Sterling, the major currency of UK declined to a figure that’s the lowest in the last 6 months after a Government report came out showing that the inflation has slowed down more than what was predicted by the economists. Therefore, the Central Bank now has more room for boosting the stimulus which generally tends to weaken a particular currency.
Not only against USD, but Sterling went down against most of its major counterparts. The Bank of England will be publishing its minutes of the 8th – 9th May meeting on tomorrow. It is expected that the number of policy makers who voted for boosting the asset purchases will be revealed through the same. As the inflation data was released, the UK Government bonds rose a bit, but, on a whole, they are more or less unchanged on today.
Mexican Peso Erases Early Declines, Swiss Franc Declines and Canadian Dollar May be undervalued05/22/13
The major currency of Mexico, Mexican Peso was able to erase its earlier declines after an official of the Federal Reserve supported the policy of maintaining a monetary stimulus program which has buoyed the assets of the emerging markets. Mexican Peso was more or less unchanged on today as it is currently priced at 12.3013 per USD. It earlier went down by 0.8%. In 2013, Mexican Peso has increased by 4.4%.
James Bullard, the President of the St. Louis Fed stated that the Central Bank of US should continue with the bond buying program as it is the best available option for the policy makers for giving the lower than expected growth a boost. Bullard will be voting on the Federal Open Market Committee in 2013 and that is responsible for setting policies.
Goldman Sachs Group thinks that the rally in the US stock market should last for another 2 and a half years, thereby sending the benchmark stock gauge 26% up to 2,100. According to the US Equity Strategist of the lender, David Kostin, the positive 2013 outlook of S&P 500 has played out way faster than the initial expectations. One of the major reasons behind the higher multiple is the increased confidence in the medium-term outlook for the US economic growth. Apart from that, the investor risk appetite was improved as well. The difference between the equity and bond yields will be closed more by the stocks now, rather than the bonds, as assumed by Kostin.
After reaching to a record high, the German stocks have changed little. The chemical companies experienced gain, whereas, the bank stocks went down. The benchmark stock gauge DAX Index retreated less than 0.1% and the same is currently at 8,452,67. In 2013, the gauge has jumped ahead by 11%, mainly being helped by the decision of the central banks from all over the world to maintain the monetary stimulus. On the other hand, the broader HDAX Index experienced a decline of less than 0.1% on today. As mentioned by the Co-Founder and Fund Manager of Clairinvest, Ion-Marc Valahu, the markets are currently taking a breather; however, most likely, the dips will be bought.
The major currency of South Korea, Won has been able to recover from a 4-week low as the country has announced that it will act to curb currency swings. The regional tensions are however on a rise as the neighboring country, North Korea has fired missiles towards the same. On the other hand, the Government bonds of South Korea experienced decline as well.
Hyun Oh Seok, the Finance Minister of South Korea, stated that this Asian country should be seeking to limit the volatility of Won if the same intensifies just because of the slide experienced by Yen. The Chairman of the Financial Services Commission, Shin Je Yoon stated that the foreign currency liquidity will be monitored closely after the risks escalating due to North Korea. This is the 3rd straight day when North Korea has fired missiles towards South Korea, as mentioned by the Defense Ministry of the country.
For the 2nd straight day, the UK stocks have gone ahead as the benchmark stock gauge FTSE 100 Index closed at its highest level since September, 2000. The FTSE 100 Index increased by 32.57 points and the same is currently at 6,755.63, at time of close. On last week, the gauge experienced a surge of 1.5% and in 2013; the gauge has till date, advanced by 15%. The gauge has been hugely boosted by the Central Bank stimulus. On the other hand, the broader FTSE All Share Index experienced a gain of 0.4% on today, marking its advance for the 13th straight day. This is the longest streak for the gauge since 1987. Apart from that, the benchmark stock gauge of Ireland, ISEQ Index jumped ahead by 1.5%, marking its highest level since September, 2008.
