Thursday, 24 March 2011

Vibrant exports will save Spain, and perhaps the euro

The saga is by now well-known. Germany screwed down wages after the launch of EMU, while Spain succumbed to an inflationary credit bubble – La Burbuja – caused by real interest rates of minus 2pc (set by Frankfurt) that were far too low for its exuberant fast-growing economy.

The result was a 30pc rise in labour costs compared to Germany, though this oft-cited number is misleading: Spain joined EMU at a greatly undervalued rate – unlike Portugal, which locked in too high.

But the Devil is in the details. A study by Natacha Valla at Goldman Sachs found that Spain had the eurozone’s highest skew towards "price inelastic" exports with a score of 60, compared to 59 for Germany, 55 for France, 53 for Italy, 50 for Greece, and 48 for Portugal. This is a complex stuff – Balassa theory to anoraks – but it broadly means that Spain’s exports are high enough up the technology ladder to let quality trump price.

Economy Secretary Jose Manuel Campa said Spain had lost 15pc in competitiveness against euroland by the peak in 2008 but has since clawed back a third through wage restraint and a blast of labour reform. Much of that loss was in reality "convergence," he said. If so, the claim that Spain has priced itself out of monetary union falls apart.

ITP has clearly not been broken by the crisis. It has cut costs with a partial pay freeze but is now bullish enough to launch an investment blitz aimed at doubling sales by 2015. ITP is building a plant in Mexico to hedge costs in an industry where sales contracts are in dollars. Mr Alzola said a euro near $1.20 rather than $1.36 would make life a lot easier, but the firm is maintaining core engineering in its Basque homeland.

In Madrid, the computer logistics group Indra has just pulled off the impossible. The 30,000-strong company – which supplied the electronic voting system for the London Mayor’s election – has not only astounded Chancellor Angela Merkel by taking charge of Germany’s upper airspace, it has also won the contract to manage 80pc of China’s air traffic from the control centres at Chengdu and Xian.

China’s deputy premier Li Keqiang said last month that he has his eye on Indra’s flight simulator, already used by the US Navy for Harriers and F18s. It lets pilots fly in virtual 3D through eerily convincing terrain, adjusted for speed and time.

Indra’s foreign sales jumped a tenth last year to 40pc of the total while sales in Spain fell 3pc, keeping earnings nearly level through the crisis. It is a textbook case of rebalancing, yet achieved without the crutch of Peseta devaluation as in the early 1990s.

Strategic director Juan Jose González said the company is cutting costs by shifting plant to cheaper areas within Spain, rather than to Asia. "We have our own 'near offshore’ a few hundred kilometres from Madrid where unemployment is higher and wages are lower," he said.

Nearby at the ZED Group – which struck rich with the video game "Commandos" and is now the world leader in digital content for mobile phones – chairman Javier Pérez Dolset told me it was a myth that Spain had let wages soar into the stratosphere. "It still costs less than half to produce here than in the UK or Northern Europe, and the level of skill and artistic talent is greater," he said.

Anthropologically, you could say that Spain has refound its 14th Century creativity when it was the most dynamic society on earth, before Conquista gold corrupted the Iberian soul. Its chefs are sought everywhere, its sportsmen are triumphant. Even its boom-bust ordeal is the symptom of a thrusting nation in a great secular upswing, like Holland in the 1630s, or England in the 1720s. It is the declining plodders you need to worry about.

Spain’s current account deficit was second only to the US in absolute terms in 2007. It has since plummeted from 10pc to 4pc of GDP, in stark contrast to Portugal where the rot is structural. The trump card is Asiatic levels of savings, which makes it easier for the country to carry a public-private debt near 300pc of GDP.

Mr Campa said the investment rate reached 30pc of GDP during the boom. While a chunk was squandered on construction, most was spent on machinery and infrastructure. "This was real investment for the future, and that is the difference with Portugal and Greece," he said.

Spain is not out of the woods yet. It must raise €300bn of sovereign, regional, or bank debt this year in a hostile market. Unemployment is stuck at 20pc. There is an overhang of almost 1m unsold homes on the market.

A Chinese hard-landing and a US-EU relapse would vastly complicate matters, and there is always the risk of a temper tantrum in Berlin or a ruling by the German constitutional court that the EU bail-out machinery is illegal. Yet short of an external shock, Spain should pull through.

Perhaps too much Rioja has gone to my head, but I no longer think it matters whether Portugal follows Greece and Ireland in needing an EU-IMF rescue. The risk of instant contagion across the Rio Guadiano – undoubtedly real a few months ago – has diminished with each passing week, while the EU bail-fund is at last taking a half-way credible form.

This does not mean that EMU’s yawning North-South chasm has been bridged, or that monetary union has yet proved itself workable without fiscal transfers and a debt union, or that such political union could ever be democratically healthy and accountable if achieved.

But those who still thinks that Spain will trigger the break-up of the euro are barking up the wrong tree.

Germany is another matter, of course, and so is France.

Aerospace and Aviation vacancies at Telegraph Jobs


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Wednesday, 23 March 2011

Winning Sportingbet's docking rumours that rises the FTSE 100

Analysts at Numis, who have a "buy" on Sportingbet, said a transaction between Sportingbet and Unibet "would be logical to Sportingbet settlement with the Department of justice United States - now that U.S. regulatory risk has been resolved, it is easier for a partner to value Sportingbet".

The broker said that a merger would also make strategic sense that businesses have geographical advantages capital complémentaires.Rive analysts also agreed that the regulations of the U.S. opens up the possibility of consolidation Sportingbet online.

Also to raise a sense was that Sportingbet had struck a joint venture between five second licensed bookmaker the Russia, First International Bookmakers Company news.

Russian sports NRC industry is growing rapidly, with a turnover estimated 1 $ 8bn (£ 1. 12bn) per year.

Sportingbet is passed 4.85 to 63.3 percent to take place in the classification grouped top, while the greatest rival PartyGaming acquired 11.9-225 p.

M & A considerable rumour also stimulated Premier Oil .the ' Explorer gained 62% to £ 18,60 reports that the oil company supported by State of southern Korea showed an interest.But the company has sought to minimize any speculation.

Oil of Prime Minister and the rise of Sportingbet is entered as the FTSE 250 points 10923.2 56.71 while the FTSE 100 gained points 5820.41.Investisseurs 23.54 were keep an eye on developments in the sea of Ireland, waiting to see if Ireland will seek European assistance to deal with its support of the dette.Mais sales data at u.s. retail better than expected helped lift sentiment.

Blue chips included Invensys.Controls for products such as washing machines manufacturer has been following the comments of the Chief Executive which partner, South Rail, China could - in principle - buy Invensys if the price was bon.Se featured feel compelled to clarify the situation, Invensys has published a statement that he had received an approach say nor had any discussions regarding a possible for the company - or a strategic partner by taking a minority stake offer.

Despite the moves to quell speculation, Invensys surged 29.1 - or 9 13pc - 347.9 p at the head of the classification of large-cap.

Analysts in the evolution of the securities, which have a "buy" on Invensys, said that they do not consider CSR moving in tomorrow to make a call for tenders.

