Time to swim against the tide and dip into Europe again

For investors as well as journalists, where the funds are actually flowing tells a tale, even if it is more often than not a contrarian one. Investing in the places no-one else wants to go is psychologically hard but frequently profitable.

The fund flow data so far this year confirm a marked shift in investor sentiment. A net $16bn (£10bn) – inflows minus outflows – has returned to the world's stock markets, reversing about 9pc of last year's outflows, according to Citi figures.

More interesting is where the money is heading. It has been pouring into emerging markets and out of developed markets, with the exodus from the mature markets accelerating in the past couple of weeks. In total, emerging markets have attracted $24bn, offsetting about half of last year's redemptions, while developed markets have seen $8bn taken off the table. In particular, investors have been least interested in European and Japanese equities as their appetite for the developing regions of the world has returned.

It is probably not too surprising that these are the two markets to have been left out in the cold. Japan has been a disappointment while making the case for Europe has been mission impossible since the Greek crisis flared up two years ago. It is a statement of the blindingly obvious that Europe continues to face some pretty intractable problems. But investment is less about spotting where things are going right or wrong than about noticing where the perception of those trends is at odds with the reality. However bad things are, investors can profit if the market thinks they are worse than they turn out to be.

That is the gist of the argument for investing in Europe today, or as Credit Suisse put it this week: "Europe – lots of problems but raise to benchmark". It is the first time the bank has been anything but negative on the region in two years.

Here are some of the problems for investors in Europe. First, growth is anaemic and, with wages in the peripheral countries needing to fall by as much as 13pc to restore the periphery's competitiveness, it is likely to continue to stagnate. Second, the process of paying down debts has barely begun – another reason to expect weak growth. Third, several governments outside the core look insolvent. Fourth, the euro remains grossly overvalued, which in turn crimps growth.

Against this backdrop, it is unsurprising that investors have shunned the region. Even less surprising when you consider the inability of the eurozone's political leaders to convey any sense that they either understand the scale of the challenge or can find a solution. So why might Europe, nevertheless, be worth a look now? First, because the risk of a disorderly break-up of the eurozone now looks lower than a few months ago. ECB President Mario Draghi's injection of long-term liquidity for the region's banks has made a Lehman-type credit crunch possible rather than probable.

Second, because manufacturing new orders are picking up and earnings forecast revisions are second only to those in the emerging markets and better than in the US, UK and Japan. When European earnings revisions have turned before, the region's shares have tended to outperform over the next three to six months.

Third, because European companies have a significant exposure to the faster-growing markets in the rest of the world. Many of the large, multi-national businesses that dominate most European investment funds are tied to the fortunes of the global economy and not just the eurozone area. Just over half of continental European earnings come from outside the region.

Finally, and most importantly, valuations are attractive on a historical basis. Dividend yields, in particular, are in many cases approaching 5pc, which is around 50pc higher than the average in Europe in recent decades and more than twice the yield on German government bonds. Compared to the rest of the world, the valuation of European shares has not been this attractive for around 16 years.

If successful investing was about following the herd and doing what felt easiest, we would all be good at it. Unfortunately, the rewards accrue to those who swim against the tide and invest when it feels most uncomfortable. Perhaps this is just such a moment in Europe. "Don't follow the money," as Deep Throat didn't say.

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Shares to profit from a recession

Jonathan Jackson, head of equities at stock broker Killik & Co said that in a recession people cut back on their use of cars and turn to public transport. Good news for First Group, the leading transport operator in Britain and North America, operating bus and train groups including First Great Western, First Capital Connect and the Yellow School Bus.

Picture: Alamy

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Tory hedge fund donor fined $80m in the US

Pentagon Capital Management, headed by Lewis Chester, a contemporary of the prime minister at Oxford, was found to have engaged in late trading in mutual funds.

Investors in the fund, which has been winding down its assets since 2008, have included media tycoon Richard Desmond, former Labour treasurer Lord Levy, and property magnate Gerald Ronson.

The ruling, handed down by Judge Robert Sweet in Manhattan, will fuel scrutiny of the Conservatives' ties to big business and City financiers.

The Securities and Exchange Commission (SEC) issued charges against Pentagon in April 2008 after former New York Attorney General Eliot Spitzer launched a crackdown on trading in mutual fund shares.

Handing down his opinion, Judge Sweet ruled that Pentagon had "intentionally and egregiously" violated federal securities laws by engaging in late trading – or trading in mutual funds after the market close. "This scheme was broad ranging over the course of several years and in no sense isolated," he said. However, the judge found in favour of Pentagon on a second charge of market timing abuse.

Frank Razzano, a lawyer working on behalf of Pentagon, said: "We are grateful for Judge Sweet's finding that no illegal market timing took place. We are disappointed by his late trading conclusion. We shall be appealing."

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Stock markets show there are signs of optimism amid the gloom

The Dow Jones Industrial Average, still the best barometer around of the state of the US economy, this week reached its highest level since May 2008, while the technology-orientated Nasdaq Composite hasn't been as high as this since the immediate aftermath of the dot.com bubble back in late 2000.

