Docstoc

Global equities show spring in their step

Document Sample
Global equities show spring in their step Powered By Docstoc
					                                          Prepared for professional clients only – March 2012




                                          Global equities show a spring in their step
                                          North America
                                          While optimism continued to grow that the US economy is back firmly on the path to
                                          recovery, this was tempered by comments from the chairman of the US Federal
                                          Reserve, Ben Bernanke, who stated that while the employment situation has improved,
                                          “we still have a long way to go before the labour market can be said to be operating
                                          normally”. He pinpointed the high level of long-term unemployment as a particular
                                          concern. Meanwhile, there was good news on the economic front as the US GDP
                                          growth rate in the fourth quarter of 2011 was revised upwards, from 2.8% to 3%.

                                          US consumer confidence rebounded strongly in February, having fallen in January,
                                          according to the Conference Board. This bounce owed much to less pessimism about
                                          business conditions and labour market conditions, although the threat of increased fuel
                                          prices remains a concern. However, despite greater consumer optimism, the US
                                          housing market remains in the doldrums. The S&P/Case-Shiller house price indices hit
“...there was good news on the economic   record lows in December as improved consumer sentiment failed to be reflected in the
front as the US GDP growth rate in the    housing market. That said, existing home sales improved in January, the third gain in
fourth quarter of 2011 was revised        four months, according to the National Association of Realtors.
upwards, from 2.8% to 3%.”
                                          Elsewhere, campaigning for the Republican’s presidential nomination got into full
                                          swing. Mitt Romney, seen as the GOP’s favourite in many quarters, won a significant
                                          victory in Florida early in the month.

                                          Against this backdrop, the FTSE All-World North America Index (which includes
                                          Canada) posted a strong positive return of 4.1%, although it underperformed the FTSE
                                          All-World Index return of 4.7%. At the sector level, with the exception of basic materials
                                          (and industrial metals companies, in particular), all sectors ended the month in positive
                                          territory. The technology sector led the way, returning over 7%, while the oil and gas
                                          and financial sectors both posted 5% returns. At the stock level, the technology giants
                                          Apple and Microsoft were notable strong performers, while conversely, Wal-Mart
                                          Stores struggled over the month.

                                          Despite US government borrowing costs moving marginally higher amid the improving
                                          economic growth outlook (and the benchmark 10-year issue returning -1.2% over the
                                          month), yields remained within their established year-to-date range, reflecting
                                          investors’ expectation of ‘lower for longer’ US interest rates.
                                            BNY Mellon Asset Management – Economic and market overview                         page 2
                                            Prepared for professional clients only – March 2012




                                            Latin America
                                            The central banks of Brazil and Chile held benchmark rates flat, at 10.5% and 5%
                                            respectively, amid signs of improvement in the global economic outlook during
                                            February. In an effort to curb the strength of the Brazilian real and protect domestic
                                            manufacturers, the Brazilian government extended a tax on foreign borrowings and
                                            threatened the introduction of further capital controls.

                                            Mexican fourth-quarter GDP growth, at 0.4%, was lower than expected and the central
“In an effort to curb the strength of the   bank policy rate remained unchanged. However, recent signs of US economic
Brazilian real and protect domestic         recovery continued to be perceived as positive for the Mexican economy. The US is an
manufacturers, the Brazilian government     important export market, and growing investor confidence has been reflected in the
extended a tax on foreign borrowings and    Mexican peso’s strength since the beginning of the year.
threatened the introduction of further
capital controls.”                          In contrast, Colombian monetary authorities lifted the official interest rate by 25 basis
                                            points to 5.25%. The rate has been increased by 100 basis points since June last year.
                                            The central bank also launched a US dollar buying programme to curb the rise in the
                                            Colombian peso.

                                            Latin American equity markets strengthened in February. The FTSE All-World Latin
                                            America index rose 3.1% in local currency terms, underperforming the FTSE All-World
                                            Index, which increased by 4.7%. The Chilean market outperformed the regional
                                            average, buoyed by strong performances from two market heavyweights, the industrial
                                            conglomerate Empresas Copec and diversified retailer Falabella.