But they added that someone will show interest Invensys, their "current sum of the parts is p 433, which supports our goal of 435 p and Full Monty, we arrive at p 500 more close.

Just behind Invensys, producer of Platinum Lonmin ticked up to 71% to £ 18.38(1) after restarting its dividend at 15 cents per share, and after attending a recovery of prices and production.

Making ATAGO of risers was also two stocks were friends of fin.Après have dragged back during the recent storm provider reimbursement, Serco has been on the site.

8.5 To 571½p after disclosure of the revenue gained outsourcing giant should increase to approximately £ emissions at the end of 2012 as cash-strapped Governments and local authorities seek economies.

Analysts said Numis they are reassured by the Declaration, as well as news that Serco has signed a memorandum of understanding with the Government regarding the economies.

Broker added as having lower on stock 10pc since one month, he sees scope for a relief rally, but added that this rally could be two short term and put in sourdine.Il settled on Serco rating to "hold" to "reduce".

Ticking place too was Marks & Spencer. after Marc Bolland, M & S Chief Executive, has unveiled its expected strategic review of the retailer last week, M & S shares came under pressure as traders concerned about the cost of an investment increased in the chain.

Analysts of Deutsche Bank laid their eyes on the test, saying that it was a plan long terme.alors plan should lead to more and less volatile profits in the long term, they said, short term it will result in a disturbance in stores so that benefits are unlikely to be seen by 2012 to partir.Bien broker has retained its "hold" rating on M & S, he moved the target prices up to 430 p 370 p, which helped raise M & S 10.7 percent 403.9.

Rolls-Royce was under pressure, investors were shaken by reports that a 747 Qantas flight must return to Sydney after the pilot saw smoke in the cabine.Bien 747 has been powered by General Electric engines and Qantas said probably smoke came from an instrument landing and was not related to the engine, it is enough to hold already anxious investors but Rolls fell 14 to 597 p.

Among second linings, housebuilders peppered Board loser after Persimmon reported a slower fall selling season and warns that a tight mortgage market detrimental to any resumption of the industry.

Khaki discard 2.9 357.3 percent, while Taylor Wimpey lost 1.02 to 24.95, Barratt Developments hangar 2.4 to 76.9% and Bovis Homes fell 6.6 percent 333.1.

But the increase was Cranswick, as a supplier of pork, bacon and sausages, displayed more high profits by increasing demand for pork products.

Panmure Gordon brought on Cranswick rating to "buy" to "wait", saying that close Friday 786 p represents a "point of entry good stock".Cranswick on 39 825 p.


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Tuesday, 22 March 2011

Why prices for raw materials important both for the FTSE

Therefore, when the strong growth in China's manufacturing plant and United States, more great economy of the planet, prices of products improved economic data points increase and take blue-chip index Britain with them.

The power produced players also means the FTSE may increase even when the British economy remains weak, because their production sites and markets are largely outside of the country.

In 2010, minor Indonesian coal Vallar struck an agreement that will bring the company list in London, and Africa Barrick Gold, the Tanzanian assets of Barrick Gold Canada, also listed in London.

Swiss products giant Glencore trade is supposed to list in London to 2011 and he is also a Brazilian mining company Vale speculation, can ask a joint list here, which she would join FTSE 100.

Before Christmas, FTSE rose above 6,000 points for the first time in 30 months, driven by energy companies price of oil reaching $91 per barrel.

Copper also reached a record high at the end of 2010, $ 9,660 per tonne.

In rally on Tuesday, the first day of trading for the FTSE in 2011, BP, Shell and minor Anglo American were corporations which led to the increase.

Speculation of a public bid for BP by Shell pushed higher, the oil giant actions as positive economic data from some United States and Europe and a rise in the price of oil.

While keep oil and metals prices climbing, its value for London work hard to maintain its position as leading stock products market worldwide.


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Monday, 21 March 2011

Wood Group is a likely takeover target?

Most analysts put a price on the part of 12pc gain on the fact the company succeeded in obtaining a price much better than expected for the division well-support – "nearly twice the price than many market practitioners thought that it would get," according to a securities broker.

Andrew Dobbing, JP Morgan Cazenove analyst also noted that "removal raises the competitive positioning of Wood Group" Don in their point of view "more focus and clearer market leadership in its other businesses."

Indeed, Wood Group will now only fully focus of "urban Sites contaminated brownfield production services", a service which consists to renew and maintain existing oil fields for production companies.

Still, there is a sense that persist among some analysts and traders by selling wells-support division, the company did itself a more tempting prospect for a purchaser of the whole group.

Even if a takeover is unlikely to short-term, traders to take into account that a bid on a large scale is possible over the next twelve months.

It is partly because consolidation is intensifying in oilfield services. GE, for example, a hoovered of several companies, including Wellstream listed in London. Wood, meanwhile, Group buys NHP almost billion $ last year.

Keith Morris, analyst of evolution, said: "carriers energy cashed-up see cyclical recovery extends over the next years, so it is better to buy now rather than later, when it will be too expensive."

So, who are likely buyers of group wood?

City notebooks take into account that the company would be an ideal candidate for potential merger to Amec.

The two companies have vigorously denied in the past that a merger is unlikely, but an analyst, said: "It is fair to say that through the sale of wells-support division, the company is now more attractive to Amec."

Energy & Utilities and positions vacant Oil & Gas jobs Telegraph


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Saturday, 19 March 2011

Warning shot for America and Europe as S&P downgrades Japan

In contrast to Europe, Japan has barely started to tighten its belt, drifting on with a budget deficit that will be 8pc of GDP as far out as 2013. "This is not affordable. Japan is running out of the domestic financial assets to absorb the debt," said Mr Ogawa.

Japan's population has been contracting since 2005, pioneering a fate that awaits much of Europe and Asia. Its median age is a world record at 44.4 years, and rising fast. The population will fall from 127.5m to 89.9m by 2055, according to Japan's Social Security Resarch Institute. "Despite this bleak demographic outlook, Japan has no specific measures or plans to deal with its diminishing and aging population," said S&P.

Japan was downgraded repeatedly between 1998 and 2002 without suffering much harm but that was in a different world, before the global credit crisis shattered illusions about the sanctity of sovereign debt.

The Bank for International Settlements has warned that simmering fiscal problems in the rich countries are nearing "boiling point", with a risk of an "abrupt rise" in bond yields as investors choke on excess debt.

Kaoru Yosano, Japan's economy minister, called S&P's decision "regrettable" given that the government is working on a plan to overhaul the tax and social security system. "I hope the world will understand our sincere efforts to carry out fiscal consolidation. I believe confidence in Japan will not be shaken."

Mr Yosano himself said last week that Japan has reached a "critical point" where investor patience might suddenly snap. "We face a dreadful dream that one day the long-term interest rate might rise."

Mr Jessop said the S&P downgrade is no shock since the country was already on negative watch. However, the Democratic Party of Japan – hampered since June by a hung parliament – has not yet shown that it is "up to the job" of restoring discipline.

