Showing posts with label optimism. Show all posts
Showing posts with label optimism. Show all posts

Wednesday, 29 February 2012

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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Tuesday, 6 December 2011

Retrieve the markets of the Middle East on optimism the Egypt

Investors set aside concerns that violent demonstrations in the State of the gas-rich Algeria and other events at the Yemen could destabilize the region, or in any way threaten the oil reserves.

Stock Exchange remains the Egypt closed and will reopen this week with margins, but companies with large Egyptian interests que se aligned on other exchanges. Dana Dhabi gas jumped 4 5pc, whereas Air Arabia and group telecom Etisalat the two 0 9pc pink. EGX 100 index the Egypt fell 27pc more than two weeks before the Exchange was closed on January 30, but seems ready for a rebound.

Lars Christensen, head of emerging markets at Danske Bank, said invest in shares MIDEST is similar to European assets purchase is after the fall of the Berlin wall and could be rewarded for time if more open societies unleash economic potential. "We are very positive: the way things are playing is on the more positive point possible scenario." There is no civil war in Egypt and no hostile actions against other countries. »

Mr. Christensen, said the Egypt and the Tunisia are "star artists" in economic terms before their revolutions and should seek there where they left. "Our one of the concerns are that leaders across the region trying to buy their people instead of opening with reform", he says. Jordan has raised grants for food and Bahrain, where a Sunni elite governs the Shiite majority, is to give each family a bonus of £ 1,650 for food.

The Egypt managed to increase the $1 billion market debt Sunday but rigid price pay 11 68pc for 9 months invoices. Credit default swaps on the last Egypt debt traded at 322 points, below Hungary, the Portugal, Ireland or the Greece.

Finance Minister Egypt Samir Radwan, stated that the country is considering financial boost to restart growth, even though the budget deficit may hit 10pc of GDP this year, against 7 9pc initial estimates. He said "There is a need a recovery plan that is very closely linked to employment".

Mr Radwan said losses of agitation reached $6 MD, largely caused by tourist flight. Growth will drop to 5 8pc slot 4pc in 2011. The Egypt must create 700,000 jobs per year to absorb a "youth bulge" entering the labour market.

The main causes of the revolt in Egypt and Tunisia was new wealth is enriched elite but did not follow relatively quickly to the rest of the country, validating once more the theory of Tocqueville revolutions occur because increasing prosperity is biased, rather than because of poverty.

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Friday, 25 November 2011

Retrieve the markets of the Middle East on optimism the Egypt

Investors set aside concerns that violent demonstrations in the State of the gas-rich Algeria and other events at the Yemen could destabilize the region, or in any way threaten the oil reserves.

Stock Exchange remains the Egypt closed and will reopen this week with margins, but companies with large Egyptian interests que se aligned on other exchanges. Dana Dhabi gas jumped 4 5pc, whereas Air Arabia and group telecom Etisalat the two 0 9pc pink. EGX 100 index the Egypt fell 27pc more than two weeks before the Exchange was closed on January 30, but seems ready for a rebound.

Lars Christensen, head of emerging markets at Danske Bank, said invest in shares MIDEST is similar to European assets purchase is after the fall of the Berlin wall and could be rewarded for time if more open societies unleash economic potential. "We are very positive: the way things are playing is on the more positive point possible scenario." There is no civil war in Egypt and no hostile actions against other countries. »

Mr. Christensen, said the Egypt and the Tunisia are "star artists" in economic terms before their revolutions and should seek there where they left. "Our one of the concerns are that leaders across the region trying to buy their people instead of opening with reform", he says. Jordan has raised grants for food and Bahrain, where a Sunni elite governs the Shiite majority, is to give each family a bonus of £ 1,650 for food.

The Egypt managed to increase the $1 billion market debt Sunday but rigid price pay 11 68pc for 9 months invoices. Credit default swaps on the last Egypt debt traded at 322 points, below Hungary, the Portugal, Ireland or the Greece.

Finance Minister Egypt Samir Radwan, stated that the country is considering financial boost to restart growth, even though the budget deficit may hit 10pc of GDP this year, against 7 9pc initial estimates. He said "There is a need a recovery plan that is very closely linked to employment".

Mr Radwan said losses of agitation reached $6 MD, largely caused by tourist flight. Growth will drop to 5 8pc slot 4pc in 2011. The Egypt must create 700,000 jobs per year to absorb a "youth bulge" entering the labour market.