                                            Equity markets in Mexico and Peru were relative underperformers, rising by 1% and
                                            0.1% respectively. Strength in the Mexican telecoms and construction sectors was
                                            offset by negative contributions from miners and financials.


                                            Europe
                                            The Greek government approved a package of spending reductions to meet some of
                                            the conditions necessary for the ratification of the second bailout from EU and the
                                            International Monetary Fund worth €130 billion. To secure the monies, Greece was
                                            required to reach a deal with its existing private-sector lenders to reduce its debt,
                                            whereby old bonds would be swapped with newly issued ones that would be worth less
                                            and pay less interest.

                                            Private holders agreed to take a 53.5% nominal loss on their Greek debt, the
                                            culmination of months of negotiations by the Institute of International Finance
                                            representing most of Greece's private-sector creditors and the European Central Bank,
                                            whose efforts to prop up Greece's banks and its bond market have resulted in its
                                            owning Greek debts. Taking into account the loss of future interest payments and the
                                            extra time for Greece to repay its reduced debts, this would work out to be a real loss
                                            of about 74%. Raising the stakes, Greece threatened to default on any of its
                                            bondholders that declined to take part in the €206 billion debt restructuring.

                                            The Bank of England maintained its key interest rate at 0.5% and increased the size of
                                            its asset purchase programme by £50 billion to £325 billion to help the ailing UK
                                            economy. In company news, BP reported strong quarterly profits (US$7.7 billion) and
                                            raised its dividend to shareholders, signalling confidence in its future after the Gulf of
                                            Mexico oil spill. Eurozone annual inflation was expected to be 2.7% in February 2012,
                                             BNY Mellon Asset Management – Economic and market overview                        page 3
                                             Prepared for professional clients only – March 2012




                                             according to a flash estimate issued by the European Union’s statistical office Eurostat.
                                             It was 2.6% in January. The Eurozone’s seasonally adjusted unemployment rate was
                                             10.7% in January 2012, compared with 10.6% in December.

                                             Against this backdrop, the FTSE All-World Europe ex UK Index returned 4.7% in
                                             February, matching the 4.7% of global markets in local currency terms, as measured
                                             by the FTSE All-World Index.
“The Bank of England maintained its key
rate at 0.5% and increased the size of its   Among Continental Europe’s larger markets, Germany delivered 6.1%, France 4.8%
asset purchase programme by £50 billion      and Italy 2.9%, while the Netherlands recorded 2.8%. German chemical company
to £325 billion to help the ailing UK        BASF posted higher net profits and revenue in the final quarter of 2011 and forecast
economy.”                                    higher sales this year driven by growth in emerging markets and recovering mature
                                             markets. Spain and Switzerland had respective returns of -0.4% and 3.3%. The UK
                                             recorded 4.0%.

                                             The markets of the Nordic region had varied but positive performance; Denmark
                                             posted 12.2%, Norway returned 9.3%, Sweden 6.9% and Finland 5.5%. Performance
                                             in peripheral European markets was generally positive; Turkey returned 5.3%,
                                             Hungary posted 1.1% and Greece -9.9%. In Central and Eastern Europe, Russia
                                             delivered 9.3%, Poland -1.0% and the Czech Republic recorded 2.7%.

                                             At the sector level, the better performing areas were financials and consumer goods,
                                             whereas utilities and healthcare were weaker performers.

                                             The much improved liquidity backdrop enabled the larger ‘peripheral’ Eurozone
                                             sovereign markets to rally sharply, with strong support from domestic banks helping
                                             both the Spanish and Italian governments’ 10-year bond yields to fall. Consequently, a
                                             partial withdrawal of the ‘safe-haven’ premium inherent in the value of UK Gilts and
                                             German Bunds prompted yields in these markets to move higher. Indeed, the 30-year
                                             Gilt issue returned -3% for the month, despite the Monetary Policy Committee’s
                                             additional quantitative easing support.


