Weekly Review of Global Markets

Im Folgenden stellt Ihnen Barings Asset Management einen Rückblick auf die globalen Märkte in der vergangenen Woche zur Verfügung. Erfahren Sie mehr zur Inflation in UK, Griechenland, Japan´s Steuern, der US Wirtschaft oder der Nike Aktie und weitere Themen hier: Barings | 04.07.2011 08:39 Uhr
Archiv-Beitrag: Dieser Artikel ist älter als ein Jahr.

* Inflation expected to rise in the UK, labour productively slows 

* Greece approves austerity measures 

* Japan´s consumption tax to double

* Mixed data for US recovery

* China National Audit Office reports local debt hike

* Nike announces strong sales, and profits, News Corporation sells Myspace for £35m

Higher inflation expectations in the UK

During the week, the survey conducted by YouGov and Citigroup found that consumer’s expectations of inflation for the next five-toten years had risen from 3.5% in May to 4.1% in June – the highest level since the survey began in 2005. Consumer expectations of inflation for the next year rose from 3.4% to 3.9% - which is well above the 2.6% expected by the Bank of England. The significance of this is that there is a risk that (unrealistically) high expectations of inflation become entrenched and have an impact on wage negotiations. This is at a time that the latest figures from the Office for National Statistics (ONS) suggest that labour productivity in the UK has been weak. Over the year to the end of Q1 2011, productivity increased by just 0.3%, or by much less than the average of 2.2% that prevailed over the 16 years to 2008, when the global financial crisis struck. Nationwide’s index of housing prices was unchanged in June, and up by 0.3% over the quarter. However, the index indicates that prices are 1.1% lower than they were in June 2010.

Greece’s parliament approves austerity measures

Greece’s parliament voted in favour of the implementation of the EUR28bn fiscal austerity package which includes tax increases and spending cuts: this opens the way for the European Union (EU) and the International Monetary Fund (IMF) to lend EUR12bn that the Greek government needs to avoid defaulting in the middle of this month on EUR340bn of debt, of which EUR100bn will mature prior to the end of 2014. Over the coming two weeks, the various interested parties will need to reach an agreement in relation to a new package to replace the EUR110bn package that was put in place in May 2010. Without the package being in place, the IMF may not agree to the next (and sixth) instalment of funding that Greece needs in mid-September. Possible obstacles to the new agreement include the opposition of private sector holders of Greek government bonds to an extension of maturity (or other changes) and hostility within Greece to the ambitious privatisation programme that has been proposed by the government. Meanwhile, European Central Bank (ECB) President Jean-Claude Trichet hinted in an official comment, through his use of the key phrase ‘strong vigilence’, that the ECB’s Governing Council will increase its key interest rate again in July. This in spite of the lingering fiscal problems of the governments of Greece and some other ‘peripheral’ Eurozone countries.

The Bank of International Settlements (BIS) said that global economic growth must slow if inflationary pressures are to be curbed – in a week during which the International Energy Agency authorised the release from (mainly US) reserves of 60m barrels of oil: the aim was to offset the impact on the oil price of the disruption to supply from Libya. Germany’s Federal Labour Agency said that unemployment in that country fell for the 24th straight month. The unemployment rate remains at 7%, the lowest level since the time series began in 1991.

The patchy US recovery continues

Data released during the week pointed to a somewhat patchy recovery in the US economy. The Bureau of Economic Analysis lifted its estimate of growth in 1Q11 slightly – from 1.8% to 1.9%. However, this represents a deceleration from the 3.1% growth of Q4 2010. The revision reflected higher estimates of restocking of inventories. Overall, demand has been suppressed by the lingering weakness of the US housing market, the softness in the labour market and poor consumer sentiment. The report also lifted estimates of the personal consumption price index for Q1 2011 from 3.8% to 3.9%: core prices – which are unaffected by moves in prices of food or energy – increased from 1.4% to 1.6%. The Federal Reserve commented that it has lifted its forecast for core inflation for 2011 as a whole from 1.5% to 1.8% - but noted that the pick-up in inflation is likely to be temporary. The central bank has lowered its forecasts of economic growth for 2011 from 3.2% to 2.8%, and for 2012 from 3.85% to 3.50%. The Commerce Department said that new orders for durable goods rose by 1.9% - or by more than expected – in May, thanks to rebounding demand for transportation equipment.