Even more representative indices such as the S&P 500 and the FTSE All Share are racing ahead. Could it be that share prices are telling us something? Stock markets can be some of the best lead indicators around, but they are also famously unreliable. There are plenty of rallies which prove unrequited, with the economy failing to improve as anticipated.

The most notorious of these false dawns was in the aftermath of the Great Crash of 1929, when after falling more than 40pc in the initial panic, the Dow Jones then rallied sharply. Everyone rushed back in, only to lose their shirts for a second time as the stock market crashed back down again. By the time it finally hit the bottom in the summer of 1932, the Dow had lost 90pc of its value. Other, similar false rallies occurred throughout the 1930s.

The dangers of reading too much into the short-term movement of stock markets are all too apparent.

Even so, for the time being, the bulls are getting the better of the bears, so it's worth exploring why. The negatives are obvious enough. It's as plain as a pike staff that the eurozone's latest piece of sticking plaster isn't going to hold for long. Oil prices also give cause for grave concern, for we know that high oil prices, by taking money out of people's pockets that would normally be spent on other things, have a powerfully deflationary effect on Western economies.

What is more, nobody could think that the debilitating consequences of the financial crisis are now fully behind us. Cheap money alone seems to keep the whole edifice afloat. Where does the world economy look for support once the intoxicating effects of the central bank printing presses begin to wear off?

In Europe, official support for the banking sector seems only to be storing up problems for the future. Extensive use of European Central Bank (ECB) liquidity has diluted the quality of the assets used to attract market funding, creating a vicious cycle of ECB dependency that is almost bound to end badly.

And if these concerns were not bad enough, there is also the little matter of stock market valuations to worry about. Equities look relatively cheap against bonds, but that may be only because bonds, whose price has been artificially inflated by ultra-loose monetary policy, are very likely overvalued rather than shares being undervalued.

Put another way, share prices have benefited almost as much as bonds from cheap money policies, and are therefore quite vulnerable to any change in the current, zero interest rate environment.

Using the Robert Shiller valuation method - a cyclically adjusted measure that takes a moving 10-year average of historic earnings - US equities are far from cheap. True enough, they are not off-the-scale expensive, in the way they were at the turn of the century, but they are significantly above the historic average, and they are certainly at a level from which we have seen big tumbles in the past. Such valuations are only justified if you think there is further significant scope for profits growth.

You may be wondering by now where I am going to find the positives amid all these negatives. It's not easy, but stock markets are as much about sentiment as economic fundamentals, and it is important to bear in mind that all these negative risks will to some extent already be weighed in the balance. They are the known unknowns, if you like. On the whole, investors remain highly risk averse, and these are the sort of things they worry about most.

So rather than focusing on the possible downsides, we should perhaps be looking at the potential for upside surprises. Where might they come from? The most obvious source is the eurozone, whose muddling through approach to the crisis may succeed in holding the whole thing together for rather longer than conventional economic and political analysis suggests.

Perpetual crisis is not great for growth, but it is also quite plainly better than the financial Armageddon feared just a few months back. For the time being, ECB liquidity has succeeded in forestalling this more catastrophic outcome.

The longer the eurozone can keep staving off disorderly default, the more likely it is that confidence will start returning. There is a certain amount of "fear fatigue" creeping into sentiment. A backlog of opportunities, sidelined by prospects of economic meltdown, has built up, which investors and businesses will eventually grasp.

Already we are seeing the beginnings of a mini mergers and acquisitions boom. The junk bond market is returning, allowing a certain amount of leverage once more to be applied to private equity takeovers and corporate refinancing. These are all positive signs.

But the biggest potential for upside surprise is in the United States, where it is possible, and in my view quite likely, that the present economic recovery will prove more than just a pre-election flash in the pan. A self-sustaining recovery in the US, if that is what we are beginning to see, would certainly provide ample support for equity valuations at current levels. Growing energy self-sufficiency as a result of the shale gas revolution will in time remove the US as a marginal buyer of international crude, which ought to take the heat out of oil prices.

Edward Bonham Carter, chief executive of Jupiter Fund Management, reckons equity markets are likely to continue in positive mood for the next six months because of the improving economic backdrop. But he doubts the main indices will permanently move onto higher ground in the next year, in the sense of significantly breaching past all-time highs. This looks about right to me.

A more positive mood is establishing itself, but the idea that we are entering a new and sustained bull market still looks premature.

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Portuguese storm gathers as EU leaders fight over Greece

The FTSE 100 fell 1.1pc and Germany's DAX was off 1pc, while the iTraxx Crossover index measuring credit risk in Europe jumped 30 points to 637. Yields on Italian 10-year debt rose 21 points to 6.08pc.

The worries over Portugal continued to mount even as German Chancellor Angela Merkel backed away from demands for a European austerity commissioner to take control of the Greek budget, averting an explosive clash with Athens.

"We don't want controversial talks, but a discussion that is successful for the Greek people," she said, insisting that Germany's plan was just one many of options.

The change of tack came after Berlin's allies in the northern creditor bloc warned such heavy-handed diplomacy had become offensive and breached the spirit of the EU project.