The President of the Central Bank of Brazil, Alexandro Tombini, is committed to fight against inflation and the same is increasing prospects that Real will soon be rebounding from a 4-month low figure, as far as the trade patterns are concerned. On last week, Real weakened by 0.7% against USD and thereby it has got outside of the so called trading envelope for the first time since March. Such an occurrence indicates that the decline will be difficult to sustain. Just after Turkish Lira and Singapore Dollar, Real is the 3rd currency that is deviating the most from the typical Bollinger band.
For the first time in last 3 days, the Asian stocks have jumped ahead; as the regional gauge is now all set to get to the highest close since June, 2008. The US consumer sentiment exceeded estimates and Japanese utilities went ahead being led by Tokyo Electric Power Co.
The MSCI Asia Pacific Index went ahead by 1.2% and it is now at 144.25. The measure has advanced by 12% in 2013, mainly led by Japanese shares, as the Bank of Japan took steps to counter deflation. Apart from that, data coming out of US signaled that the biggest economy in the world is improving currently.
Shinzo Abe, the Japanese Prime Minister seems to be the favorite among the investors. The confidence level of the investors on Abe is the most since September, 2010. The optimism for Abe has actually surpassed the optimism for Abe’s counterparts in US, China and various European countries as well.
According to a worldwide poll conducted on the traders, investors and analysts, people who are optimistic about Abe’s plans on the investment climate increased to 66% on May from its value of 54% in January. According to 33% of the respondents, Japan at least offers one of the 2 globally top opportunities in every year. This is better than its previous value of 21% and is better than the figures of China, for the very first time since 2009.
The benchmark stock index of Dubai, DFM General Index rose ahead for the 9th straight day marking its longest winning streak in the last 2 years. The investors are currently optimistic that the Emirates are on a recovery mode from the property cash experienced earlier. Apart from that, the debt is being restructured as well. The gauge in Abu Dhabi rallied ahead too.
The property companies and the banks in Dubai are rallying as these experienced a series of debt restructurings. The ruler of the Emirates is the owner of Dubai Group LLC, an investment company and the same has agreed on terms with the main creditors for a debt restructuring worth $6 billion. On the other hand, Amlak Finance PJSC, which is an Islamic mortgage provider, is currently proposing an extension of maturity on more than $2 billion of loans to the creditors.
The benchmark bond yield of Australia is currently offering the smallest premium over the US notes in the last 11 months. The sharpest predicted growth slowdown in the last 4 years for Australia is spurring the bets of possibility of interest rate cuts in future. On 17th May, the 10-year rate was at 3.17%. The similar dated treasuries were at 1.88%. On 14th May, the gap actually touched 1.27 percentage points, marking the least value of the same since 4th June. On this month, Australian Dollar, the major currency of Australia, has declined against most of its major peers. Many investors are afraid that as the growth is slowing down in China, the demand for Australian commodities will weaken in near future as well.
Economy Minister of Japan, Akira Amari believes that the Government of Japan should demonstrate a commitment in fiscal rehabilitation for boosting the credibility of the Government bonds. Such steps should prevent a spike in the long term yields as well as if the stocks increase, it should damp the allure of the sovereign debt of the country.
According to Amari, the stocks have experienced high rallies in this year and hence, it’s pretty obvious that the capital will now shift to stocks, from bonds. Hence, it is important to enhance the credibility of the Government bonds in an attempt to prevent any sort of increase in the long term yields.
Krona’s surge is definitely hurting exporters big time in the largest Nordic economy, as mentioned by the Prime Minister of Sweden, Fredrik Reinfeldt. Hence, Sweden needs to create policies which will keep the interest rates low. Reinfeldt added that public finances should be kept in order as that’s generally the foundation when it comes to keeping the interest rate levels low. Reinfeldt confirmed that his colleagues are currently working on to strengthen competitiveness of Sweden and they intend to increase incentives to work.