Japanese consumption tax to double

The major political parties in Japan reached agreement in principal that the consumption tax – which is currently 5% - should be doubled over the next five years, to fund rising social security costs. However, implementation is far from assured, given the lack of consensus on the timing of the tax increase within the ruling Democratic Party of Japan (DPJ) and widespread expectations that Prime Minister Naoto Kan will have to step down in the coming months. The Ministry of Economy Trade and Industry (METI) said that industrial output rose by 5.7% in the month of May (or by less than the government had been expecting), following a 1.6% rise in April. The recovery in output indicates that corporate supply chains are being reopened after devastation associated with the earthquake, tsunami and nuclear disaster in March.

Emerging market news

Most of the latest developments in emerging markets worldwide reflected a common theme: policy-makers are having to deal with the consequences – some of which are unwelcome – of rapid growth. In China, for instance, the National Audit Office reported that the aggregate borrowings of China’s local (i.e. provincial and municipal) governments amounts to Rmb10,700bn (US$1,650m). Most of this is accounted for by loans to the country’s banks. This figure is larger than previous official estimates and is roughly equivalent to 27% of GDP. It does not include an additional Rmb4,970bn (US$765bn) in borrowings undertaken by the local governments through Local Government Financing Vehicles (LGFVs). Much of the debt was accumulated in 2009, when the authorities authorised an aggressive expansion of lending by the banks in the wake of the global financial crisis. India’s Finance Minister Pranab Mukherjee indicated that the government is concerned by high inflation, which has forced the central bank, the Reserve Bank of India, to tighten monetary policy quite aggressively. At 9.06% in the year to May, wholesale price inflation is well ahead of the 5-5.5% range that, according to Mukherjee would be ‘ideal’ or the 6-6.5% range that the government ‘could live with’.

South Korea’s Financial Services Commission (FSC) indicated that it would take steps to reduce the overall level of household borrowing, which amounts to Won801,400bn (US$744bn). The FSC proposes to accelerate the lowering of the commercial banks’ Loan-Deposit ratios, seek higher provisioning for non-performing losses by the banks, encourage the banks’ assessment of borrowers’ creditworthiness and promote lending at fixed rates. The last of these is significant because, in a country where 95% of the mortgage lending is at variable rates, the household sector is vulnerable to higher interest rates at a time that the central bank is tightening policy. In a move to avoid a wave of credit card debt defaults, like that which occurred in 2003-04, the authorities will provide tax incentives for the use of debit cards.

Turkey’s statistics institute reported that GDP growth accelerated from 8.9% in 2010 to 11% in 1Q11, thanks to a surge in consumer spending. This rate is much faster than the 6% or so that government ministers are looking for in relation to 2011 as a whole. A major problem is that surging imports have lifted the current account deficit to nearly 10% of GDP. Much of this has been funded by short-term capital inflows – which means that the economy is vulnerable to external shocks. The central bank has kept interest rates low – but has sought to curb bank lending by increasing the Reserve Requirement Ratios (i.e. the percentage of deposits from non-bank customers that the banks cannot on-lend). Statistics on South Africa noted that producer price inflation in that country rose from 6.6% in April to 6.9% in May. Meanwhile, consumer price inflation increased from 4.2% to 4.6%. The Reserve Bank of South Africa expects that consumer price inflation will rise above the top end of its 3-6% target band in Q1 2012. Russia’s President Dmitry Medvedev noted that the country’s economy should continue to grow at around 4% this year in his budget speech. He also identified a number of measures to improve governance (e.g. by
decentralising power) and the efficiency of the economy.

Company News

The share price of Nike, the largest sporting goods company in the world, rose sharply when the company reported quarterly profits that were ahead of analysts’ expectations, thanks to strong sales in North America. Net income for the quarter rose by 14% to US$594m. In the UK, investors reacted favourably to the announcement by Lloyds Banking Group that it would reduce costs by another £1.5bn, through withdrawal from half of its 30 overseas businesses and a reduction in headcount by 15,000. Lloyds – which is 41% owned by the government following the bail-out of late 2008 - will use the savings to part-fund a major investment programme, which will seek to promote the Halifax brand and to develop its wealth management business.

Takeover speculation continued to surround the London Stock exchange (LSE) in the wake of the collapse of the planned merger with TMX Group – the Toronto-based company that is Canada’s largest stock exchange operator. TMX’s price fell, because of concerns that Canada’s anti-trust regulator would not approve a hostile bid from Maple Acquisition, a Canadian consortium. News Corporation announced the sale of social-networking site Myspace for £35m, or a fraction of the £580m that it had paid for the site in 2005. Diageo, the drinks giant, said that the Chinese authorities had approved its planned takeover of Quanxing, a listed company that controls Shui Jing Fang, a popular brand of white spirits. “White spirits’ account for about half of China’s US$20bn liquor market. This deal is seen as a test of how the Chinese government views purchases of premium local brands by foreign multi-nationals.

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