"You never stoop to insults in politics. It solves nothing," said Austria's Chancellor Werner Faymann. Luxembourg's foreign minister Jean Asselborn said it behoves Europe's most powerful state to display a "little more caution", advising Germany to "watch out" as passions grow stronger.

The dispute overshadowed the summit, intended to promote EU growth and tackle youth unemployment – now 22pc Europe-wide and 51pc in Greece. Talk of growth at a time when EU austerity has entrenched severe slumps across southern Europe has left markets bewildered.

While EU leaders fleshed out a German-inspired "fiscal compact" to police the budgets of EMU states, Finland called it "at best unnecessary and at worst harmful" while Luxembourg deemed it a "waste of time". The pact has been weakened, allowing a breach of the new structural deficit limit of 0.5pc of GDP in a wider range of circumstances.

On Monday night, 25 of the 27 EU nations signed up to the fiscal compact, with the Czech prime minister joining the UK in staying outside the deal.

While German calls for an EU commissar for Greece are not new, the aggressive tone of the draft shocked EU veterans. It stipulated that Athens must give "absolute priority to debt service", "transfer national budgetary sovereignty", and agree to terms that make it impossible for Greece to "threaten lenders with default". Furious Greek leaders rejected the terms as debt servitude.

Analysts have questioned whether Germany deliberately called for conditions that Athens cannot accept, perhaps to force Greece's withdrawal from the euro and set an example to others.

The softening of the German stance does not in itself settle the Greek crisis – even assuming Athens agrees soon to a deal with private creditors for debt relief near 70pc. Greece will almost certainly need a further €15bn on top of the €130bn package in force, yet Mrs Merkel has warned that Germany will not provide any further funds.

Jacques Cailloux from RBS said there would be a chain reaction if the troika halts payments and sets in motion a Greek default and exit from EMU.

"That would the disaster scenario. Those who think this could be contained don't know what they are talking about. There would be extraordinary contagion, as we are already seeing in Portugal, spreading back to Spain, Italy, and France," he said.

Citigroup thinks Portugal's economy will contract by 5.7pc this year and 3.5pc next year, replicating the downward spiral seen in Greece as austerity began to bite.

While Portugal has delivered on its promises, the task may be Sisyphean with a combined public and private debt of 360pc of GDP – 100 percentage points higher than in Greece. Grit alone cannot overcome the same chronic lack of competitiveness.

Europe's leaders have vowed that they will not inflict a "haircut" on Portugal's creditors, insisting that Greece is a "special case". The relentless exodus from Portuguese debt suggests that investors do not believe them.

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Portugal to need "debt haircut" as economy tips into Grecian downward spiral

 Demonstrators on the streets of Lisbon: Portugal has so far avoided the sorts of riots seen in Greece, but patience is wearing thin. 

Yields on Portugal's 10-year bonds climbed to 14.39pc on Thursday. Credit default swaps measuring bond risk have reached 1270 points, pricing a two-thirds chance of default over the next five years.

While some of the latest damage reflects forced selling of Portuguese debt after Standard & Poor's cut the country's credit rating to junk status last Friday, there are deeper worries that sharp fiscal cuts by the free-market government of Pedro Passos Coelho may prove self-defeating.

Mr Passos Coelho has been praised by EU leaders and the International Monetary Fund for delivering on austerity, but the risk is that severe tightening - without offsetting monetary and exchange stimulus - will push Portugal into the same downward spiral that has already engulfed Greece.

Jurgen Michels, Europe economist at Citigroup, said Portugal's economy will contract by a further 5.8pc this year and by 3.7pc in 2013, a far sharper decline than official forecasts. The peak-to-trough collapse would be 13pc, a full-fledged depression.

"As this gets worse it is going to be extremely difficult to go ahead with more austerity measures: political contagion will start to come through," he said.

Portugal has so far reacted calmly. It has avoided the sorts of riots seen in Greece, but patience is wearing thin. The CGTP labour federation held a protest march in Lisbon this week, vowing to resist "forced labour".

A new study by the Barometer for Democracy shows that confidence in Portugal's democracy has fallen to the lowest since the end of the Salazar dictatorship. Barely more than half retain faith in the system and 15pc pine for "authoritarian" rule.

While Portugal's public debt of 113pc of GDP is lower than Greece's, the private sector has much larger debts and the country's total debt-load is higher at 360pc of GDP - much of it external debt.

"There is huge private sector deleveraging going on and the banking system has big problems. It is unclear how much of this private debt is going to end up on the state's door-step," said Mr Michels.

"Without a sizeable haircut to its debt stock, Portugal will not be able to move into a viable fiscal path. We expect a haircut of 35pc at the end of 2012 or in 2013."

Portugal's Treasury faces modest debt repayment of €17bn this year. There is no imminent crisis since Lisbon is already under an EU-ECB-IMF Troika regime as part of its €78bn rescue and does not need to access markets until 2013.

The problem is the slow-burn threat of debt-deflation. Interest costs for Portuguese companies are painfully high - if they can roll over loans at all - and the debt burden is rising on a shrinking economic base. Real M1 money deposits contracted at an annual rate near 20pc in the second half of 2011.