Since the end of 2008, Krona has gone ahead by 27% against Euro and this sparked call from the exporters to stem the gains. Earlier in 2013, many policy makers of Sweden, including Reinfeldt, gave signals that they are concerned with this surge. Currently, they are stepping up rhetoric for cooling down Krona, just like other Governments from countries such as New Zealand and Switzerland are working on declining their respective currencies.
The swap rates of Brazil declined from a 4-week high value as an index measuring the construction, wholesale and consumer prices experienced a bigger drop than what was forecasted. This incident spurred speculation that the Central Bank will soon be limiting the increases in the borrowing costs. The swap rates which are due in January, 2015 went down by 5 basis points and these are currently at 8.38%. On yesterday, these swap rates increased by 2 basis points and were at 8.43%, marking the highest level on a closing basis since 17th April. On the other hand, Real declined by 0.2% and it is currently at 2.0269 per USD, marking the weakest level of the same since 25th January.
On today, the Getulio Vargas Foundation reported that the May IGP–10 Index of the construction, consumer and wholesale prices went down by 0.09%. Incidentally, economists were predicting a cut of 0.06%. IGP-10 monitors all the prices from the 11th of the previous month to the 10th day of the current month.
Chinese stocks experienced the biggest gain in last 2 weeks and the biggest gainers of today were the financial and property development companies. The benchmark index traded at the biggest discount to the global markets in the last 3 years. The benchmark gauge Shanghai Composite Index increased by 1.2% and the same is currently at 2,251.81. Therefore, the gauge has been able to par the drop of 0.8% experienced in this year. The measure actually traded at 11.9 times of the reported earnings on yesterday. Incidentally, the multiple is 16.8 times for the MSCI All Country World Index. This is the biggest gap between the two since December, 2009. On the other hand, a report coming out on today showed that the foreign investment in China was less if compared with the estimates set by the analysts.
On yesterday, the benchmark stock gauge of UK, the FTSE 100 Index went to its highest level since October, 2007 and the longest streak of gains was completed by the stock in the last 4 years. The UK stocks were mostly unchanged on today. The FTSE 100 Index went ahead by 6.71 points and the same is now at 6,700.26. On yesterday, the equity benchmark completed the longest streak of gains since July, 2009. In 2013, the gauge has experienced an increase of 14%, mainly being helped by the decision of the various central banks to continue with the stimulus measurements. On the other hand, the broader FTSE All Share Index increased by 0.1%. The benchmark gauge of Ireland, ISEQ Index jumped ahead by 0.3% as well. On today, the total volume of shares being traded at the FTSE 100 companies was 19% above the average of last 30 days.
The major currency of Poland, Zloty has declined to a figure that’s the lowest in last 5 weeks. The inflation in Poland has decelerated to the slowest place in last 7 years and thereby speculations are rife now that the Central Bank will cut the interest rates soon.
Zloty has declined by 0.5% on today and it is currently at 4.1871 per Euro. This is the 2nd worst performance if all the emerging market currencies are considered on today, just behind Koruna, the major currency of Czech Republic. On the other hand, the forward rate agreements which are used for betting on the future interest rate changes, declined, for the 1st time in the last 3 days. These have gone down by 5 basis points and are currently at 55 points below than the Warsaw Interbank Offered Rate. This shows further scope of a more than 2 quarter percentage point cuts.
US stocks went ahead, thereby erasing earlier losses that it experienced for the benchmark indexes. A report came out showing that weakness in manufacturing industry will make sure that the Federal Reserve does not scale back the stimulus.
The benchmark gauge Standard & Poor’s 500 Index went ahead by 0.6% on today and it is currently at a record high of that of 1,659.77. Earlier in the session, the gauge actually went down by 0.2%. On the other hand, the Dow Jones Industrial Average increased by 69.38 points and the same is currently at 15,284.63. This is an all-time high figure for the same. Overall, the trading volume was 2.4% below the 30-day average of the shares being traded.
