Get Markets Right

I am looking forward to an exciting day today with loads of numbers and then the FOMC meeting as a fine finish.

Just to mention the positive Japanese stocks this morning. The banking sector went up as it seems likely that the tougher capital rules will be delayed. The Japanese banks will probably get 10 years to adopt the new rules. Short term, it of course helps the profitability in the banking sector and give some relief (also the reason for the delay I assume). One of the reasons to tighten the rules was to protect the investor, but to give a 10 years deadline is equal to cancel them. Within the next 10 we will have had another crisis…

Let’s take the good numbers first. The November industrial production came out better than expected, but honestly, mainly due to domestic demand. Normally it’s a healthy sign if the import is rising as well, and it did above expectations. All in all, taken as positive by the market.

Some say that the rebound is on track, I judge it more like stability, like mentioned several times. The domestic demand is pushed and forced higher by the public stimulus package. That the domestic Chinese demand is growing stable will not help the rest of the world, as the outside world cannot produce as cheap as the Chinese companies can. There is no “save the world effect” in these numbers. The higher…

So Dubai took the center stage all of a sudden, but how should we treat it ? We all know the short term logic consequence some developers, private investors and banks will lose money. Probably are the banks the most hurt as they regarding all debt in Dubai as quasi sovereign supported, but it was not.

Apart from these very direct losses the Dubai problem shouldn’t affect the world in any particular way, unless the financial markets are in some sort of stress. But they are and that’s why the reactions are so negative. For me it shows that the upside momentum in the global equity markets is getting more and more heavy as all coming positive news already…

The Greenback continues to be fundamental weak in several ways. This was also highlighted earlier in the week where USD had some upside momentum but EUR/USD never came lower than 1,4825. If this is the current “strong” level for the greenback, then there is a good basis for a move towards 1,5500. Especially the US housing data this week showed stronger than expected October data. The headlines are more impressive than reality due to the downwards revisions of erlier data, though still an improvement that surprise me a bit. It should have helped USD but confirms the negative momentum right now.

Very important is the rising activity among  hedge funds and other position takers. They now go short USD…

A friend in Hong Kong wrote some thing to me, where I allow to pick the main aspects.

Data published by National Bureau of Statistics of China lately confirmed that the world’s 3^rd largest economy is on track.

Retail sales gained a 16.2% year-on-year increase, which is 0.7% above the figure of last month. Some economists hold the opinion that China’s economy rebound is mainly due to its huge stimulus package. This mainly drive up its fixed investment, and this kind of economic growth mode is not sustainable when government retreat from this huge economy. The steadiness in the private consumption gives the economy a long-term momentum which we notice as a positive factor.

Very important was the industrial output that…

I think the quarterly Bank of England report released Wednesday 11^th give some good hints to the market. Particularly when we bear in mind that Bank of England has been very negative. The Bank forecast growth rates of 2.1 per cent for 2010 and 4 per cent for 2011. This is suddenly much higher than the outlook of private sector economists and the Treasury’s forecast.

Bank of England still tells us not to be too excited with the wording from the governor Mr. King “Small movements in quarterly growth rates will not alter the extent of the challenges now facing the economy, such is the scale of the fall in output over the past 18 months,” he said. “We have…

Worse than expected. The jump to 10,2% in jobless rate against the market consensus  of 9,9% is the headline to hit the newspapers Saturday morning. It cannot be neglected despite some weather conditions making it impossible for more workers to come to work compared to the average October. I also respect that the September non-farm payroll was revised to a significant better number. All in all it doesn’t change the 10,2% nasty number. The investor should also notice that the weekly working hours didn’t go up as many expected – i.e. no real demand for more working hours. As mentioned last week do I expect this to hurt both the greenback and US equities meaning the negative correlation between USD…

Dear Reader,

During the last month I have explored some technical problems which I apologise. I have have been working on some changes as well. The new updated version of the blog I expect to launch in mid December. The comments goes on as usual.

Best regards

Peter

Hot Topic – DPJ wins – Deep Pain Jammed LDP

The victory for The Democratic Party of Japan (DPJ) and their party leader Mr. Yukio Hatoyama is not a surprise. Though, after almost 50 years LDP government leadership of the second largest economy in the world, I certainly think the political change in Japan is a Hot Topic. This is a short view on what we can expect of political changes and what to watch out for as an investor and in corporate treasuries.

DPJ will surely try to outlive two headlines from their election campaign. One is to change the export dependent economy into a domestic demand economy. Second is to loosen the tight bands between the government and the large…

China – Oops! Minus 20% – time to get nervous ? Not yet

To be honest, the China piece required the deepest thinking, so you get some extra. When a stock market drops 20% within 2½ weeks, and furthermore in an economy that lives on a public boost and excess liquidity the thinking needs to be accurate. The drop was over a period long enough to be traded, and not just a couple of days with panic. This makes the set-back more remarkable.

The boost and the bubble

The equity market got a boost from the very famous anti recession package. It’s ok that this supported the stock market, but the bubble like rise since March is caused by the sharp lending increase…