Since the country cannot devalue within EMU, it hopes to achieve an "internal devaluation" to restore 30pc in lost competitiveness against Germany. This is a gruelling process, entailing cuts that eat away at tax revenue.

Portugal is a troubling case for EU officials, who insist that Greece is a "one-off" case rather than the first of a string of countries trapped in a deeper North-South structural rift. The official line is that Portugal will pull through because it has grasped the nettle of retrenchment and reform.

Europe's leaders have vowed that there will be no forced "haircuts" for holders of Portuguese bonds. If the country now spirals into a Grecian vortex as well they will have to repudiate that promise or accept that EU taxpayers will have to shoulder the burden of debt restructuring.

While all eyes are on Greece, it is the slower drama in Portugal that will ultimately determine the fate of the eurozone.

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New recession threatens the globe as debt crisis grows

China's carefully managed soft landing has turned uncomfortably hard, with ripple effects through the commodity markets. Spot iron-ore prices have dropped 30pc since July to $126 a tonne. Copper prices have fallen 20pc since August.

Barclays Capital said the risks of contagion to China has become serious. The bank is monitoring the country's "key high frequency data" for early warning signs of the sort of sudden crash in metals demand seen during the Lehman crisis.

China had the firepower to respond to the 2008 crisis with blitz of credit that helped lift the whole world out of slump, a feat that cannot easily be repeated if there is a second shock.

The IMF said loans have doubled to almost 200pc of GDP, including off-books lending. This is an unprecedented level of credit growth, twice the intensity of the Japanese bubble in the late 1980s.

The authorities are trying to deflate the excesses slowly with higher interest rates and reserve ratios. This is proving painful. Yao Wei from Societe Generale said prices of new residential property fell 14pc in October. Railway investment collapsed by 40pc as the insolvent railway ministry struggled to cope with $300bn of debt. Highway construction dropped 2pc.

Europe is in a deeper, more intractable crisis. Industrial output buckled in September with falls of 4.8pc in Italy, 2.7pc in Germany, and 1.7pc in France from a month earlier as the effects of the debt crisis – as well as fiscal contraction and prior monetary tightening – finally hit with a vengeance.

EU commissioner Olli Rehn slashed growth forecasts from 1.6pc to 0.5pc next year, warning "that recovery has now come to a standstill and there's the risk of a new recession unless determined action is taken". This did not stop Brussels sending a letter to Italy calling for yet more fiscal cuts to meet it is balanced budget target by 2013.

"It is imposing pain for pain's sake, and it is going to cause creditors to collect even less on their Club Med debts than if austerity were abandoned. Even in the early 1930s they weren't as bad as this," said Charles Dumas from Lombard Street Research.

Humayun Shahryar from the hedge fund Auvest said the eurozone faces a "major economic collapse", perhaps with double-dgit falls in GDP. "European banks are massively over-leveraged and almost every one is worthless if you mark to market. This is going to be worse than 2008 because they have run out of bullets. The sovereign states are not strong enough to stand behind the banks," he said.

Professor Johnson said the EU authorities had made a serious mistake by raising capital ratios for banks to 9pc rather than forcing them to raise fresh capital. "That will lead to a further contraction of credit."

Banks have already taken drastic steps to cut their loan books rather than raise money in a hostile market, earmarking over €700bn for the next year. There will be knock-on effects for the rest of the world. European banks account €2.5 trillion cross-border loans to emerging markets.

In the US, the economy has held up better than feared so far but faces a fiscal shock early next year. Tax write-offs have pulled capital expenditure forward into late 2011, flattering the picture.

Payroll taxes will rise automatically from 4.2pc to 6.2pc in January. Dumas said the combined fiscal squeeze could be as much as 2pc of GDP, heavily "front-loaded" in the early months. "Sharp recession is likely," he said.

"The credit spigot has been turned off in the US," said Chris Whelan from Institutional Risk Analytics. "Almost every bank is still running down its loan book, so we are facing a slow motion credit-crunch."

Fiscal and monetary stimulus has disguised the underlying sickness in the debt-laden economies of the West over the past two years. This heavy make-up has at last faded away, exposing the awful visage beneath.

It is a delicate moment. The risk of a synchronised slump in Europe, the US and East Asia is bad enough. What is chilling is to face such a possibility with the monetary pedal already pushed to the floor in the US, UK and Japan.

Worse yet is to do so with Europe spiralling into institutional self-destruction, allowing its debt crisis to metastasize because EMU has no lender of last resort. That is an unforced error we could do without.

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Nicolas Sarkozy pledges drastic austerity measures as French bank shares crash

Mr Sarkozy returned from the Riviera to chair an emergency meeting in Paris with his inner cabinet and the central bank chief, Christian Noyer, breaking the sacrosanct August holiday.

The key ministries were given one week to draw up radical austerity measures.

"Whatever the impact of global uncertainty, or the S&P's downgrade of America's debt, or the turbulence of the markets, we will take the necessary steps, " said finance minister François Baroin.

The political drama came as swirling rumours set off a collapse of French bank shares.

Société Générale fell 21pc before recovering partially, plagued by fears that it may be heavily exposed to tumbling global stockmarkets through its role in the equity derivatives market. Credit Agricole closed down 13pc, and BNP Paribas fell 10pc.