"If the government gets this wrong, Japan could be the first Asian casualty of the global financial crisis. Markets have tolerated Japan's awful fiscal position because it was the fastest growing economy in the G7 last year, thanks to a rebound in exports and fiscal stimulus. But it all started to go horribly wrong in the fourth quarter when the economy almost certainly contracted again," he said.

Adarsh Sinha from Bank of America said Tokyo is on borrowed time but does not expect a bond crisis this year. "Inexorable structural forces mean that each year brings us closer to when the domestic pool of saving will be insufficient to finance Japan's public debt. However, 2011 is unlikely to be the tipping point for this disorderly adjustment."

Tax revenues covered just 52pc of spending in 2010. Almost half the budget was borrowed. Even in the boom year of fiscal 2007 revenues covered only 70pc of outlays, so the problem is clearly chronic and not caused by the recent recession.

The IMF's latest Article IV report on Japan warns that without a shift in policy the "public debt-to-revenue ratio" will rise from 263pc three years ago to 482pc by 2015. No country in peacetime has ever pushed the fiscal boundaries so far and emerged unscathed.

Peter Tasker from Arcus Research, a venerated Tokyo expert, said horror stories about Japan's debt have been the stuff of folklore for years, yet borrowing costs have fallen ever lower anyway because the country is "entirely self-financing". If need be, the Japanese can squeeze a lot more tax from their under-taxed economy.

"Rather than a 'dreadful dream', Japan's leaders face an enticing reality. They have the opportunity to issue more and more bonds at the lowest interest rates seen since the Babylonians invented accounting. Japan needs to forget about the views of credit agencies, which have not had a terribly good track record recently," he wrote recently.

Japan has certainly been shielded from global vigilantes so far because 95pc of its debt is held by local investors, allowing Tokyo to issue 10-year bonds at just 1.21pc. It is far from clear that this can continue. The Government Pension Investment Fund (GPIF) – the biggest holder of Japanese debt – has switched from net buyer to net seller as it meets payout costs for retiring baby-boomers.

Dylan Grice, a noted Japan bear at Societe Generale, said the country's ageing crisis would bite in earnest in two to three years, causing pensioners to run down their assets. The savings rate has already dropped from 15pc of GDP in 1990 to under 3pc. It may soon turn negative, depleting reserves needed to soak up state debt.

"They will have to turn to foreign investors, who will demand higher yields of 4pc to 5pc. The government will not be able pay this because interest payments are already 28pc of tax revenues," he said.

"If they try to correct it by a fiscal contraction [raising taxes] they will cause a depression that dwarfs anything in Greece. The Japanese are facing a problem that no country has ever faced before. I think Japan is already is beyond the pale," he said.

Mr Grice predicts the get-out-of-jail-free card will prove to be some sort of stealth default through inflation, perhaps spiralling into hyperinflation very fast once the genie is out of the bottle.

James Bullard, the head of the St Louis Federal Reserve, said recently that the US is "closer to a Japanese-style outcome today than at any time in recent history". That bears thinking about.


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Friday, 18 March 2011

Will 'Chindia' rule the world in 2050, or America after all?

Having rid themselves of calamitous nonsense – Maoism, the Hindu model, and other variants of central planning or autarky – and having at last achieved a “threshold level” of law and governance, nothing should stop them, or so goes the argument.

“Sustained growth prospects in per capita incomes across the world have not been as favourable as they are today for a long time, possibly in human history.” Global growth will quicken. GDP will quadruple again from $73 trillion to $378 trillion by 2050 (constant US dollars).

Dr Buiter’s team adds the usual caveats: “beware of compound growth rate delusions;” or “the bigger the booms, the more spectacular the bubbles, and the devastating the busts;” or indeed that “convergence is neither automatic, nor inevitable. In history, it has been more the exception than the rule.”

Argentina is a salutary lesson. Why did it diverge from its sister economy Australia, so similar in trading patterns in the late 19th Century? Why did it fall from the world’s fifth richest in per capita terms in 1900 to a third of Australia’s level a century later?

It is hard to pin-point where the rot began, though Peron clinched decline by bleeding farm wealth to fund his populist patronage, and by forcing the central bank to print the shortfall. Bad policies hurt.

Oddly, Britain will scrape through in Citigroup’s global reshuffle, just holding on as the world’s 10th biggest economy in 2050, the only EU state left in the top ten. It will even overtake the US in per capita terms.

Can this be so? Britain has slipped to 25th in reading, 28th in maths, and 16th in science in the Pisa rankings. Shanghai’s school district takes top prize across all three, ahead of Korea and Finland. While the UK faces a less disastrous ageing crisis than much of Europe, this is thanks to our unrivalled leadership in unwed teenage pregnancies.

HSBC’s report also sketches an era of unparalleled prosperity, yet the West does not sink into oblivion. China overtakes the US, but only just, and then loses momentum.

Chimerica, not Chindia, form the G2, towering over all others in global condominium. Americans prosper with a fertility rate of 2.1, high enough to shield them from the sort of demographic collapse closing in on Asia and Europe. Beijing and Shanghai are 1.0, Korea is 1.1, Singapore 1.2, Germany 1.3, Poland 1.3, Italy 1.4 and Russia 1.4.

Americans remain three times richer than the Chinese in 2050. The US economy still outstrips India by two-and-a-half times. This is an entirely different geo-strategic outcome.

My own view is closer to HSBC, perhaps because my anthropological side gives greater weight to the enduring hold of cultural habits, beliefs, and kinship structures, and because of an unwillingness to accept that top-down regimes make good decisions in the end.

Both studies rely on the theories of Harvard economist Robert Barro, but differ on how easy it is to handle population collapse. The great unknown is what rapid ageing does to creative zest, and how many decades it takes to turn the demographic super tanker.

China’s workforce peaks in absolute terms in four years. While the population keeps growing until the tipping point in the mid 2020s, it is ageing very fast. Hence warnings by Chinese demographers that there may soon be an epidemic of suicides, as the elderly step out on the ice to relieve the burden.

Zhuoyan Mao from Beijing’s Institute for Family Planning said China’s fertility rate had been below replacement level for almost twenty years. “Population momentum” turned negative over a decade ago in Beijing, Tianjin, Shanghai and Liaoning, but the countryside is catching up. “The decline speed in rural areas is faster,” he says.

It is bizarre that China should still cling to the one-child policy, though Shanghai’s local authorities have been encouraging couples to have a second child since 2009. The policy is losing its relevance at this stage, though gender picking (female infanticide, at the ultrasound stage) has left the legacy of a male/female ratio of 1.2 to 1, with all that implies for social stability.

China’s fertility rate is collapsing anyway for the same reasons as it has collapsed in Japan and Korea – affluence, women’s education, later pregnancies that stretch generations, in-law duties, and costly housing. You cannot reverse this with a wave of the wand. The lag times can be half a century.

George Magnus, UBS’s global guru, writes in his book “Uprising” that China faces a “triple whammy of ageing”. The number of children under 14 will fall by 53m by 2050; the work force will contract by 100m; and the over-60s will rise by 234m, from 12pc to 31pc of the total.