                                             Asia
                                             As part of its efforts to engineer a soft landing for the economy, the People’s Bank of
                                             China reduced by 0.5% the required reserve ratio for depository institutions in
                                             February. The first rise in the rate of annualised inflation for six months, to 4.5% in
                                             January from the previous month’s 4.1%, indicated that consumer price pressures,
                                             despite having moderated, continue to weigh on the Chinese economy. While export
                                             and import volumes fell for the first time since 2009 in January, sentiment was boosted
                                             by the continued expansion of manufacturing, as the purchasing managers’ index rose
                                             for the third successive month, to 51.0 in February from January’s 50.5.

                                             In Japan, industrial production grew by 2% in January, following December’s 3.8%
                                             expansion in activity. The Bank of Japan increased the total size of its asset purchase
                                             programme by ¥10 trillion (around $130 billion), as well as setting a goal of 1% for the
                                             rate of annualised consumer price inflation. Following three months of negative price
                                             growth, consumer prices rose by 0.1% in the year to the end of January.

                                             The Indian economy grew by an annualised 6.1% between October and December,
                                             the rate of GDP growth having declined over each quarter of last year. Annual GDP
                                             growth, of 7.1% in 2011, was down from the previous year’s 8.5%. India’s benchmark
                                             wholesale price index continued its descent, prices rising by 6.6% in the year to the
                                               BNY Mellon Asset Management – Economic and market overview                                 page 4
                                               Prepared for professional clients only – March 2012




                                               end of January, compared to December’s 7.5%.

                                               In Taiwan, the rate of annualised consumer price inflation fell in February, to 0.25%
                                               from 2.4%, while industrial production contracted by over 15% in January. Elsewhere,
                                               Australian Prime Minister Julia Gillard was re-elected as leader of the ruling Labor
                                               party following a leadership challenge from Kevin Rudd, whom she succeeded as PM
“The first rise in the rate of annualised
                                               in 2010.
inflation for six months, to 4.5% in January
from the previous month’s 4.1%, indicated      The FTSE All-World Asia Pacific ex Japan Index returned 4.6%, with regional markets
that consumer price pressures, despite         modestly underperforming the global average as the FTSE All-World Index rose by
having moderated, continue to weigh on         4.7% (both in local currency terms). The Japanese market rallied, gaining 11.3%.
the Chinese economy.”                          Financials contributed positively to returns, as did Toyota Motor and Honda Motor in
                                               the consumer goods sector. Among other company news, Singapore-listed
                                               commodities trader Noble Group reported an over 50% drop in fourth-quarter profit.

                                               Markets in China and Hong Kong were boosted by strength in the financials sector,
                                               generating returns of 6.1% and 8.4% respectively. The Taiwanese market (+7.1%)
                                               made gains as technology hardware and equipment companies HTC and Taiwan
                                               Semiconductor Manufacturing Company performed strongly. Korea gained 5%, while
                                               Indonesia was the only regional market to end the month in negative territory. The
                                               market in Australia rose by 1.5%, with weakness among miners weighing on returns.

                                               Australian government bond yields rose across the spectrum over the month, with the
                                               yield on its 10-year issuance rising by 25 basis points, equating to a return of -1.7%.
                                               Meanwhile, Japanese government bond yields remained broadly flat for the month.


                                               Commodities
                                               Commodity markets were dominated by oil price strength during February, as
                                               escalating tensions between Iran and the West led to fears of oil supply disruptions.
                                               The price of West Texas Intermediate Crude oil rose above US$106 per barrel for the
                                               first time since May 2011, gaining 8.3% during the month.

                                               The price of gold rallied before falling sharply at the end of February, to close 2.4%
                                               lower on the month at around US$1697, after US Federal Reserve chairman Ben
                                               Bernanke indicated that an additional round of quantitative easing appeared unlikely
                                               given recent signs of US economic recovery. The nickel price also declined, falling
                                               7.3%, but silver and copper were relative outperformers, rising by 4.1% and 2.3%
                                               respectively.