French banks have €410bn (£360bn) of exposure to Italy alone according to the Bank for International Settlements. The twin crises in France and Italy are now intimately linked and appear to be feeding on each other.

The MIB index on the Milan bourse fell 6.7pc as the euphoria following the European Central Bank's intervention in the Italian bond markets gave way to angst that the EU bailout machinery may not be large enough to back stop the whole of southern Europe.

France's CAC 40 closed down 5.5pc.

Morgan Stanley said the flight from French bank equities was "overdone".

BNP Paribas does not need to tap the capital markets this year, while SocGen is 93pc funded. The European Central Bank has kept its lending window open and offered a 6-month tender.

Julian Callow from Barclays Capital said the credibility of the €440bn rescue fund (EFSF) depends on France retaining its AAA rating.

That is now highly questionable despite assurances from all three rating agencies on Wednesday that nothing had changed.

"The debt ratios of the US and France are very similar. France also suffers from economic rigidities and now has this extra burden of the EFSF. People are asking themselves whether S&P can downgrade US without downgrading France," he said.

Mr Callow said France has a current account deficit of 3pc of GDP, unlike other members of the eurozone core. This is a sign of slipping competitiveness and a warning that France may struggle to carry the burden of escalating bail-outs.

French industrial output fell by 1.6pc in June and economic growth ground to a halt in the second quarter, further eroding budget finances.

The fiscal deficit was running at 7pc of GDP in the first half. It will take draconian cuts at this point to meet the 5.7pc target agreed with the EU.

With Spain, Britain, and even Italy now forcing the pace on austerity, France cannot appear nonchalant. Italy's premier Silvio Berlusconi met union leaders on Wednesay to forge a deal on €20bn of anti-deficit measures and labour reforms demanded by the ECB.

He has recalled parliament to vote on a balanced budget amendment to the constitution.

The ratings agencies are under intense pressure in Europe and may no longer be able to carry out their work effectively. Italian prosecutors have raided the offices of S&P and Moody's in Milan, accusing them of issuing "false and unfounded judgements" on the Italian financial system.

S&P said the accusations are "without any merit"

The Procura di Trani said the agencies had jumped the gun by issuing a report in early July on draft budget proposals.

Three analysts from S&P are accused of "market manipulation" and "abuse of privileged information" by issuing "inaccurate" reports over a period of several months.

This sort of judicial action against rating agencies is highly unusual. If it is shown in any way that the charges are politically motivated, the episode may inflict damage to Italy's reputation as a safe place to conduct business.

Marchel Alexandrivich from Jefferies Fixed Income said investors are worried that the latest contagion to France could bring the eurozone's bubbling problems to a head in a dramatic fashion.

"If France is dragged into the problem, then we will hit crisis point. They will either have to move to a full-blown eurobond -- and German politicians are set against that -- or face a break-up. There is a significant chance that the euro will no longer exist in its current form within twelve months," he said.

President Sarkozy said France would include a "golden rule" in its constitution to restore fiscal probity, adding that the fiscal targets for 2011 and 2012 were "untouchable".

The new budget measures will be introduced on August 24 and are expected to include the closure of 500 tax loopholes, .

The IMF said France has the highest debt ratio of any AAA state this year at 85pc of GDP and may have to tighten further next year. Like the US, France has also built up huge pension debt and contingent liabilities.

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Oil rises to $104 per barrel in the middle of the Middle East tensions

Brent crude rose above $ 104 per barrel after Israel says two warships Iranian expected to navigate through the Suez canal in Syria road.  Photo: AP

Gross Brent rose above $ 104 per barrel later Wednesday and stay there Thursday after avigdor lieberman, Israeli Foreign Minister said two warships Iranians planned navigate through the Suez canal in Syria road.

Apart from the fresh tensions Israel-Iran oil traders concerned also stirring the Bahrain where the riot police killed demonstrators and the oil-rich Libya.

They fear the kind of disturbance that reverses the Presidents of the Egypt and the Tunisia could extend to other Middle East oil-producing nations.

"Trouble in the Middle East are on the agenda of events at Bahrain and Saudi have placed in barrels of political tensions, said Rob Montefusco, a financial Sucden oil trader."

Ken Hasegawa, Manager of Newedge broker Japan, derivatives says oil could easily hits $105 today, according to economic data out of the United States later.

Mr. Lieberman called the move later "provocation" by the Iran whose Israel sees a significant threat to nuclear weapons program OPEC nation.

However, the Suez Canal by the Egypt Authority said today was "informed of the cancellation of two regular journeys of two Iranian warships.

Channel, official who refused to be named, "no new date has been set to cross the Suez in convoy south from the Red Sea", told Reuters.

Military vessels passing through the channel must first obtain permission from the Ministry of defence and the Ministry of Foreign Affairs.

The official identified vessels like Alvand and Kharg Island, said that ships were near the port of Jeddah, Saudi Arabia Red Sea. Shipping experts said that the Alvand frigate Kharg refueller.

Last time, Iranian warships crossed the channel is in 1979.

