Doomsday California-style
Last week a ship with Libyan refugees went down in the Mediterranean Sea – UN has accused Gaddafi saying that his soldiers embarked people – hence they are the culprits. In Germany, there is a shake-up of key figures in FDP party – Minister of Economy Brüderle became the leader of the parliament group while his place was taken by the Minister of Health Rösler, however, rearrangement of beds in a brothel hardly helps the party whose rating has fallen to 4% (below 5% threshold for making it in the parliament). Scholars of the University of Dundee studied the causes of mass disease in bees – and in the midst of research the experimental insects were for some reason stolen. Western Samoa moved a day forward in order “to be closer to Australia” – a century earlier they, by contrast, went into yesterday to communicate closer with the United States: a trifle, but still a symptom. The Romans fled the city in panic caused by an old prediction of one seismologist – but the predicted earthquake of May 11 did not happen in the capital of Italy but in the south-east of Spain. Americans have a bigger scale – an 89 years old prophet (former engineer) Camping, after a careful study of the Bible, has forecasted a doomsday on May 21, at exactly 18.00 California time: at this moment 2% of the world’s population will rise up to heaven while the others will cast into hell; warning posters have appeared in many places (even in Moscow); gossips said that the prophet had already declared the end of the world in 1994 - but Camping coolly parried with a remark that he then had poorly studied the Bible, but now everything is correct for God has gave him the proof!
Illustration: Artem Popov, ITinvest
"He can only print money"
Monetary markets. The Bank of Norway has expectedly raised the interest rate while the Bank of Korea unexpectedly did not; People’s Bank of China raised the reserve ratio by another 0.5% to 21%. Actions of the Fed were smashed by a noted investor Rogers: this autumn he expects a serious crisis, and in general fears the collapse of treasuries; Rogers said about Bernanke that “he can only print money”, without understanding the economy or finances. Inflation report of the Bank of England for the second quarter was cheerless: inflation forecast was revised upwards, while the estimate of GDP growth was downgraded. The struggle for the presidency of the ECB is over – all the EU leaders have endorsed the candidacy of Draghi: the last was Chancellor Merkel – she was hoping to bargain a little longer, but was forced to accept. Eurogroup held a night meeting on Greece – which again needed help: everyone assured that the default will not happen. A few believed – German bankers have demanded for “the restructuring to be voluntary”: how is that, we wonder? Banks holding Greek bonds must go to Athens’ authorities and tell them – we love you so much that we would gladly take losses from you, so please declare us the default? Yields of 2-year Greek bonds have exceeded 27% per annum; S&P cut the country’s rating by another 2 points, Moody’s is going to do the same; bad news from Athens were not only on Wednesday – when the country’s media participated in a general strike, and there was no one to broadcast. Portugal also needs help – and the German parliament has already approved it; but True Finns continue to balk – their leader Soini said that he is against the bailout despite whatever concessions Portugal could make!
Currency markets. The dollar has generally grown against other major currencies – although not as impressive as a week before: the euro went to 1.41, the pound – to 1.62, and the yen – to 81.4. Some pirouettes were performed by the Australian dollar, which took off and then collapsed – however, the Australian newspaper promises native currency to reach $1.7 in 2014. Belarus devalued her currency under the pressure of increased demand for foreign currency, usual at a chronic balance of payments deficit; and if the government won’t do stupid things the consequences could be beneficial for the economy – as for Russia in 1999-2000.
Source: SmartTrade
Stock markets. Major indexes recovered from the fright of the previous week – but didn’t acquire confidence; so the major indexes fluctuated up and down nervously almost every day. Reports were few: Toyota’s profit fell by 4.5 times because of the earthquake – and if it had happened a few days earlier the company would be in a loss for the quarter; Cisco pleased with performance – but issued a gloomy forecast (much worse than expected) and is going to reduce costs by cutting staff even more than at the height of the crisis in 2009; report of Walt Disney was simply bad. The Japanese government has finally lost its patience in the matter of the nuclear crisis – and plans to buy back shares of TEPCO (thankfully those have fallen below any reasonable levels) in order to finally sack the company’s senseless leaders. And Microsoft set out to absorb Skype – the estimated cost of the transaction amounts to $8.0-8.5 billion.
