FT Newsmine 4/29

Financial

The Short View (James Mackintosh) on the dollar, April 29

"The [Federal Reserve's] own measure of the dollar in real terms against America’s main trading partners shows it ended March at its lowest since it first traded freely in 1973."

On the dollar, April 28

"On Wednesday, the Fed said QE2 would end as planned in June, but also maintained it was in no rush to tighten policy. This stance contrasts sharply with many other central banks and explains why, since June, the dollar has fallen 16.6 per cent against its main rivals on a trade-weighted basis. The dollar index sits just 3.5 per cent above its record low plumbed in April 2008."
"As the dollar has stumbled, so currencies with higher official interest rates, such as the Brazilian real, Norwegian krone and Australian dollar have surged, with the latter hitting a 28-year high of $1.0852 on Wednesday."

The Short View (James Mackintosh) on seasonal market movements, April 28

"In the UK, a study by Sven Bouman of Aegon and Ben Jacobsen of Erasmus University showed shares did far less well from May to September than in the rest of the year right back to 1694. Since the FTSE 100 was created in 1984, it has fallen from the start of May to end-September half the time, and only just scraped a positive average return in the period."

On the S&P 500, April 27

"The S&P 500 index was 0.9 per cent up at 1347 by midday in New York and up 7.1 per cent this year. The rally this year has been led by the energy sector, which has risen 16 per cent, followed by the industrial sector and healthcare, which are both up 10 per cent. The benchmark has nearly doubled from its low of 676 set in March 2009, during the financial crisis, but is still 14 per cent below its all-time high of 1,565.15 reached in October 2007."

On Europe's rising debt yields, April 27

"Greek bond yields soared by more than 1 percentage point to fresh euro-era highs as Athens failed to meet deficit targets and an adviser to German chancellor Angela Merkel warned the country would have to restructure its debts. Greek two-year bond yields, which move inversely to bond prices, jumped 133 basis points to 24.34 per cent after it was revealed that the country’s budget deficit for 2010 was 10.5 per cent. Greek two-year yields have jumped about 10 percentage points in the past month. The deficit was above the government’s February estimate of 9.4 per cent, although below the 2009 shortfall of 15.4 per cent of gross domestic product, the EU’s statistics office in Luxembourg said."
"The cost of borrowing for Ireland and Portugal also rose to euro-era highs because of rising concerns that all three peripheral eurozone economies will be forced to restructure their debts. Irish two-year bond yields rose 75bp to 12.09 per cent and Portuguese yields jumped 21bp to 11.46 per cent."
"The yield difference, or spread, between Greek 10-year bonds and German securities of a similar maturity widened to 1,208bp, the most since data were first collected in 1998. The spread has widened 260bp this month. The spread between Portuguese and German 10-year bonds also widened to as much as 635bp, the most since before the introduction of the euro, while Irish spreads over Germany increased to 720bp."

On Brazil's bond issuance, April 27

"Brazilian bond issuance has hit a record high this year, helped by overseas sales from domestic companies trying to tap lower offshore interest rates, according to figures from Dealogic, the data provider. Dealogic said the total value of bond issuance between January 1 and April 26 rose to $18.8bn, in about 35 deals, compared with $15.5bn a year earlier, in spite of government efforts to clamp down on some forms of external credit."

On global high-yield bond issuance, April 23

"Global high yield bond volumes have reached $146.5bn to date this year – a 34.4 per cent increase over the same period last year and the highest year-to-date total on record. In Europe the jump has been especially sharp – a near doubling – with year-to-date issuance reaching $33.5bn, up 77.4 per cent on the same period last year, said data provider Dealogic. March has been the busiest month on record for the high yield markets."

Asia

On Japan's economy, April 29

"Japanese factory output suffered a record decline in March as last month’s tsunami crippled supply chains across the world’s third-largest economy and prompted the central bank to cut its growth forecast for the fiscal year. Government statistics showed that production fell 15.3 per cent in March from February, the biggest fall since records began in 1953, and worse than analysts expected. They came amid a flurry of disappointing data this week from both the supply and demand sides. Household spending fell 8.5 per cent, underlining the immediate effect of the natural disaster. This prompted the Bank of Japan to reduce its forecast for this fiscal year to March by a percentage point to 0.6 per cent."

On China's foreign direct investment, April 26

"In the six months to the end of March 2011, Chinese businesses invested $64.3bn in Europe in acquisitions, trade deals and loan agreements. This was more than double the comparable figure over the previous 11 quarters. Engineering and manufacturing have been a key focus, according to London bank Grisons Peak."

On China's investment in Brazil, April 26

"In 2009, according to the Brazil China chamber of trade and industry, Chinese investment in Brazil was worth just $386m. In 2010, that number ballooned to an estimated $19bn. Most of that – about 85 per cent – was commodity-related."

Miscellaneous

Martin Wolf on the frequency of war, April 27

"While the number of countries experiencing civil war is in the mid-30s, battle deaths have fallen from an average of 164,000 a year in the 1980s to 42,000 in the 2000s."

Lex on economic progress in developing nations, April 26

"More steel, mobile phones and concrete were purchased or produced in 2010 in developing than developed economies. Car production was just about evenly divided. And at purchasing power parity (PPP), non-rich countries accounted for 48 per cent of global GDP, according to the International Monetary Fund. But PPP measures, which are supposed to adjust for unrealistic exchange rates, flatter the economies of poorer lands. In effect, the adjustments value services about equally everywhere, but these generally cost much less in poor countries. At market exchange rates, the non-rich share of world GDP comes to something like 38 per cent."
"Back in 1990, the advanced economies accounted for 69 per cent of global GDP (in PPP terms). And in the past eight years, real GDP in advanced economies increased by a mere 14 per cent, while developing nations grew by 69 per cent."

On US housing prices, April 26

"Prices of single-family houses in the 20 largest US cities fell 0.2 from January to February on a seasonally adjusted basis, according to the S&P/Case-Shiller home price index. The decline was less steep than economists’ expectations of a 0.4 per cent fall, but left the index barely above its April 2009 trough. Prices recorded their biggest annual drop since November 2009, falling 3.3 per cent from February 2010, in line with expectations."

On Latin America's trading relationships, April 26

"In 1999, trade betwen Latin America and China was a mere $8bn. By 2009, according to UN figures, it had grown 16 times to $130bn. By comparison, bilateral trade with the US rose by just a half over the same period."
"Developed markets remain mired in sluggish growth and high debt. Meanwhile, emerging economies are surging ahead; they now account for three-quarters of global economic growth, according to the Inter-American Development Bank (IADB)."
"In 2006, before the financial crisis erupted, 9 per cent of Brazil’s exports went to the other Bric countries – Russia, India and China. By 2009 that had almost doubled to 17 per cent. As a result, the Brazilian economy boomed."

On changes in Latin America's trading relationships, April 26

"A decade ago, Asia accounted for roughly 5 per cent of the region’s trade, according the Inter-American Development Bank (IADB)."
"Even friends – and neighbours – appear to be turning away. The US’s most important trading bloc, the North American Free Trade Agreement (Nafta), is nearly two decades old and is starting to look its age. The share of trade between the three signatories – the US, Mexico and Canada – has fallen by nearly 10 per cent over the past decade: from 55 per cent of the countries’ global exports in 1999 to 46 per cent in 2009."