In January, disorders in Egypt helped push Brent over $ 100 per barrel. The last approach by Iran between five days after the Egyptian President Hosni Mubarak resigned and Israeli leaders have expressed concerns that the Iran may operate the transition period.

Energy & Utilities and positions vacant Oil & Gas jobs Telegraph

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Osama bin Laden's death did not cause products to crash

Much of this was reduced to a loss of confidence in the euro. The single European currency fell more than four months against the dollar last week after Jean-Claude Trichet, President of the European Central Bank, indicated that interest rates may not move over the next month and concern grows that the debt of the Greece crisis is spiral out of control.

Also, U.S. crude oil stocks rose. The Energy Information Administration, in its report of crude oil weekly said U.S. commercial crude oil inventories increased by 3.4 m in the week ending April 29 to 366.5 million barrels. This means that oil inventories remain above the upper limit of the average range for this time of year. These data were released on Wednesday, when the rout meeting pace.

Prizes will be always volatile. Mining is a cyclical industry and it is not going to change. However, we are far form near the end of the cycle, as there is not much sign of China shot tools immediately.

Course, worrisome inflation in the country has meant that there was some tightening - and this has had an impact on demand. But it is lighter, and the country will continue to aspire products for some time.

Prices will still rise and fall last week is a correction rather than when the party. Barclays is in agreement.

"In this context, the huge decline in prize money and a substantial strengthening of the dollar appear to have triggered a phase of long liquidation in commodities which had flammable legacy for some time, but will probably not last very long"Barclays Capital said.""

Of course, raw materials will drop significantly at some point in the future. Miners are investing billions in bringing new capabilities on stream - and when the offer of equation begins to expand rapidly, the cycle will be at its peak.

However, it is quite a bit more later. It takes several years to get to the stage where boards approve expenditures, regardless of the time it takes to build the mine.

There are also significant delays on the order of mining equipment and this can lead to a major bottleneck - especially in a mining boom as we are witnessing at the moment.

Investors can feel reassured that prices will recover - especially if the dollar continues its almost inevitable runway below. The only thing that could derail this gesture would be another crisis in the euro area.

There was speculation Greece may have to get out of the single European currency. If this occurs, a flight safety would occur and lots of dollars would be repatriated, sending the currency higher.

However, it is very difficult both a top - or a Fund - in any market and it is preferable to use the falls by buying opportunities. The correction may continue for some time, but it is likely to be precisely: a temporary correction. GW

Silver loses its luster.

Silver indeed lost its lustre last week, dropping by more than a quarter in price.

Many observers, including this column a month ago, has warned that the money was heading for a fall, but few could predict the size of the correction.

A week earlier, he had been teasing $50 an ounce, but the price is now languishing below $38. Analysts say silver has been the leader in the rout of the goods which saw metals to considerably lower this week. Most of the raw materials fell as the dollar has accelerated. Investors retreat reached in concerns about the growing global moderator request high oil and doubts that commodity prices have been driven out by speculation above the foundations of the offer and the application of recent months.

Daniel Major and Nick Moore RBS believe correction is overdue in precious metals: "gold and silver prices have been richly to price and trade well above fundamentally justified levels."

"As an example, gold and silver margins producer are enormous." Precious metals consultants GFMS feel fresh cash world production of gold in 2010 $ per ounce and the costs of total production to $723 per ounce. Money, the situation is even more spectacular, with 2010 estimated total cash costs at only $5.27 ounce against a price spot a week ago was ounce $50. » RM

Brent crude plunged $10

Oil has seen a dramatic sell-off, plunging $10 Thursday at $113 per barrel in a rout of products in all areas. Investors was afraid to long Records held by the fund managers and concerned about the erosion of the demand caused by price to $125 per barrel. However, analysts warned that the decline is probably a correction in the short term and the disruption of supply or shortages on the oil market could easily send the prize to the same heights by next year. RM

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On world markets fall on global growth fears

In the United States, the Dow Jones industrial average fell 1. 1pc to 11,984, while the broader S & P 500 index fell 1. 2pc and the Nasdag slid 1. 2pc.

Chinese exports slow in may as world demand has hesitated. This came a drop on the part of British industrial production in April and recent reports from United States showing an anemic recovery.

The price of oil was also fell after Saudi Arabia began to offer more oil to Asian refiners, with Brent crude in London down a $1.25 to $118.32 in afternoon trading.

"The world economy embarked on a"soft patch"and this is particularly the case for developed countries, but no one knows what the magnitude and duration will be," said Herve Goulletquer, analyst at Credit Agricole.

The uncertainty caused stock market sentiment to turn sour. In Europe, the FTSE 100 closed down 1. 5pc to 5,765, while the Germany DAX fell 1. 2pc and the CAC 40 in France fell by 1. 9pc.

In the United States, the Dow Jones industrial average fell 1. 1pc to 11,984, while the broader S & P 500 index fell 1. 2pc and the Nasdag slid 1. 2pc.

In the currencies market, the euro continued its descent of recent summits of one month after the Germany have voted for a second package of assistance for the Greece, provided that the holders of bonds share the load. It is in disagreement with the opinion of the European Central Bank who fear that any change to the Greek debt could trigger a "credit event" which, to injure other fragile economies of the euro area.