Mr Magnus is scathing about the “muddled thinking” of those who fall for BRICs hysteria, or who succumb to the facile conclusion that the global credit crisis finished the West and served as catalyst for a permanent hand-over to Asia.

The crisis also exposed the fragility of Asian mercantilism, even if this has been disguised for now by a stimulus blitz in China that has pushed credit to 200pc of GDP.

I might add that China is depleting the non-renewable aquifers of its northern plains at an alarming place, and faces a separate water crisis from receding Himalayan glaciers.

Cheng Siwei, the head of China’s green energy drive, told me a few months ago that eco-damage of 13.5pc of GDP each year outstrips China’s growth rate of 10pc. "We have an intangible environmental debt that we are leaving to our children," he said. That debt is already due.

Perhaps the 21st Century will be America’s after all, just like the last.


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Thursday, 17 March 2011

World Promethean wipes off-target price as FTSE 100 rises

But analysts said: "as a whole, given the decline of the c.75pc in the course of actions of Promethean since the intellectual property offices (and c.30pc), last week, the day of the profit warning we believe future dark is updated for the company." We believe not proceed as U.S. budget eventually recover in 2012 and society began to grow once more. »

Despite cutting, Promethean 1½ pink p 57.75 as partners in Sturgis, Manager of funds, raised its participation in a little more 5MC.

Interactive whiteboards aside, the most excitement was among major FTSE J Sainsbury actors stole Tesco entertainment as whispers resurfaced - again - that State Qatar investors could snaffle supermarket chain.

Although Tesco was the one results optimistic, 15.3 - ball Sainsbury or 4 28pc - p vertical on reheated gossip Qatar whose investment authority has a 27 5pc its participation in the retailer could be an inclination of society. This time, the figure being brandished threat was 450 p apart.

Qatar could not buy three years Sainsbury's, but she has invested in a string of international companies it seeks to diversify. Qatar Holding - Division on investment Qatar Investment Authority - buy Harrods earlier this year for about £ 1. 5bn.

But the merchants urged caution on speculation. The prospect of a bid for Sainsbury Qatar made before tours - when rumours supply resumed cropped in October last year, shares stir-fry Sainsbury 10pc in a single day. In July of this year, shot Sainsbury until almost 5MC that speculation swept once more the market.

Traders noted that Sainsbury's ' increase could have as much to do with third-quarter results and news that the retailer was seeing a pick-up request he leads in Tesco period peak Christmas trade.

However, with Tesco amounting to a mere 10 to 430 Sainsbury of the Eclipse p its largest peer yesterday.

Rehash rumors about the Sainsbury's has helped market rally one day when the mood was also clarified by rising prices of raw materials. As metals hit new heights, minor lit up the rankings. Africa Barrick Gold claimed pole position, putting on 34½ 600 percent, then that Antofagasta gained 71% to £ 15.28.

With minor heavy weight on the rise, the FTSE 100 obtained 38.17 38.17 points to 5808.45, while the FTSE 250 points 11299.44 148.09. Wednesday, investors will be discover that is defined for the promotion and demotion of CPI.

A final decision will be based on Tuesday closing price Wednesday, but indicative positions suggest that IMI could enter the FTSE 100 leave Cobham. IMI has 34 948 p while than Cobham 195.9 p 1.4.

Betfair may be set to enter the FTSE 250, while the Yell Group could be on the path of. Betfair on 62% to £ file while Yell throw 0.02 at 12.10 p.

Making an appearance alongside Sainsbury's ranking was Unilever thanks to an optimistic note from Michael Steib, an analyst at Morgan Stanley receives consumer giant a double-upgrade - boosting its position on "overweight"underweight"Unilever and raise his price target to £ 23.00 from £ 19.00.

In a note entitled "The New 'Unilever Model'", he wrote that while challenges remain "formidable", broker has been "encouraged by how Unilever appears more reshape its growth strategy".

He added that many risks - as competition and fresh produce - are now well understood by investors and must be taken into account in the pricing actions. Unilever has increased 53% to £ compared.

With investors optimistic mood, defensive were on the decline - National Grid throw 5 547½p and AstraZeneca has fallen from £ 30.27½ 6½p.

Among liners of a second, a series of housebuilders were in first place after Bellway said he expected net profit before taxes for the first half of up 20pc.

Signs of a more promising prospect for the peer supported the Bellway housebuilders. Kaki, Taylor Wimpey and Barratt Developments put on 416.4 p, 33.7 1.77 to 29 percent and 7½ to 86.3. But Bellway claimed gold medal over in more 54½ 612½p.

Saint Modwen developer has also benefited from JP Morgan Cazenove boost "overweight" to "neutral" rating in an extensive review of the property sector. Analysts said St Modwen stock was lower by 22pc for three months. St Modwen increased hereditary 151 p.

Suffering from a carefree bearish note was supergroup. The retailer behind worship wear used by artists such as David Beckham, reduce back his losses at the beginning at the end of the 2 p to £ estimate. After having tripled its price starts from floating p 500 in March, brokers were optimistic about the prospects of the supergroup - last month, Goldman Sachs has begun to cover with a "conviction buy" rating and a price of £ 21.00 target.

But execution of noble broke ranks, start with a rating of "selling" and the fair value of £ 11.65 supergroup.

Analysts said the current assessment required "flawless execution" and raised concerns about the brand growth rates. Said broker supergroup naturally takes advantage of incentives offered by the owners, but questioned whether this would lead to brand expand too quickly and to early saturation.


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Wednesday, 16 March 2011

Vibrant exports will save Spain, and perhaps the euro

The saga is by now well-known. Germany screwed down wages after the launch of EMU, while Spain succumbed to an inflationary credit bubble – La Burbuja – caused by real interest rates of minus 2pc (set by Frankfurt) that were far too low for its exuberant fast-growing economy.

The result was a 30pc rise in labour costs compared to Germany, though this oft-cited number is misleading: Spain joined EMU at a greatly undervalued rate – unlike Portugal, which locked in too high.

But the Devil is in the details. A study by Natacha Valla at Goldman Sachs found that Spain had the eurozone’s highest skew towards "price inelastic" exports with a score of 60, compared to 59 for Germany, 55 for France, 53 for Italy, 50 for Greece, and 48 for Portugal. This is a complex stuff – Balassa theory to anoraks – but it broadly means that Spain’s exports are high enough up the technology ladder to let quality trump price.

Economy Secretary Jose Manuel Campa said Spain had lost 15pc in competitiveness against euroland by the peak in 2008 but has since clawed back a third through wage restraint and a blast of labour reform. Much of that loss was in reality "convergence," he said. If so, the claim that Spain has priced itself out of monetary union falls apart.

ITP has clearly not been broken by the crisis. It has cut costs with a partial pay freeze but is now bullish enough to launch an investment blitz aimed at doubling sales by 2015. ITP is building a plant in Mexico to hedge costs in an industry where sales contracts are in dollars. Mr Alzola said a euro near $1.20 rather than $1.36 would make life a lot easier, but the firm is maintaining core engineering in its Basque homeland.