The main causes of the revolt in Egypt and Tunisia was new wealth is enriched elite but did not follow relatively quickly to the rest of the country, validating once more the theory of Tocqueville revolutions occur because increasing prosperity is biased, rather than because of poverty.

Get free advice on investments maximize with Telegraph wealth management Service


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Tuesday, 19 July 2011

Danger signal as UK services optimism plunges

 Shadow Chancellor Ed Balls said the Government was playing a "dangerous game" by launching an assault on public services. 

The latest trends report by consultants BDO said the optimism index fell to 92 from 94.8 in December, signalling trouble in late Spring. "There remains a real risk that the UK could enter a technical recession," it said.


The service sector index accounting for 55pc of output saw the second largest fall on record, dropping to 88.4. "This could spell danger. Any rise in interest rates would derail the UK economy in its current fragile state. It may be that the Bank of England has to consider putting QE [money printing] back on the table as we go through the year," it said.


"The marked decline in optimism is attributed to elevated inflation, weak earnings growth and the erosion of households' real disposable income. This is set against the backdrop of public sector cutbacks," it said.


The findings will further inflame the debate over the pace of fiscal tightening. Shadow Chancellor Ed Balls said the Government was playing a "dangerous game" by launching an assault on public services. "The cuts are too deep, too fast, putting the recovery at risk," he told the BBC.


Yet the Government may not have much room for manoeuvre given the fiscal deficit inherited from Labour and the harsh mood of global bond vigilantes, even if the gilts market has been well-behaved so far. "If someone says it's not as bad as all that, they just don't realize the calamitous position we are in," Ken Clarke, the Justice Secretary, said yesterday.


BDO's output index rose just above the break-even point for expansion to 95.5, led by manufacturing. While industry has been buoyant, growth barely kept pace with the rise in eurozone factories. Sterling's devaluation has so far failed to bring about the step-change in Britain's manufacturing companies that the many economists had expected, hinting at deep structural flaws in the British economy.


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Monday, 23 May 2011

U.S. job market woe dampens optimism

Several thousand protesters demanding jobs outside of Los Angeles City Hall.  Photo: AFP

Increase the rate of 9 8pc 9 6pc in October will be little comfort U.S. consumers whose spending helped power the global economy until the financial crisis.


Overall, the u.s. economy created 39 000 jobs in November, the report largely monitored by the Ministry of labour has shown well shy of the 150 000 provided by Wall Street economists.


The report, which followed a more encouraging signs for two months, string struck sentiment on the stock market and triggered a government bond price rally. FTSE ended the day 0 4pc to 5,745, while both the Dow Jones and the wider base S & P 500 were down about change lpc in afternoon trade at the beginning.


"It was basically a low ratio", said Neil Dutta, an economist at Bank of America Merrill Lynch. "We believe that the unemployment rate is higher before it goes lower.


While employers 50,000 committed private sector workers, it was too unless the 160,000 pencil in by analysts and not enough to lower the unemployment rate in a pool of labour which saw the 900 000 people to join so far this year. The weakness of employment extended in industries with retailers to cut 28 000 jobs, manufacturing lost 13,000 jobs and business building, leaving 5,000 people to go.


Failure recovery to a tooth President Obama unemployment rate and the Democrats in the election of the Congress of the month last and also invited the Fed to engage in a second round controversial quantitative flexibility with up to $600bn (£ 380bn).


Fed Chairman Ben Bernanke said last month that the current level of unemployment is "unacceptable" and not something that the U.S. company should tolerate.


Paul Dales economic capital said that "overall, data strongly support our esteem for a long time that the unemployment rate will remain at 9 5pc or higher at least the next two years and as GDP did increase much 2pc".


The number of people hired on a temporary basis by 39,500, noting that businesses are preferring hedge their Paris as uncertainty vortices over whether taxes will go back to January 1. "Temporary workers are also easier to fire and there is still an overhang of uncertainty, said Mr. Dutta.".


Taking into account the retail of the country and manufacturing sectors showed signs of strengthening these past few weeks, others have warned that it is too early to draw definitive conclusions as a report.


Retailers reported sales during sales Thanksgiving last weekend, the beginning of a critical period of consumer spending. A separate report today from the Institute of Supply Management showed the United States services industry grew at the fastest pace in the six months of November.


Nigel Gault, Chief u.s. economist at IHS Global Insight has stated that he suspected that the report of the Ministry of labour is a "a flap - on the disadvantage - but it stressed that the recovery remains a progressive."


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Wednesday, 11 May 2011

Middle East markets recover on Egypt's optimism

Investors brushed aside concerns that violent protests in the gas-rich state of Algeria and further demonstrations in Yemen could destabilise the region, or in any way threaten oil supplies.