"The escalation of tensions between the Germany and of the ECB - tensions who believes that markets had been resolved - has been a key factor in undermining confidence,"said Derek Halpenny, global European research head of currency at the Bank of Tokyo-Mitsubishi UFJ.""

"For financial markets to remain stable and sustained euro must be a resolution of the German-ECB conflict", he added.

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Shares to profit from the double-dip recession

Jonathan Jackson, head of equities at stock broker Killik & Co said that in a recession people cut back on their use of cars and turn to public transport. Good news for First Group, the leading transport operator in Britain and North America, operating bus and train groups including First Great Western, First Capital Connect and the Yellow School Bus.

Picture: Alamy

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Tom Stevenson: the key to a resilient portfolio

During 2011, as I pointed out last week, the difference between investing in the US stock market and its counterpart in India was close to 40pc in dollar terms – the companies you picked within those markets may have been rather less important.

Sectors matter too – 2011 was a good year to be invested in businesses that are less susceptible to the ups and downs of the economy. Companies supplying goods and services that people are obliged to spend money on, like food, heating and phone bills, did better than those in more cyclical sectors.

As well as where they are and what they do, however, companies are also distinguished by how big or small they are and this too was a key factor in stock market performance last year, although one that gets less attention than the other two.

I was reminded of the size effect this week by the publication of the RBS Hoare Govett smaller companies (HGSC) index. It's the 25th edition incidentally, so happy anniversary to the London Business School's Professors Dimson and Marsh who have been gamely crunching the numbers since 1987.

After two years of out-performance, investing in smaller companies hit the buffers last year. The performance of the HGSC index (which includes the bottom tenth of the stock market by value) had a total return including dividends of -8.8pc. That compares with -3.5pc for the FTSE All Share index. By contrast, the total return of the FTSE 100 index of the biggest companies in the market was only 2.2pc down.

Not only was this a break with the performance of the previous two and a half years since the market turned up in March 2009, it was also a reversal of the long-term story. Although the index was first published in the 1980s, the data goes back to 1955 and over the full 57-year history of the series smaller companies have enjoyed a 15.1pc annualised gain, a full 3.2pc better than the All Share index.

That might not sound a great deal, but a 3.2pc difference, year-in year-out for more than half a century, represents a massive difference in total return. Over the long haul, investors have been amply rewarded for investing in riskier smaller companies.

It is never quite as straight-forward as the long-term averages might suggest, however. As the performance of smaller companies since the market low in 2009 has shown, the smaller company premium is heavily influenced by some short periods of explosive growth. At other times larger companies can be in vogue for years on end.

In this regard, the market high of 2000 was a watershed moment. In the 13 years from 1987 to 1999, larger companies did better than smaller companies (another example of a stock-market anomaly being understood and promptly disappearing!). Since the top of the dot.com bubble, however, smaller companies have come back into favour – since 2000, as the chart shows, the FTSE 100 has managed just 1.5pc a year against 5.7pc for the HGSC index and over 7pc for the FTSE250.

And there is one really striking outlier in the figures – the AIM market, which includes mainly smaller companies but which has nonetheless been a terrible performer over the past 12 years, has fallen 7.3pc a year in total return terms. In fact it's been a dog over the whole 25 year period; that may be related to the sector composition of the index or may just be a reflection of the quality of companies in the junior market. Who knows?

The key question is whether there is any practical use for investors in this data. On the face of it, the numbers seem to provide statistical support for the old adage that "elephants don't gallop". This has always been used as a justification for investing in smaller companies, the argument being that it is much harder for BP to double in size than, say, Caffe Nero. While that is true, it may also be the case that the long-term out-performance of smaller companies is simply fair recompense for the fact that they are more volatile, more exposed to the vagaries of their domestic economy and more expensive to deal in.

In the same way that spreading your investments between different countries and sectors makes sense, it is hard to argue against having a balance of big and small in your portfolio.

Tom Stevenson is an investment director at Fidelity Worldwide Investment. The views expressed are his own. He tweets at
@tomstevenson63

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Traders brace for eurozone crisis fallout

The German chancellor warned that Standard & Poor's decision to downgrade nine eurozone countries on Friday evening demonstrated that politicians needed to step up their efforts to resolve the crisis, warning that it was a "longer process" that would take more than a few months.

"The decision confirms my conviction that we have a long way ahead of us before investor confidence returns," she said in a radio address. Germany was not among the countries downgraded.

The downgrades, after markets closed on Friday, marked a further escalation of the debt crisis, which has seen investors lose faith in euro governments' ability to service their debts.

Stalled talks over "haircuts", or writedowns, of Greek government debt will further worry investors, as they pose the threat of Athens making a disorderly default.

Nicolas Sarkozy, the French President, yesterday called for cool heads after his country was scalped of its prized triple-A rating, pushing up its borrowing costs.

"The crisis can be overcome provided that we have the collective will and the courage to reform our country," he said. "We must resist, we must fight, we must show courage, we must remain calm."

The rating agency had explained its move by warning that recent European policies "may be insufficient to fully address systemic stresses in the eurozone". While downgrades were widely rumoured, its decision to cut the ratings of some but not all eurozone nations has complicated the political situation.