In Madrid, the computer logistics group Indra has just pulled off the impossible. The 30,000-strong company – which supplied the electronic voting system for the London Mayor’s election – has not only astounded Chancellor Angela Merkel by taking charge of Germany’s upper airspace, it has also won the contract to manage 80pc of China’s air traffic from the control centres at Chengdu and Xian.

China’s deputy premier Li Keqiang said last month that he has his eye on Indra’s flight simulator, already used by the US Navy for Harriers and F18s. It lets pilots fly in virtual 3D through eerily convincing terrain, adjusted for speed and time.

Indra’s foreign sales jumped a tenth last year to 40pc of the total while sales in Spain fell 3pc, keeping earnings nearly level through the crisis. It is a textbook case of rebalancing, yet achieved without the crutch of Peseta devaluation as in the early 1990s.

Strategic director Juan Jose González said the company is cutting costs by shifting plant to cheaper areas within Spain, rather than to Asia. "We have our own 'near offshore’ a few hundred kilometres from Madrid where unemployment is higher and wages are lower," he said.

Nearby at the ZED Group – which struck rich with the video game "Commandos" and is now the world leader in digital content for mobile phones – chairman Javier Pérez Dolset told me it was a myth that Spain had let wages soar into the stratosphere. "It still costs less than half to produce here than in the UK or Northern Europe, and the level of skill and artistic talent is greater," he said.

Anthropologically, you could say that Spain has refound its 14th Century creativity when it was the most dynamic society on earth, before Conquista gold corrupted the Iberian soul. Its chefs are sought everywhere, its sportsmen are triumphant. Even its boom-bust ordeal is the symptom of a thrusting nation in a great secular upswing, like Holland in the 1630s, or England in the 1720s. It is the declining plodders you need to worry about.

Spain’s current account deficit was second only to the US in absolute terms in 2007. It has since plummeted from 10pc to 4pc of GDP, in stark contrast to Portugal where the rot is structural. The trump card is Asiatic levels of savings, which makes it easier for the country to carry a public-private debt near 300pc of GDP.

Mr Campa said the investment rate reached 30pc of GDP during the boom. While a chunk was squandered on construction, most was spent on machinery and infrastructure. "This was real investment for the future, and that is the difference with Portugal and Greece," he said.

Spain is not out of the woods yet. It must raise €300bn of sovereign, regional, or bank debt this year in a hostile market. Unemployment is stuck at 20pc. There is an overhang of almost 1m unsold homes on the market.

A Chinese hard-landing and a US-EU relapse would vastly complicate matters, and there is always the risk of a temper tantrum in Berlin or a ruling by the German constitutional court that the EU bail-out machinery is illegal. Yet short of an external shock, Spain should pull through.

Perhaps too much Rioja has gone to my head, but I no longer think it matters whether Portugal follows Greece and Ireland in needing an EU-IMF rescue. The risk of instant contagion across the Rio Guadiano – undoubtedly real a few months ago – has diminished with each passing week, while the EU bail-fund is at last taking a half-way credible form.

This does not mean that EMU’s yawning North-South chasm has been bridged, or that monetary union has yet proved itself workable without fiscal transfers and a debt union, or that such political union could ever be democratically healthy and accountable if achieved.

But those who still thinks that Spain will trigger the break-up of the euro are barking up the wrong tree.

Germany is another matter, of course, and so is France.

Aerospace and Aviation vacancies at Telegraph Jobs


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Monday, 14 March 2011

Zimbabwe's 'Blood Diamonds' exposed by Wikileaks cable

Washington keeps a close eye on Marange because of suspicions that diamonds are being sold to Lebanese traders acting for Al Qaeda. Terrorists rely on gems to move money because they are compact, and do not set off metal detectors.

The undocumented diamonds are sold to a mix of foreign buyers, "including Belgians, Israelis, Lebanese, Russians and South Africans who smuggle them out of the country for cutting and resale elsewhere".

"The majority of the diamonds are smuggled to Dubai and sold at the Dubai Multi Commodities Centre Authority. The highest quality diamonds are shipped to Belgium, Israel, or South Africa for cutting," said the report.

The cables suggest that the US diplomats give weight to allegations by Zimbabwe sources claiming that central bank chief Gideon Gono ran the operation, paying for gems with freshly printed "Zim dollars", and reselling them for US dollars.

The trade helps explain why Zimbabwe's central bank had a motive for generating the worst hyperinflation since Hungary in 1946 or Germany under Weimar. The currency disintegrated in early 2009, giving way to US "dollarisation" under the power-sharing deal with premier Morgan Tsvangirai.

The cable relayed claims that Mr Gono ran the operation and pocketed "several hundred thousand dollars a month" before being displaced by Zimbabwe's military. Vice-president Joyce Mujuru allegedly skimmed off similar sums.

The report cited allegations that President Mugabe's wife, Grace, and sister, Sabina, were both profiting from the smuggling. A string of top officials in Mr Mugabe's ZANU-PF party were named as active participants in the venture.

The violence has been staggering. After one assault by security forces "over 200 bodies turned up at Mutare mortuaries. Many of those bodies arrived with fatal gunshot or dog bite wounds and were tagged "BID Marange" or "brought in dead from Marange".

Some allegations came from tribal leaders in the Mutare region near Mozambique, where Marange is located. One source is a member of the ZANU-PF central committee, who stated that the late Sabina Mugabe "had been profiting from the purchase and sale of [Marange] diamonds". The name of the source is not redacted by Wikileaks, leaving him vulnerable to reprisals.

The reports buttress claims that African Consolidated, which has long alleged that the Mugabe elite seized the property to enrich itself and finance the ZANU-PF machine.

Andrew Cranswick, ACR's chief executive, is identified by name as a source for one cable, giving specific details about specific individuals in the smuggling ring, including a prominent South African.

"It was highly irresponsible for Wikileaks to publish names," he told The Daily Telegraph. "This is extremely dangerous and puts peoples' lives at risk."

Mr Cranswick has other difficulties. He has been declared bankrupt by an Australian court for overdue taxes. The company, which also has phosphates and metals, has been crippled by the Marange dispute. It operates from a modest house in a Harare suburb.

A survey report for De Beers indicated that the Marange fields have a ratio of more than 1,000 carat per hundred tons, eight times higher than peers. One industry expert said it was "the richest diamond field ever seen by several orders of magnitude".

ACR executives first realised its full potential when it the saw local boys using the glassy green-black stones in slings to kill guinea fowl. "We asked one youngster to show us the stones in his pocket and almost all of them were diamonds. That is when we understood," said Mr Cranswick.

The Marange stones - 70pc industrial, and 30pc gems - came to the Earth's crust 1.3m years ago, far earlier than other diamonds. The radiation has changed their appearance, so it takes an expert to spot that they are diamonds.

Tribal chiefs said the diamonds were causing havoc. "The environmental degradation was severe, violence reigned, and the community was not benefiting from the resource. Three quarters of the schools failed to open because teachers and students alike were digging for diamonds," said the cable.

The US embassy said Marange could be a bonanza for battered Zimbabwe, perhaps generating sales of $1.2bn (£760m) a year. Instead it had become a "curse".


