Dazed and confused

May 13 - 17, 2013

AMERICAS 

Market comments: The MCSI all world index has now risen almost 13% since the beginning of 2013. Last week, markets continued to rise, and the Dow Jones and S&P 500 reached new record highs.  It continues to confound bulls as well as bears.  Particularly, because emerging markets and commodity indexes are not performing equally well (they are relatively flat and have dropped c. 3% so far in 2013, respectively).

In Canada, consumer prices came in at a lower rate than expected, growing only 0.4% - its slowest rate of growth in 3.5 years.

Company news:  Google has now exceeded $900 per share. At its meeting, it revealed tweaks to Google Maps, and unveiled a music streaming service meant to compete with companies such as Spotify.

Sony, a Japanese company, experienced some difficulties last week when American activist investors Daniel Loeb bought a 6.5% stake in the company, and began to urge the company’s directors to sell its entertainment arm to re focus on hardware (consumer electronics).  Apple, on the other hand, is set to lose again. It fell 3.5% last Wednesday.

Yahoo is set to buy tumblr, a popular social blogging platform, for US $1.1bn.  The revenue stream seems a tad confusing, but it is certainly another move by the company to be “cool again”. The service is primarily used by young folk, and emphasizes sharing and images.

Otherwise: A fear that oil and gas companies colluded to fix oil prices exists, and investigations are under way. The European Commission raided BP, Statoil and Shell, together with some funds and trading houses bout possible price rigging. “The market is not overseen by governments or exchanges, but by companies such as Platts, a price reporting agency (PRA) which publishes daily assessments that are gospel in the world of physical commodities.” Giving them significant influence.

A recommended read this weak is the Economist’s leader (and also its briefing note) on Shinzo Abe. Which can be found at: http://www.economist.com/news/leaders/21578044-shinzo-abe-has-vision-prosperous-and-patriotic-japan-economics-looks-better. Basically, “Mr Abe is electrifying a nation that had lost faith in its political class. Since he was elected, the stockmarket has risen by 55%. Consumer spending pushed up growth in the first quarter to an annualised 3.5%. Mr Abe has an approval rating of over 70% (compared with around 30% at the end of his first term)… Pulling Japan out of its slump is a huge task. After two lost decades, the country’s nominal GDP is the same as in 1991, while the Nikkei, even after the recent surge, is at barely a third of its peak. Japan’s shrinking workforce is burdened by the cost of a growing number of the elderly. Its society has turned inwards and its companies have lost their innovative edge.”

UK/EMEA

Cameron's government is trying to legislate an in-out referendum, seemingly forgetting the next government does not need to follow all legislation put in place by the previous government. Cameron's control in the conservative party with respect to Brexit seems shaky. This was particularly unfortunate given his visit to American President Barack Obama last week, where he was discussing trade between the US and EU. 

Despite this, the Economist points out Britain is re establishing trade with old partners: American and Asia. Full article here.  

Britain’s trade with other European countries is vital: seven of the ten main exports destinations are also in the EU. But non-EU trade is becoming more significant. The four leading foreign homes for BMW’s Mini, made in Oxford, are America, Germany, China and France. That pattern explains why the export of goods to EU and non-EU members is almost identical (see chart). The EU’s 50% share of British exports points to a relatively fast erosion: ten years ago it was above 60%.

In companies, M&S unveiled a new clothing line and investors are happy. They are cutting back suppliers, and intend to offer higher quality and more fashionable goods. What's not to like? The drop in full year profit expected to be announced this coming week.

Easyjet also doing well as Britons escape the never ending rainy slog (not that I'm bitter).

 

*Dazed and confused is a song most commonly attributed to Led Zeppelin  (its really a cover by the Yardbirds covering Jake Holmes). It was chosen as a title for this post to reflect market confusion - a continuing to increase market despite poor growth in emerging markets.