In the UK, William Hague, the Foreign Secretary, warned that the clutch of downgrades "is serious. It underlines the fact that the eurozone is not through its problems."

Spanish Prime Minister Mariano Rajoy, responding to his country's own downgrade, pledged spending cuts and a reform of Spain's banking system.

While European leaders appeared to be signing from the same hymn sheet of reform yesterday, eurozone officials suggested there remained considerable doubts over how the region's bail-out fund would be funded, and by who.

"There is a debate. The question is still open and there is no consensus so far," one official reportedly told news agency AFP. Germany is thought to be still unwilling to increase its contribution to the European Financial Stability Facility (EFSF). The S&P downgrades could hit the EFSF's triple-A rating, economists have warned, sending borrowing costs higher.

In an example of the affect the crisis is having outside the region, Japan's prime minister warned that his country, hobbled with the world's largest debt load, could fall into the same problems. Yoshihiko Noda said Europe's situation "isn't a house burning on the other side of the river," telling voters: "We must have a great sense of crisis."

Attempts to stabilise the euro situation were further undermined on Friday after talks between the Greek government, international lenders and private sector holders of Greek debt collapsed.

Officials from the "troika" of Greece's international lenders – the International Monetary Fund, European Commission and European Central Bank – are due in Athens tomorrow to assess the country's efforts in cutting its borrowing and enacting reforms.

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Questor share Tip: negative sentiment on the Egypt Centamin has created an opportunity to purchase

Gold prospects are positive that investors worried about inflation, devaluing currencies and geopolitical disorders Photo: ALAMY

The negative sentiment has created an opportunity to purchase - but not without risk. The situation is far from over in North Africa.

Friday, the miner said that he would welcome a trip by analysts at its Sukari mine in the North African country. Suspects Questor week next these analysts will issue positive updates on the situation in the mine of the company - a gesture which could stimulate the company of the action.

Questor recommended to buy the post-crisis actions, 135.9 p, but the actions are always good value.

This is despite the fact that the company said Thursday that production of 2011 would be at the lower end of its target.

There is a delay in the delivery of blasting equipment - but this has been resolved.

Gold prospects are positive that investors worry about inflation, devaluing currencies and geopolitical problems. Friday, Standard Chartered said that gold "supercycle" could increase the price of the metal to an average of $2,100 in 2014.

Questor recommended actions such as high as 159.75 p purchase, but they were initially tipped to 42.5 percent on January 5, 2009. They are traded on a remuneration of 14.1 multiple current year, falling to 9.7 next year. The company does not pay a dividend.

Questor takes into account falls are exaggerated and actions are a speculative buying.

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Questor share Tip: Inchcape deserves the green light for investors

The figures of the society of motor manufacturers and traders showed that UK car sales fell 7 FP7 in February from last year and the end of the scrappage incentive means that this decline is likely to be maintained through the year.

Questor has only look in its portfolio because its after-sales activities growing. Inchcape, which is by far the largest list British dealer, with a market capitalization of £ 1 MD, has been warning yesterday of "uneven global recovery" and "margin erosion" of increased costs for vehicle manufacturers.

It is expected to decline this year in four markets - Singapore, Greece, Belgium and United Kingdom - which account for half of the Group turnover.

However, at the side of caution outlook is a car dealer who deserves to be passing the green light.

The key is that the Inchcape operates 26 markets and is the leader of the market in 14 of them. Thus, while European revenues fell 13 4pc 871 m £ last year, this division accounts for 15pc of sales and its decline was offset by the performance of the Australia, China, and the Russia.

Overall, pretax profits stir-fry 41pc to 192 m £ on earnings above £ 5. 89bn, 5. 4pc then Australasia represents £ billion in sales and the Russia and emerging markets another £ 1 billion.

Not only the emerging markets are set for further growth in sales of car - Director General André Lacroix has Hong Kong, in Australia, the Russia and South America in particular - but Inchcape also got a foot in the burgeoning luxury car segment.

In China, for example, Inchcape sells Jaguar and Land Rover, and the success of British brands allows him to prepare for an expansion of £ 170 million in the country over the next five years.

Mr. Lacroix, said Inchcape is "uniquely positioned to take advantage of these markets premiumisation" while the class average and seeks a better quality of life. In addition, he claims that luxury brands with inchcape works will be "ahead of their competitors in their development of advanced hybrid and electric vehicles."

Financially, Inchcape can invest in these opportunities with a pile of 206 million net cash of £, amassed fortunes last year resumed and a deferral of certain capital expenditures. This pile of cash has also led to the company restoring the dividend for the first time since 2009. A payment of 6.6 p per share will be made to the shareholders.

The action of the Inchcape prices rallied 65 p in March 2009, when the dividend has been discarded, a rights issue was launched and Questor has warned investors to avoid actions. He has been a steady rise since August, when it rose to 253.20 p.

By Miss report and UK rival Pendragon, Inchcape is not cheap, trading at 11.7 2011 time gains and 2 4pc performance. However, Questor believes the global reach of the business and potential undermines the relevance of this comparison. Purchase.

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