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Friday, 11 March 2011

Political upheaval rocks eurozone debt markets

Portugal - Political upheaval rocks eurozone debt markets Finance minister Fernando Texeira dos Santos said failure to agree on budget cuts will 'plunge the country into a very deep financial crisis' Photo: AP

Hopes of a budget deal in Portugal collapsed after marathon talks between the minority government of socialist premier Jose Socrates and conservative leaders ended in acrimony.

Finance minister Fernando Texeira dos Santos said failure to agree on budget cuts will "plunge the country into a very deep financial crisis".

Meanwhile, Ireland has announced fiscal retrenchement of €15bn over the next four years, twice the original plan. It is already cutting public wages by 13pc.

John Fitzgerald from Ireland’s Economic and Social Research Institute said there is a risk that austerity tips the economy into a downward spiral, comparing it to an overdose of "chemotherapy" that does more harm than good.

Finance minister Brian Lenihan said the country had no choice. "The cost of borrowing is high and rising, and if we do not act soon to live within our means, people may stop lending to us. We will not fool the markets for an instant if we seek to defer any longer what evidently needs to be done now. The Irish people will have to accept cuts in public expenditures and higher taxes," he said.

In Greece, yields on 10-year bonds surged 67 points to 10.26pc, the biggest jump since the turmoil in June. The sell-off came after permier George Papandreou warned that the country was still in danger, and threatened to call early elections.

Finance minister George Papaconstaninou refused to rule out a request for an extension of the repayment period for the EU rescue package and confirmed that tax revenues are falling short. "We are deluding ourselves as a country in thinking we have a tax system. We don’t," he said.

He confirmed leaks that the budget deficit for 2009 would be "above 15pc" of GDP, higher than the last estimate of 13.8pc and five time the original claim of 3pc by the previous government.

Gavan Nolan from Markit said fears of "political instability in sovereign credits" had moved onto the radar screen, with investors now paying closer attention to whether or not governments can actually deliver on austerity plans.

It unclear whether Portugal can salvage anything over coming days in what amounts to a game of brinkmanship, with the socialists demanding VAT tax rises and the conservatives demanding spending cuts.

The opposition denied that there was "any possibility" of continuing talks, but hinted that it would abstain on the budget vote. Mr Socrates in turn has said he will resign if there is no accord.

Julian Callow from Barclays Capital said politics is intruding in the eurozone fiscal crisis. "It is one thing to promise cuts but it is very different to agree on details and decide where the axe will fall. There are some encouraging signs but Portugal has an awesome undertaking ahead in squeezing fiscal policy by 4pc of GDP over the next year, and the the task may be too great."

Yields on 10-bonds jumped 25 basis points on Wednesday to 5.77pc, far above the likely rate available from the EU’s bail-out fund and the International Monatery Fund. A string of top economists in Portugual have said the country should call in the IMF to gain breathing time.

As members of the eurozone, Portugal, Ireland, Greece cannot devalue or resort to monetary stimulus offset fiscal tightening. They must each pursue a policy of "internal devaluation", meaning deflation within the currency bloc to regain lost competitiveness.

This is risky for economies with total debt levels above 300pc of GDP, as is the case in Ireland and Portugal. Ireland’s nominal GDP has already contracted by over 20pc of GDP, yet the debt burden has not diminished.

The test will be whether these countries can generate enough exports to trade their way out of crisis over coming years, or remain trapped in slump with rising political tensions.


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Thursday, 10 March 2011

EU 'haircut' plans rattle bondholders

EU 'haircut' plans rattle bondholders Front row left to right, European Commission President Jose Manuel Barroso, French President Nicolas Sarkozy, and Lithuania's President Dalia Grybauskaite. Back row left to right, Portugal's Prime Minister Jose Socrates and German Chancellor Angela Merkel at the EU summit in Brussels Photo: AP

Germany has agreed to give the EU's €440bn (£383bn) bail-out fund permanent status rather than letting it expire in 2013 as planned, but only as part of a "Crisis Resolution Mechanism" that forces bondholders to share losses from any future bail-outs. The fund must be anchored in EU law through changes to the Treaties in order to head off legal challenges at Germany's constitutional court.

A draft proposal from Berlin – now serving as a working text for the European Commission – calls for "orderly insolvency" by eurozone countries in trouble. Details are sketchy but this "Chapter 11" for sovereign states would include an extension of debt maturities, a "holiday" on interest payments for as long as needed to let debtors recover, and a suspension of bondholder rights. The blueprint is akin to debt-restucturing schemes used by the International Monetary Fund.

Under a Finnish proposal, there are likely to be "Collective Action Clauses" in all new bond issues to prevent minority bondholders blocking a default deal.

European President Herman van Rompuy will be tasked to draw up a blueprint for the crisis mechanism. There may also be a Sovereign Debt Restructuring Mechanism (SDRM).

Berlin is determined to avoid a repeat of the €110bn bailout for Greece when banks were shielded from losses, leaving eurozone taxpayers facing the full cost.

Silvio Peruzzo, Europe economist at RBS, said talk of "haircuts" for bondholder at this delicate juncture could backfire. "The debt crisis in the eurozone periphery has not been sorted out. These countries need markets to keep buying the bonds, but investors are going to stay away if you open the door to private sector pain," he said.

It is unclear whether the latest bond jitters in Greece, Ireland, and Portugal is linked to growing awareness of the German plans. Each country has its own troubles. Yields on Ireland's 10-year bonds briefly rose to a post-EMU high above 7pc on Thursday, partly due to a stand-off between Dublin and angry funds facing losses on the junior debt of Anglo Irish Bank.

However, EU officials fear that the proposals could make it harder for high-debt states to tap debt markets, risking a self-fulfilling crisis.

Germany is likely to win backing in principle at Friday's EU summit in Brussels since it has already struck a deal with France, and Britain has dropped its opposition to treaty changes.

Brussels believes it is possible to invoke Article 48.6, which allows changes to the Lisbon Treaty without the political trauma of referenda or full ratification in all 27 states. This "simplified revision" can be used to cover matters in Part III of the Treaty, but the EU risks a political backlash if it tries to push through such a controversial plan by these means. Viviane Reding, the EU justice commissioner, said it was "suicidal" to tinker with the treaties so soon after the Lisbon storm.

German Chancellor Angela Merkel is also demanding EU powers to strip countries of their voting rights if they breach eurozone rules, but this has been dismissed by Brussels as "totally unacceptable" and will be blocked by other states.

The summit was intended to endorse plans by an EU taskforce for a beefed-up Stability Pact, but as so often at EU meetings France and Germany have run away with the agenda.

The German proposals have a logic since they let struggling states claw their way out crisis by reducing debt. Greece's rescue risks failure because it will leave the country with public debt of 150pc of GDP, near the point of no return.


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Wednesday, 9 March 2011

Angela Merkel consigns Ireland, Portugal and Spain to their fate

“We must keep in mind the feelings of our people, who have a justified desire to see that private investors are also on the hook, and not just taxpayers,” said German Chancellor Angela Merkel.

