So the dust has settled following the eruption of Icelandic volcano Eyjafjallajökull (which for pub quiz goers I’m told is pronounced ‘Ay-yah-fyah-plah-yer-kuh-duhl’), but have supply chains across Europe and further been left adrift?

Read the rest of this entry »

The readjustment into what will be considered normal operating conditions for the markets continues. Stock markets despite a brief wobble have bounced back and key indices remain at 18 month highs, and Greece aside, developed market government bond markets seem to remain relatively range bound in spite of the imminent need for a deluge of issuance. What seems to be clear is that whereas previously there was expected to be a degree of correlation in Globalised market movements, there is now much more scope for regional and indeed further micro driven anomalies.

Read the rest of this entry »

Officiallty the UK came out of recession in the last quarter of 2009 with the economy managing to post a positive growth figure for the first time in two years. However the 0.1% growth fgure was substantially below the average estimate of 0.4% and even below the lowest individual estimate of 0.2% of specialist economists.

Read the rest of this entry »

The last year proved what the concerted efforts of a group of central bankers and governments can achieve.  From the edge of financial meltdown the bounce back has been indeed remarkable.  Asset markets around the world put in very impressive rallies including stocks, credit markets, housing.  You name it, 2009 saw it rally.

Read the rest of this entry »

The themes in the news really remain focused on the state of the economy with the key GDP statistic released on Friday unexpectedly bad. Company specific news of any major significance remains secondary.

Read the rest of this entry »

The stories in the press over the last week and weekend remain balanced for the most part with some positive stories, however there does seem to be an increasing tone of realism/pessimism as there are an ever growing number of mixed signals coming through.

Read the rest of this entry »

An increasing number of politicians and policy makers are talking about the worst of this crisis being over, and there being evidence of the beginnings of recovery.
Read the rest of this entry »

With the threat of the imminent collapse of the world’s financial system no longer hanging above us there has been some return to normality.  Admittedly we are still in the first week back after holiday season and volumes are very much at the lower end, but we do seem to have the beginnings of orderly market conditions.

Whilst there is still clearly some navigating to be done by the policy makers, especially in the UK following the closure of some retailers late on in December, with rates in the developed world expected to head close to zero we are finally seeing the hoped for knock-on effect that money markets are beginning to free up.

This aggressive global monetary policy approach is also beginning to impact the corporate world with there now being a more sensible approach to valuations, as opposed to the panic we saw at the height of the de-leveraging during Q4 af last year.  The indeces tracking default risk of corporate bonds are tightening in investment grade names, whereas the crossover index tracking the higher risk end continues to widen reflecting the concern that these types of companies may well struggle to roll over their debt this year.

In equities the year has begun unremarkably with the FTSE still above 4,500 and the Dow above 9,000.  Until the first round of earnings numbers we would expect volaility to remain low, however the market still clearly remains vulnerable to any shock news.

Overall for January, after last year’s energy sapping volatility, we expect the markets to be reasonably quiet with risk appetite remaining low as participants just try and ease themselves back in without losing money.

The post-Thanksgiving rally only lasted one day this year.

Usually the markets enter December in a good mood, as the first weekend after the Thanskgiving holiday is when US consumers start their spending and stock markets rally as the sound of ringing tills signals Christmas shopping season is underway and earnings forecasts remain achieveable.  This year the world is clearly a different place.  After a feeble 100 point climb in the Dow on Friday, yesterday we closed down close to 8% and the broader based S&P 500 ended the day close to 9% in negative territory.  Evidently earnings estimates are still expected to be tough to meet.

Asian markets picked up on the negative sentiment with indeces closing down between 4% and 6%.  Negative economic data continues to flow out of the region with the previously impervious Chinese manufacturing sector now pointing towards a recession.  This time last year such thoughts were not even on the agenda.

The European markets initially opened with red flashing everywhere, and with bond credit risk indeces reaching new wide levels, it seemed as though the mood was going to continue.  However even with recession news stories abound, with the UK MPC meeting on Thursday now expecting to produce another 100bp cut, and the Fed making noises that, if needed, zero rates are not off the agenda, the mood shifted.  Stock markets bounced into positive territory in Europe, and in the US futures rallied to signal a positive open.

We are expecting December to be a quiet month as we move towards the end of what has been an historic year.  General themes we are looking at : continued deleveraging, risk appetite reduction, the effects this will have as we move into 2009, and any sign of potential improvement to the global economic outlook.

The mood this week has so far been positive following the latest bank bailout in the US.

This time the giant Citigroup needed a cash injection from the Fed, as well as further guarantees totalling over $300bn.  Stock markets around the world reacted well, with the FTSE, CAC and DAX all posting gains around the 10% mark.  One surprising area of concern has appeared with Dubai, previously seeming completely immune with the glut of petro-dollars, now stating that it too is in trouble having over-leveraged to get to its current position.  With property prices reportedly now some 40% off the highs it seems that realisation is dawning that no-one is likely to remain unaffected from this current crisis.

The UK issued its so-called ‘pre budget’ report outlining how it intends to finance its plans to further borrow its way to economic growth.  Now being dubbed the ‘Robin Hood’ budget, there were some measures to tax high earners in the future to pay for some of the short term expenditure now.  However the headline 2.5% off VAT failed to ignite too much interest - as one commentator wrote ” … would you go into a high street store offering a 2.5% discount off everything …”  This morning we are seeing further calls from the Bank of England stating that the focus should remain on the credit markets, as there is still very little evidence of any real loosening of the mechanism at bank level.

The concern remains that it is likely to be a further 6 months before the real effects of this are felt in the real economy.  With the country already firmly in recession, the bank is clearly concerned that there will be a direct correlation between when credit returns and how long the recession really will last for.

The rest of the week is likely to remain fairly quiet with the Thanksgiving holiday in the US, however the broad themes remain the same with most people remaining vigilant for any further signs of any worsening in market conditions.  Now that it is broadly accepted the world is heading into recession through the majority of 2009, the real questions are now where investors will look to remain as insulated as possible.

We will be keeping you in touch with all of the latest relevant themes.  Please post any comments and questions ….