Commodity markets. Attempt of the US authorities to collapse market commodity prices ended not brilliantly: the world’s largest hedge fund specializing in investments in commodity assets, Clive Capital, saw the loss of $400 million – it is not alone, so someone now have to think hard. Meanwhile, the exchange has raised margin requirements for oil (by 25%) and gasoline (by 21%); a group of 17 senators asked the traders’ community to develop a plan for the suppression of excessive speculation by limiting the size of the open positions on the exchanges as quickly as possible (May 23) – they are particularly worried about energy resources. WTI crude oil once again came to the lows – surge of gasoline stock dropped its price further, so that at some point the trading even had to be stopped for the daily limit of price changes was exceeded; Brent behaves more cheerful, having already recouped half of the fall. Industrial metals have calmed down; silver fell to $32 per ounce, but re-bounced immediately; gold refused to fall any further, jumping above $1500. Of the agricultural and timber products, wood and cotton fell the most (by 1.5 times from their peaks); cereals’ prices fell by 20-25%, while forage and technical crops – by 10%; yet the fruits have gone up. The latter phenomenon is probably due to the new climate cataclysms – recurrent frosts broke the European gardens, besides this year’s season has been extremely dry: British March was the most dry since 1953, and in other countries of Western and especially Central Europe the spring rainfall has been 1.5-3 times smaller than normal – by the way, the winter was dry there too.
Source: SmartTrade
Health history
Asia and Oceania. In Japan, balance of payments and leading indicators dipped sharply in March – but in April the economic observers have noted improvements in sentiments and stabilization of the overall situation. In Australia, business confidence deteriorated in April and employment has declined swiftly – especially bad is the full-time employment (-49.1 thousand); in contrast, South Korea’s unemployment rate fell from 4.0% to 3.6%. In the New Zealand, both prices and sales of the real estate declined, while the budget deficit was considerably higher than the previous estimates. Australian statisticians want to give the numbers of inflation monthly rather than quarterly, as it is now – but that needs additional funding, of which they were refused. Chinese statistics for April is mixed: the annual growth accelerated in capital investments (25.4% against 25.0%) – but slowed down in industrial production (from 14.8% to 13.4%); consumer prices swelled by 5.3% y/y (higher than was forecasted) – but producer prices have only added 6.8% (while +7.0% was expected); banks issued 740 billion yuan worth of new loans (680 billion in March) – but the M2 aggregate is slowing down (+15.3% y/y versus +16.6% in March). The trade surplus has reached $11.4 billion in April – 3.5 times greater than the experts predicted; however, in 4 months since the beginning of the year as a whole the surplus is 1.6 times weaker than last year – and the mid-spring improvement is caused by the Japanese earthquake, due to which imports from the country fell sharply. Retail sales increased by 17.1% y/y versus 17.4% in March and the forecast of 17.6% - in general we can speak of a slowdown in the Chinese economy’s growth, but no more than that for now.
Europe. GDP estimates for first quarter were published: mostly better than expected – except for Italy, whose dynamics upset (+0.1% q/q and +1.0% y/y). Spain reported in accordance to the expectations – the ones who showed pleasing results were Austria, the Netherlands and especially France and Germany; GDP of the eurozone as a whole (+0.8% against October-December and +2.5% against January-March 2010) has exceeded the forecasts – but not by as much as many had hoped after the data of the biggest economies. German GDP, soaring by 1.5% q/q, surpassed the pre-crisis peak of early 2008. Other countries are not so optimistic: for example, of the total French growth of 1.0% the lion’s share (0.7%) was provided by inventories – real final sales rose only by 0.3% (twice less than in October-December). According to NIESR, Britain’s GDP growth in February-April slowed down to 0.3% versus 0.5% in January-March – April was bad. Industrial production rose in March by 0.4% m/m in both Italy and Germany; the fall was noted in France and Spain (0.9% and 1.0%); the eurozone’s general output fell by 0.2%, but the annual dynamics is markedly positive (+5.3%). British manufacturing grew by 0.3% - but after the collapse of 1.2% in February this gain looks rather decent; the annual growth has almost nulled (+0.7%), and in general for the first quarter the industry was increasing its production at a minimum rate since the third quarter of 2009 (+0.2% ).