Or in the words of Bundesbank chief Axel Weber: “Next time there is a problem, (bondholders) should be part of the solution rather than part of the problem. So far the only ones who have paid for the solution are the taxpayers.”

These were the terms imposed by Germany at Friday’s EU summit as the Quid Pro Quo for the creation of a permanent rescue fund in 2013. A treaty change will be rammed through under Article 48 of the Lisbon Treaty, a trick that circumvents the need for full ratification. Eurosceptics can feel vindicated in warning that this “escalator” clause would soon be exploited for unchecked treaty-creep.

Mrs Merkel needs a treaty change to prevent the German constitutional court from blocking the bail-out fund as a breach of EU law, and a treaty change is what she will get. “This will strengthen my position with the Karlsruhe court,” she admitted openly.

One might argue that bondholders should have been punished for their errors long ago. The stench of moral hazard has been sickening, on both sides of the Atlantic. An orderly bankruptcy along lines routinely engineered by the International Monetary Fund is exactly what Greece needs. It makes no sense to push Greece further into a debt compound spiral by raising public debt from 115pc of GDP at the outset of the “rescue” to 150pc at the end of the ordeal.

If you strip out the humbug, the Greek package allows banks and funds to shift roughly €150bn of liabilities onto EU governments, or the European Central Bank, or the IMF. Greek citizens are being subjected to the full pain of austerity under false pretences, without being offered the cure of debt relief.

It is in reality a bail-out for investors. There is a touch of cruelty in this. Needless to say, the Greek Left has noticed. A socialist dissident from the “anti-Memorandum” bloc (ie anti EU-IMF) is likely to win the Athens region in coming elections.

Note too that the ruling socialists have fallen to 25pc in the Portuguese polls, while the Communists and hard-left Bloco are together up to 18pc. Ain’t seen nothing, you might say.

Yet opening the door to bondholder haircuts at this delicate juncture – with spreads reaching fresh records in Ireland last week, and Portugal struggling to pass a budget – is to toss a hand-grenade into the eurozone periphery.

We now know that that ECB’s Jean-Claude Trichet warned EU leaders on Thursday night that it was dangerous to stir up this hornets’ nest, and moreover that the politicians did not understand what they were unleashing. He was slammed down acrimoniously by French President Nicolas Sarkozy, who later denied that he lost his temper.

“Mr Trichet expressed a number of reserves. There was a debate, there is always a debate, but the European Council took its decision,” he said.

“It is wrong to say I was irritated. You can reproach heads of state for all kinds of things in a democracy, but I don’t think you can reproach them for not being aware of the seriousness of the situation,” he snorted.

Mr Sarkozy was not going to let his Brussels `triomphe’ slip away after stitching up EU affairs once again in a pre-emptive deal with Germany and imposing his will. The notion that the Franco-German axis still runs Europe is potent politics in France, even if the decisions actually reached are often of little value or – as in this case – ill-advised. Such is the chemistry of EU summits, where mad things happen.

Spain’s premier Jose-Luis Zapatero knew he had been mugged. “We need to listen carefully to what the head of the ECB says about the rescue mechanism. Great care is called for because this message is risky,” he said.

Eurozone sovereign states must issue €915bn in new bonds next year, according the UBS, either to roll over debt or to cover very big deficits – though it is hard to outdo Ireland’s deficit of 32pc of GDP in 2009. Yet investors have just been told in blunt terms to charge a hefty risk premium on any peripheral debt that expires after 2013, with great confusion over what happens even before that date. Can any investor be sure what the terms will be if Ireland or Portugal needs to access the EU’s bail-out fund next week, or next month, or next year? Are haircuts already de rigueur?

A study by Giada Giani at Citigroup entitled Bondholders Moving Back Home said data from the second quarter reveals a sharp drop in foreign ownership of debt from Greece (-14pc), Portugal (-12pc), Spain (-8pc), and Ireland (-5pc).

Local banks have stepped into the breach, borrowing cheaply from the ECB to buy their own state debt at higher yields in a `carry trade’ that concentrates risk. These four countries account for the lion’s share of the €448bn in ECB funding for banks (Spain €98bn, Greece €94bn). Frankfurt is propping up this unstable edifice. Mr Trichet may well fret.

A strong case can be made that Spain has decoupled from other PIGS in pain, though the deficit will still be 6pc next year, and the economy is at serious risk of a double-dip recession as wage cuts and higher taxes bite in earnest. But none are safe yet.

An ominous pattern has emerged across much of the eurozone periphery: tax revenue keeps falling short of what was hoped. Austerity measures are eating deeper into the economy than expected, forcing further fiscal cuts. It goes too far to call this a self-feeding spiral, but such policies test political patience to snapping point.

There is little that these nations can do in the short-run as EMU members. They cannot offset fiscal tightening with full monetary stimulus or a weaker exchange rate – as Britain can. All they do can is soldier on, sell family silver to the Chinese and Gulf Arabs, beg the ECB to join the currency war to bring down the euro, and pray that the fragile global recovery does not sputter out.

Chancellor Merkel is ultimately correct. A mechanism for sovereign defaults is entirely healthy. Had it been in place long ago, EMU would have been stronger. The proper timing for this was at the Maastricht Treaty, or Amsterdam, or at the latest Nice, but in those days the EU elites were still arrogantly dismissive about the implications of a currency union. To wait until now borders on careless.


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Monday, 7 March 2011

QE2 risks currency wars and the end of dollar hegemony

The Fed's "QE2" risks accelerating the demise of the dollar-based currency system, perhaps leading to an unstable tripod with the euro and yuan, or a hybrid gold standard, or a multi-metal "bancor" along lines proposed by John Maynard Keynes in the 1940s.

China's commerce ministry fired an irate broadside against Washington on Monday. "The continued and drastic US dollar depreciation recently has led countries including Japan, South Korea, and Thailand to intervene in the currency market, intensifying a 'currency war'. In the mid-term, the US dollar will continue to weaken and gaming between major currencies will escalate," it said.

David Bloom, currency chief at HSBC, said the root problem is lack of underlying demand in the global economy, leaving Western economies trapped near stalling speed. "There are no policy levers left. Countries are having to tighten fiscal policy, and interest rates are already near zero. The last resort is a weaker currency, so everybody is trying to do it," he said.

Pious words from G20 summit of finance ministers last month calling for the world to "refrain" from pursuing trade advantage through devaluation seem most honoured in the breach.

Taiwan intervened on Monday to cap the rise of its currency, while Korea's central bank chief said his country is eyeing capital controls as part of its "toolkit" to stem the flood of Fed-created money leaking out of the US and sloshing into Asia. Brazil has just imposed a 2pc tax on inflows into both bonds and equities – understandably, since the real has risen by 35pc against the dollar this year and the country has a current account deficit.

"It is becoming harder to mop up the liquidity flowing into these countries," said Neil Mellor, of the Bank of New York Mellon. "We fully expect more central banks to impose capital controls over the next couple of months. That is the world we live in," he said. Globalisation is unravelling before our eyes.

