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Global Economic News 03/13/2009

March 10, 2009 by admin  

The Japanese current account dips into negative territory for the first time in 13 years sending the Nikkei to a 26 year low.  This is a reflection on the weakness of Japanese exports and exasperated by the relative strength of the Yen. Imports are also very weak indicating the loss in confidence as the global economy shrinks.

Global markets rise 5% on upbeat forecasts that the US recession may be over by 2010 and start to grow sooner than expected. Better news from Citi about trading conditions also add to the positive outlook. The fact that earnings will be falling and dividends drying up seems to provide little in the way of damping of enthusiasm to investors. The unexpected rise in markets could be simple hedging of bets as short sellers cover their positions.

Quantitative Easing began to be used by the UK government to add a fresh supply of capital to the UK financial system. Money will be added to the system by the government buying back bonds in exchange for newly created money. Normally this is a last resort in boosting economic activity and it is not possible to predict with any certainty that it will have the desired effect. Secondly, the side effects of knocking confidence, devaluing the currency and causing inflation have left experts and interested parties very uncertain as to the outcome.

The wealth of the worlds richest people has taken a serious downturn in the last year but many having billions wiped off their assets. More importantly the net household worth of Americans has dropped 9% in the last qtr of 2008 making a total fall of 20% from the peak in 2007. Whilst this is largely due to falling property prices it will continue to cast a negative sentiment that will suppress consumer spending.

Markets This Week

US:DOW - up 8.2%

US:S&P500 - up 9.6%

UK:FTSE - up 6.0%

JPN:Nikkei - up 5.2%

HK:Hang Seng - up 4.8%

Gold - $928 down 1.1%

Oil: $45.80 - up 0.4%

Oil - $45.63
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Global Economic News 03/06/2009

March 8, 2009 by admin  

AIG the insurance giant posted a record loss of $61.7bn in the final quarter of 2008. The company is to receive an extra $30bn to add to the already supplied $150bn bailout package. It is perceived that to allow the company to fail would have had too huge an impact that on the wider economy. The effects of this news are to further undermine confidence in the financial sector especially the insurance business.

Car makers across the globe continue to feel the worst of the downturn with the future of GM still unsure. Its European subsidiaries Open and Vauxhall are struggling for survival without state aid. With so few people willing to take on any further debt to purchase large ticket items the future of many car manufacturers will be uncertain even with the current economic stimulus being applied.

In the UK interests fall to a new low of just 0.5% and the Bank of England announces that it will ‘print’ $105bn new money to kick start the economy and avoid the worst of the deep recession. This method known as ‘quantitative easing’ is thought to be a last resort, fail-safe way to boost the economy but is fraught with danger of causing inflation and devaluing of currency. Only time will tell if this strategy was worth it.

Markets This Week

US:DOW - down 6.2%

US:S&P500 - down 7.1%

UK:FTSE - down 7.8%

JPN:Nikkei -down 5.2%

Gold - $938

Oil - $45.63

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