of spanners into the works – 1. the latest unemployment figures were worse than expected and 2. fresh fiscal stimulus is being speculated over

Over in the UK, the BoE is planning new asset purchasing and Alistair Darling is going to announce the new FSA guidelines for the financial sector – set to be much stricter.

So is there an overall “down” mood or is the recession more W than V?  Some are saying that the dip in oil price is merely a correction on the too-early recent rally.

Stick with risk or head to the havens?  That is the most important question for investors right now!  Commodity traders are reminding us that while oil is down, precious metals are remaining consistent!

Commodities Under Pressure

July 6, 2009

What’s in your portfolio?

And what are your thoughts on commodities?  According to a new survey there is still relatively low allocation for this form of investment.  This may surprise newcomers given the size and dominance of the oil market,  but indeed as an asset class commodities are low on the scale.

There are differing reasons for this, including the fact that it is relatively new as an investment tool for financial investors.  Up until around a decade ago, commodities were for producers and consumers.  Therefore, their benefits are still being tested and tried for diversification.

Some believe that the risk premium to commdotities is medium and not ideal.  But many institutions (including Deutsche Bank AG) are exploring the possibilities and even plan to launch new indices that can benefit even from anomalies.

US Dollar Up

June 15, 2009

Earlier this year China wanted a reserve currency other than the US dollar to be considered as the benchmark for international debt.  It called for the IMF to consider possible alternatives and asked that reserves of other currencies be increased.

This call was repeated alongside Russia within the last week, but has now been silenced by the finance minister of Russia who has said this will not be a possibility at this time.  The announcement comes just ahead of a summit meeting to be held on Tuesday in Russia of emerging nations Brazil, China, Russia and India.

Instead, they will discuss such areas as financial regulatory reform.  The news has caused the US dollar to strengthen against 15 of the 16 major currencies on the foreign exchange market.

Brazil will be at the summit and will be highlighted because it has just been announced that their economy has entered a recession after a second consecutive quarter of negative growth.

Is the Recession Over?

June 11, 2009

The recession is over in the UK.  Well, that’s the opinion of one independent analysis body and many might react with surprise at the fact that a recession which was due to last at least until the end of 2009 is suddenly over.

The foreign exchange market has shown that the US dollar as continuing to weaken against high-yield currencies, which certainly backs the view that the worst is over in the USA.  But in the UK, things had been predicted to be really bad, possibly worse than many other developed economies.  So what is being said?

The analysis group is the National Institution of  Economic and Social Research, or NIESR.  So far, they have gained respect in the financial world for the accuracy of their predictions.

They say that because there has been a tiny return to growth in April and May it spells the end of recession.  Many have reacted by saying that in no way is it over and that worse may be yet to come.  That takes us back to the argument as to the shape of the recession – V or W shaped?  The first would mean that if we have reached rock bottom (which is what is being said by NIESR) then the worst is indeed over and the only way is up.  If the latter is true, then we may be going up but could plunge right down again before things get better.

We’ll see!

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.