Each case is different. For the 40-odd countries pegged to the dollar or closely linked by a "dirty float", the Fed's lax policy is causing havoc. They are importing a monetary policy that is far too loose for the needs of fast-growing economies. What was intended to be an anchor of stability has become a danger.

Hong Kong's dollar peg, dating back to the 1960s, makes it almost impossible to check a wild credit boom. House prices have risen 50pc since January 2009, despite draconian curbs on mortgages. Barclays Capital said Hong Kong may switch to a yuan peg within two years.

Mr Bloom said these countries are under mounting pressure to break free from the dollar. "They are all asking themselves whether these pegs are a relic of the past," he said.

China faces a variant of the problem with its mixed currency basket, a sort of "crawling peg". Commerce minister Chen Deming said last week that US dollar issuance is "out of control". It is causing a surge of imported inflation in China.

Critics in the US Congress say China could solve that particular problem very quickly by letting the yuan rise enough to bring the country's $180bn trade surplus into balance.

They say the strategy of holding down the yuan to underpin China's export-led model is the real source of galloping wage and price inflation on China's eastern seaboard. The central bank has accumulated $2.5 trillion of foreign bonds but lacks the sophisticated instruments to "sterilise" these purchases and stem inflationary "blow-back".

But whatever the rights and wrongs of the argument, the reality is that a chorus of Chinese officials and advisers is demanding that China switch reserves into gold or forms of oil. As this anti-dollar revolt gathers momentum worldwide, the US risks losing its "exorbitant privilege" of currency hegemony – to use the term of Charles de Gaulle.

The innocent bystanders caught in the crossfire of Fed policy are poor countries such as India, where primary goods make up 60pc of the price index and food inflation is now running at 14pc. It is hard to gauge the impact of a falling dollar on commodities, but the pattern in mid-2008 was that it led to oil, metal, and grain price rises with multiple leverage. The core victims were the poorest food-importing countries in Africa and South Asia. Tell them that QE2 brings good news.

So the question that Ben Bernanke and his colleagues should ask themselves is whether they have thought through the global ramifications of their actions, and how the strategic consequences might rebound against America itself.


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Thursday, 3 March 2011

Aussie dollar breaks the buck as Australia, India fight Fed with 'quantitative tightening'

 The surging 'Aussie' captures the shift in the world's economic centre of gravity to the Pacific region. It was worth half a US dollar nine years ago. Photo: AFP

The long-awaited moment of "triple parity" seems imminent. The Swiss franc is already worth more than a greenback, and the Canadian dollar is seemingly poised to break through as well.


The surging "Aussie" - widely seen as a play on the China growth story and used by traders as a proxy for the Chinese yuan - captures the shift in the world's economic centre of gravity to the Pacific region. The currency was worth half a US dollar just nine years ago.


Australia's reserve bank said the "the economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity. The risk of inflation rising again over the medium term remains".


The move caught markets off guard. Credit growth has been cooling off over recent weeks and inflation is still just at 2.8pc - compared to 3.1pc in the UK - but the bank appears concerned about the risk of a wage spiral.


HSBC said emerging markets and commodity exporters such as Australia are opting for "quantitative tightening" to offset the liquidity effects of quantitative easing in the US, which is causing a flood of money into faster growing economies. Several states are toying with capital controls.


India's central bank has also tightened further, raising rates a quarter point to 6.25pc. It has imposed draconian housing curbs to reduce "excessive leveraging" and prick the bubble, limiting mortgages to 80pc of property values.


It may have responded with too little too late.


"Interest rates have been negative in real terms for 26 months, and heavily negative for several months," said Maya Bhandari from Lombard Street Research.


"Inflation is 9.8pc and is is going to get worse as the Fed's QE2 pushes up food prices, so a quarter point rate rise is not going to make much difference. They are relying on `administrative measures' instead of doing what they need to do," she said.


Ms Bhandari said the authorities had let rip with a "huge monetary and fiscal boost" before the elections in May 2009, leaving a legacy of overheating that is now coming back to haunt. The combined central and state budget deficit - including fuel subsidies - is nearly 11pc of GDP.


HSBC's currency team said the Australian dollar may be nearing its peak. "One concern relates to the deflating of the property bubble in China. This could happen gently but, if not, the Aussie will not avoid the fall-out. A sharp fall in Chinese property prices may very well lead to a deep examination of Australia's property bubble, and Australian banks," they wrote in a client note.


The report said Australia's lenders rely heavily on funding from abroad to finance the country's internal boom, creating a risky mismatch in liabilities. "Rationally or irrationally, this could turn very sour. The Aussie party looks set to come to an end soon," it said.


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Tuesday, 1 March 2011

Dollar plummets on report that EDF 500bn provides $ more in the economy of the pump

The dollar fell across the board on Wednesday amid signs the Federal Reserve will pump $500billion into the economy over the next six months.The dollar fell throughout Wednesday in the middle of the signs, that the Federal Reserve will pump $500billion in the economy over the next six months. Photo: Getty Images

Beige Book survey the Fed on business regional Wednesday said the u.s. economy expanded at a "modest pace" with little sign of acceleration last month, fueling speculation that the Governors of central banks may take additional measures to support growth.

Jack Ablin, placement head to Chicago-based Harris Private Bank told Bloomberg: "the beige book reiterates call for relief quantitative.La economic growth, is simply not accelerating."It remains to be seen what finally Fed purchase obligations will be.»

A report undertaken consultation Medley Global Advisors suggested that the Fed could start with the stimulus as early as next month, costs $ per month on the binding of achats.On knows that the u.s. Federal Reserve has a commitment to do more in the next 18 months.

The dollar plummeted to its lowest level against the euro since July and a minimum of 15 years against the yen.The euro has increased by 1. 06pc to $1.395 and the dollar ended at 81.05 yen.

Camilla Sutton, Scotia capital, currency strategist says Reuters: "we believe that the dollar ends lower year, but for the moment, we will no doubt be a period of negotiation over until we have a firmer idea where makers have in their heads."

In the meantime stocks and commodity recovered after the average China surprise mardi.La interest rates increase industrial Dow Jones rose 129.35 points, or 1. 18pc 11, standard 107.97.Le and Poor 500 index has been 11.78 points, or 1. 05pc 1,178.17, with more than 20 companies scheduled to report third quarter earnings today.Nasdaq Composite index rose points 20.44, or 0 84pc, 2,457.39.

Large companies, driving change market included Boeing Company, whose shares have increased 3 35pc after displaying a quarterly profit that beat expectations Wall Street.Delta Air lines and Airways Group have also reported strong profits.

Portal Yahoo! trooping 2pc after the announcement late Tuesday, the net income for the third quarter has more than doubled $396.1 m, or 29 cents per share.

Wells Fargo, the biggest U.S. home lender climbed 4 28pc after saying it was "eager" returning cash to shareholders after a record quarterly profit.

Lawrence Creatura, a Federated Investors Inc., New York-based Fund Manager said Bloomberg: "we have a variety of reports that indicate that the sky is not tomber.Hier company gains was a dark day for the market because of macro factors today it will be business tower management teams lead once more how."


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