Egypt’s bourse remains shut and will reopen this week with curbs, but companies with large Egyptian interests rallied on other exchanges. Au Dhabi Dana Gas jumped 4.5pc, while Air Arabia and the telecom group Etisalat both rose 0.9pc. Egypt’s EGX 100 index fell 27pc over two weeks before the exchange was closed on January 30 but appears poised for a rebound.

Lars Christensen, emerging markets chief at Danske Bank, said investing in Mid-east shares was akin to buying East European assets after the fall of the Berlin Wall, and might be well rewarded over time if more open societies unleash economic potential. “We’re very positive: the way things are playing out is just about the most positive scenario possible. There has been no civil war in Egypt, and no hostile gestures towards other countries.”

Mr Christensen said Egypt and Tunisia were “star performers” in economic terms before their revolutions and should pick up where they left off. “Our one concern is that rulers across the region try to buy off their people instead of opening up with reforms,” he said. Jordan has raised food subsidies and Bahrain, where a Sunni elite governs a Shia majority, is giving each family a £1,650 bonus for food.

Egypt succeeded in raising $1.1bn on the debt market on Sunday but at stiff cost, paying 11.68pc for 9-month bills. Credit default swaps on Egypt’s debt last traded at 322 points, below Hungary, Portugal, Ireland or Greece.

Egypt’s finance minister Samir Radwan said the country is eyeing a fiscal boost to revive growth even though the budget deficit may hit 10pc of GDP this year, against initial estimates of 7.9pc. “There is a need for a stimulus package that is very closely related to employment,” he said.

Mr Radwan said losses from the turmoil had reached $6.2bn, much of it caused by tourist flight. Growth will drop from 5.8pc to under 4pc in 2011. Egypt must create 700,000 jobs a year to absorb a “youth bulge” entering the workforce.

A key cause of the uprisings in Egypt and Tunisia was that new wealth had enriched an elite but had not trickled down fast enough to the rest of the country, validating once again the Tocqueville theory that revolutions occur because rising prosperity is skewed, rather than because of poverty.

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Thursday, 5 May 2011

Middle East markets recover on Egypt's optimism

Investors brushed aside concerns that violent protests in the gas-rich state of Algeria and further demonstrations in Yemen could destabilise the region, or in any way threaten oil supplies.

Egypt’s bourse remains shut and will reopen this week with curbs, but companies with large Egyptian interests rallied on other exchanges. Au Dhabi Dana Gas jumped 4.5pc, while Air Arabia and the telecom group Etisalat both rose 0.9pc. Egypt’s EGX 100 index fell 27pc over two weeks before the exchange was closed on January 30 but appears poised for a rebound.

Lars Christensen, emerging markets chief at Danske Bank, said investing in Mid-east shares was akin to buying East European assets after the fall of the Berlin Wall, and might be well rewarded over time if more open societies unleash economic potential. “We’re very positive: the way things are playing out is just about the most positive scenario possible. There has been no civil war in Egypt, and no hostile gestures towards other countries.”

Mr Christensen said Egypt and Tunisia were “star performers” in economic terms before their revolutions and should pick up where they left off. “Our one concern is that rulers across the region try to buy off their people instead of opening up with reforms,” he said. Jordan has raised food subsidies and Bahrain, where a Sunni elite governs a Shia majority, is giving each family a £1,650 bonus for food.

Egypt succeeded in raising $1.1bn on the debt market on Sunday but at stiff cost, paying 11.68pc for 9-month bills. Credit default swaps on Egypt’s debt last traded at 322 points, below Hungary, Portugal, Ireland or Greece.

Egypt’s finance minister Samir Radwan said the country is eyeing a fiscal boost to revive growth even though the budget deficit may hit 10pc of GDP this year, against initial estimates of 7.9pc. “There is a need for a stimulus package that is very closely related to employment,” he said.

Mr Radwan said losses from the turmoil had reached $6.2bn, much of it caused by tourist flight. Growth will drop from 5.8pc to under 4pc in 2011. Egypt must create 700,000 jobs a year to absorb a “youth bulge” entering the workforce.

A key cause of the uprisings in Egypt and Tunisia was that new wealth had enriched an elite but had not trickled down fast enough to the rest of the country, validating once again the Tocqueville theory that revolutions occur because rising prosperity is skewed, rather than because of poverty.

Get free advice on maximising investments with the Telegraph Wealth Management Service


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