The economy of Peru slowed down more than what was expected by the analysts in last March. The global growth has gone to a weaker level and it is reducing the demand of the manufacturing and metal exports of the country, thereby causing decline in this Latin American country’s growth. If compared to the values of a year earlier, the economic activity increased by 3%, as mentioned in a report published by the National Statistics Agency. However, the economists predicted that the same will surge ahead by 4.5% and the actual result is way below than that. Incidentally, this is the weakest pace of growth of Peru since October, 2009.
The European stocks have jumped ahead to the highest level since June, 2008 as the Bank of England has increased the growth forecast for United Kingdom, the third biggest economy in European continent. The benchmark stock gauge Stoxx Europe 500 Index went ahead by 0.8% and it is currently at 308.06. So far in 2013, the equity benchmark has gone ahead by 10%, marking its best start in the last 15 years. Central banks from all over the world, incidentally, have maintained the stimulus measurements.
A day before the Bank of England’s presentation of the updated inflation forecasts, the major currency of the country, the Pound has weakened against USD. This has happened for the 4th straight day now and many are speculating that the investors will be cutting down their holdings of the Pound soon. Pound, also known as Sterling, dropped to a 2-week low figure against Euro as a recently released industry report showed that a gauge of the house prices in UK jumped up to the highest level since June, 2010. On 1st May, Pound jumped to a 3-month high figure against USD at $1.5606, but, since then, the currency has declined by 2.4%. On the other hand, the Government bonds experienced a fall as well after the Debt Management Office sold 5-year gilts worth 4.75 billion pounds.
Malaysia’s growth seems to have surpassed 5% for the 7th straight quarter which marks the longest stretch since the depth of the global financial crisis 5 years back. There is a pickup in the overall investment as well, thereby adding to the momentum.
Malaysia is the 3rd largest economy of the Southeast Asia and the Gross Domestic Product of the same is expected to rise by 5.5% in the first quarter of 2013, if compared with that of 2012. There is possibly a slide in the exports and hence, the pace has slowed down from its earlier value that of 6.4% in the last 3 months of 2012. The Malaysian Government is going to release the official figures soon.
Barclays Plc. had the 2nd most accurate predictions on Shekel, the major currency of Israel, in last quarter. Barclays now has come up with another forecast that the Central Bank of Israel should be able to follow the surprise interest rate cut of yesterday and the USD purchase plan with further measures if they wish to succeed in stemming the gains of Shekel. According to Senior Economist of Barclays, Daniel Hewitt, the Central Bank of Israel has a big task in its hand and over the long term, it should win this fight.
On yesterday, Shekel declined by 1.2%, marking the biggest 1-day drop that it had since last August. The policy makers of Israel, led by Stanley Fischer, the Governor of the Bank of Israel, unexpectedly reduced the benchmark lending rate by 25 basis points. They also pledged to buy around $2.1 billion by end of the current year. Shekel showed huge improvements in 2013 after the start of natural gas production lured many foreign investors.
The benchmark stock index of Dubai has jumped to the highest level since October, 2009 and the total value of the shares being traded increased mainly because the property recovery and debt restructuring were able to lure the investors. The measures of Abu Dhabi went ahead as well. The DFM General Index increased by 2.7% and the same is now at 2,255.19. In this quarter, the gauge has gone ahead by 23%, thereby becoming the best performing index in the period. The value of shares traded was at 1.1 billion Dirhams, the biggest since March, 2010.
Pound, the major currency of UK went down to a figure that’s the lowest in last 2 weeks against the greenback after a report came out stating that the retail sales of US unexpectedly went higher on last month, thereby attracting the investors to the major currency of the biggest economy in the world. Not only against USD, but, Sterling went down against most of its major counterparts as well. A UK business lobby, on today, stated that the company sentiment has shown improvement and in the next 2 years, overall growth should pick up. As far as Government reports of last month are concerned, US economy has expanded 8 times in comparison with that of UK in the 1st quarter of this year. On today, the UK Government bonds were more or less unchanged. On tomorrow, the British Debt Management Office is set to sell 4.75 billion Pounds of 5-year gilts.