                                               Currencies
                                               The best performing currencies were the Norwegian krone, which rose in line with
                                               higher oil prices, and the South African rand. The Mexican peso and the Brazilian real
                                               made gains, despite monetary authorities in Brazil intervening in the foreign exchange
                                               market to weaken the currency. Perceived safe haven currencies, the Japanese yen
                                               and the US dollar, were the worst performers as investors continued to favour riskier
                                               assets.

                                               BNY Mellon Asset Management.
                                               All figures stated in local currency terms, all data sourced from Bloomberg and FactSet.
                                                                             BNY Mellon Asset Management – Economic and market overview                                                                 page 5
                                                                             Prepared for professional clients only – March 2012




Important information

This is a financial promotion and is not intended as investment advice. The information provided within is for use by professional investors and/or distributors and should not be relied upon by
retail investors. All information prepared within has been prepared by BNY Mellon Asset Management International Limited (BNYMAMI). Any views and opinions contained in this document are those of
BNYMAMI at the time of going to print and are not intended to be construed as investment advice. BNYMAMI and its affiliates are not responsible for any subsequent investment advice given based on the
information supplied. This document may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. Past
performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you
sell your investment you may get back less than you originally invested. To help us continually improve our service and in the interest of security, we may monitor and/or record your telephone calls with us.
This document is issued in the UK and in mainland Europe (excluding Germany) by BNY Mellon Asset Management International Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA.
Registered in England No. 1118580. Authorised and regulated by the Financial Services Authority. In Germany, this document is issued by WestLB Mellon Asset Management Kapitalanlagegesellschaft mbH,
which is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. WestLB Mellon Asset Management was formed as a 50:50 joint venture between The Bank of New York Mellon Corporation and
WestLB AG. If WestLB Mellon Asset Management Kapitalanlagegesellschaft (WMAM KAG) receives any rebates on the management fee of investment funds or other assets, WMAM KAG undertakes to
fully remit such payment to the investor, or the Fund, as the case may be. If WMAM KAG performs services for an investment product of a third party, WMAM KAG will be compensated by the relevant
company. Typical services are investment management or sales activities for funds established by a different investment management company. Normally, such compensation is calculated as a percentage
of the management fee of the respective fund, calculated on the basis of such product’s fund volume managed or distributed by WMAM KAG. The amount of the management fee is published in the
prospectus of the respective fund. Any compensation paid to the WMAM KAG does not increase the management fee of the relevant fund. A direct charge to the investor is prohibited. The information given
herein constitutes information within the meaning of § 31 sub-section 2 WpHG (German Securities Trading Act). In Singapore, this document is issued by The Bank of New York Mellon, Singapore Branch for
presentation to professional investors. The Bank of New York Mellon, Singapore Branch, One Temasek Avenue, #02-01 Millenia Tower, Singapore 039192. Regulated by the Monetary Authority of
Singapore. In Singapore, this document is to be distributed to Institutional Investors (as defined in the Securities and Futures Act, Chapter 289 of Singapore) only. In Dubai, United Arab Emirates, this
document is issued by the Dubai branch of The Bank of New York Mellon, which is regulated by the Dubai Financial Services Authority. If this document is used or distributed in Hong Kong, it is issued by
BNY Mellon Asset Management Hong Kong Limited, whose business address is Level 14, Three Pacific Place, 1 Queen's Road East, Hong Kong. BNY Mellon Asset Management Hong Kong Limited is
regulated by the Hong Kong Securities and Futures Commission and its registered office is at 6th floor, Alexandra House, 18 Chater Road, Central, Hong Kong.BNY Mellon Asset Management International
Limited and any other BNY Mellon entity mentioned are all ultimately owned by The Bank of New York Mellon Corporation.www.bnymellonam.com. ICO240-07-03-2012 (1M)

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:1
posted:6/18/2012
language:
pages:5