Source: Federal Statistical Office Germany (Destatis)
French business sentiment declined in April – as well as investor confidence of the eurozone at the May’s assessment of Sentix. Trade balances of Germany (surplus) and France (deficit) have markedly improved in March – the Germans were helped by a record high exports; in Britain, by contrast, there is a deficit swelling due to collapse of exports outside the EU. Wholesale prices in Germany have slowed down in April (only +0.2% m/m and +9.2% y/y compared with +1.3% and +10.9% in March); consumer prices accelerate across the eurozone – and even beyond its borders (in Sweden); and only Switzerland surprises with a very weak inflation – although at the current high cost of the franc it is natural, what cannot be said about the slump in consumer confidence. British realty gets cheaper, while the Greek unemployment rises rapidly (15.1% in January, and already 15.9% in February); on the other hand, in France employment has increased in the first quarter - as well as wages, which, however, still lagged behind the inflation. Easter and Prince William’s wedding surged the British retail after collapse in March. Rating of the Albion’s most wealthy from Sunday Times has amused – the first lines contain the native Britons Mittal, Abramovich and Usmanov; the Duke of Westminster had slipped to fourth place.
America. Optimism of the US small business subsided in April – only 2% of firms want to expand the staff; general optimism in the economy from IBD/TIPP has blossomed because of... bin Laden’s killing. Canada’s trade surplus swelled in March, while the US deficit grew steeper of expectations – imports grew stronger than exports, and generally everything simply went up in price. And continued to do so in April: the prices of imports into the United States soared by 2.2% m/m and 11.1% y/y; of exports – by 1.1% and 9.6%. Canada’s construction developments became fewer in April, while prices stagnated. That is not true if the inflation in the United States: producer prices for final goods added 0.8% in April, bringing the annual growth to 6.8%, and up to 8.2% without hedonic distortion; for all goods annual increase has actually reached 11.4% - a peak since September 2008. Growth in consumer prices was 3.2% y/y (actually 3.5%) – a record since October 2008. The index of consumer comfort from Bloomberg dropped to the lowest level since March in the first week of May; April indicator of employment trends from Conference Board has unexpectedly dipped by 0.6%, the late April’s number of unemployment benefits’ recipients reached a peak since the beginning of February while the 4-week average of initial applications for benefits grew to a maximum since November. In April, inflation-adjusted retail sales have not increased at all – but the figures of March were revised upwards. US budget deficit rejoiced in April – against the same month last year, it has lost more than half: the costs have changed little, while revenues rose; but for 7 months of the fiscal year as a whole the hole in the treasury widened by 9%.
Russia. Gold and foreign currency reserves rose to a peak since autumn 2008 – this is good considering the inevitable market shocks in future. Inflation in early May has returned to the “0.1% per week” trend – since the beginning of the year the increase is 4.4%. As of May 1, the annual expansion of monetary base has slowed down to 7.2% - the lowest level since December 2009; it makes all the monetary tightening of the Bank of Russia meaningless – there is simply nothing to tighten. Authorities decided to please the people with celebratory posters – the wisest text read: “150 grams of bread, 1 piece of sugar, a cup of boiled water a day. Our grandfathers could do that – now try it yourself”; we are also invited to try to sleep on the damp ground for 5 years. President Medvedev has condemned wrecking of the government defence order – saying that “some time ago, perpetrators would have been in the camps by now”: it seems that even the mastermind have some problems with de-Stalinization. Medvedev urged to make Skolkovo a “shooting brand” – spiteful experts said that it is already “shooting”: its ads were shown on state television in the former Zaire – apparently very prone to fashionable innovations. Prime Minister Putin has other reasons to be proud – he promised that from now on United Russia will only drink Russian wine. And the most brilliant pearl was produced by Gryzlov-Man – he is up in arms against medical records, malignantly referred to as “case histories”: according to the innovative idea of the Duma speaker, if they were called “health histories”, things in our health care would be much better!
Illustration: Artem Popov, ITinvest
Have a nice week!