The Weekend Wrap-up

One thing about me that you might have noticed about me is that I'm particularly fond of looking into foreign markets – especially those of emerging economies. To be honest though I haven’t been looking into them as much as I’d like lately, so as an exercise to get myself back on track, reading and hastily judging about them, I decided to post a weekend recap of all things going on in the world markets.

Hope you enjoy it and as usual, hit the comments if you want to see something covered or if you have suggestions regarding the format.

Americas:

• After last week's insanity, U.S. markets were particularly quiet this time around, ending practically flat as it entered the week with the Dow down 0.3%, the S & P down 0.2% and the NASDAQ squeaking 0.3% gain amid light profit taking ahead of the weekend.

• What’s weird though is that these came at a time of seemingly good news; Consumer confidence is at a high, inflation expectations are lower and there's an increase in job openings as well. Lower commodity prices also mean that a growth in consumption over the next few weeks might happen, but as some have said, this is far from sustainable.

• Jobless claims, while down from last week, remain high at 434,000.

• Weak dollar has raised import prices, making recent retail data questionable.

• The housing market looks to be stabilizing as a 5 month low in mortgage rates translated into a rise in homeownership across the country.

• U.S. exports are also at their highest since 1994. - can someone tell me what that means in the bigger picture? lol.

• The Brazilian Government maintains their stance on high commodity prices and brought it to the business world by telling Petrobras to cut prices up to 10%. This has been a theme of the BRICs and the rest of the EM lately as fears of high commodity prices and decreasing demand might hurt growth in the regions. This can be seen as the BOVESPA dropped for the 3rd straight week amid low earnings growth and risk aversion. It’s down 5% for the month, 9% for the year.

Europe:

• Euro zone GDP grew a strong 0.8% in the first quarter, lead by Germany with a 1.5% growth and France with 1%, all three beating estimates. Spain and Portugal also beat analyst estimates with Spain growing 0.3% and Portugal shrinking 0.7% against an estimated 0.3%. Hey, it can’t all be good news right?

• An ever-dovish Mervyn King expressed concern over growing uncertainty of the U.K.’s current stagflation situation. I’m curious how he’ll handle this; I was in the raise rates camp a few months ago until I saw the figures. Needless to say, they weren’t good, so Mervyn has his work cut out for him.

• Greece continues to excite as rumors of a departure or restructuring of their debt gains steam and their yield curves continue to invert. To make things worse, despite holding a successful debt sale this week, longer term financing for them has practically dried up and they’re now completely in the hands of the ECB and the IMF.

• And adding to the ECB’s confusion was Sweden’s Finance minister stating that Sweden does not intend to give aid to Portugal. Combine this with an Irish Finance Minister’s comment that Irish debt would likely have to be restructured in the next three years; things are starting to look even bleaker for the EU. I wonder how the big players are positioned on this, there’s some commentary going on that the Euro has been oversold but every time you look into what’s going on there, things look shittier than ever.

• FTSE 100 was down 0.32% for the week, Euro is still under some selling pressure.

Asia:

• China raised RRR rates 50 bps just as expected. This was the 5th time they’ve raised rates this year and it’s consistent with the current BRIC and EM problem we’ve seen happening. This comes after India, Malaysia, Vietnam, and the Philippines showed exceeding hawkishness last week by raising rates and telling the markets that, essentially, there’s more where that came from. Their respective indices lagged the past few weeks.

• Meanwhile in South Korea, the BOK unexpectedly left rates unchanged, paring losses in the Kospi. Note that this was not a unanimous decision.

• Hong Kong’s economy grew 2.8%, beating expectations and speculation that growth in Asia might be muted. Similarly positive figures came from Singapore as well.

• The AUD looks like a good long with exports rising 9.2%, driven by iron ore and coal. Reports of an increase in future export output as well as the RBA announcing that further tightening will be necessary might see the AUD gain momentum.

• Indian sugar production might be 1 million tons less than expected.

And with that, I leave you with my clip of the week:

Enjoy your weekend monkeys.