Last week saw several major international news reports that caused severe concern across the global markets, most notably the news coming out of the Ukraine.
With Prime Minister Putin having been given the green light to use military force, if necessary, to protect the Russian interests in the Crimea region of the Ukraine making breaking news, there has been a huge knock on effect over many markets and commodities.
In early trading on the Moscow MICEX index a 9% decrease in its overall value was seen along with the Rouble taking a downward turn against both the Euro (Down 1.5% - 50.30) and the USD (Down 2.5% - 36.50). This was mainly put down to the Russian Central Bank increasing its key lending rate from 5.5% to 7% in its attempt to prevent risk of inflation and financial stability due to volatility.
Towards the end of last week precious metals saw a progressive increase (Gold up 2% at close on Friday 28th) as investors and fund managers looked to the metals as a way to hedge against the general market sentiment; which was being driven lower by the unrest in Eastern Europe and concerns over growth figures coming out of China. Although both Gold and Silver spot have show good gains since the beginning of the year, Gold posting gains of 3.2% and 6.6% in January and February respectively;
As mentioned above, concerns over Chinese growth and the drop in the Chinese Yen has had a surprising impact across the board. For over 30yrs the Yen has stayed within the region of 7CNY to the USD and even a slight movement in the Yen was a reason to sit up and take note. With the currency going down again from 6.16CNY at the close of last week and further declines in the start of March to 6.15CNY there has been plenty of speculation as to why. Recent data from HSBC PMI showed that smaller factory manufacturing output was slightly lower than expected (Down 1 point from 49.5 to 48.5) and the official figures from the Chinese government also confirmed this regarding manufacturing output as a whole from 50.5 to 50.2. There are plenty of theories as to why but the most likely is the affect of Chinese New Year whereby the majority of the workforce took extended holidays over the later end of January and early February. Expectations are that these guides will revert to positive territory in March however if this is not the case concerns will rise, and the Yen may decline further.
On a positive note, for holders of Berkshire Hathaway Inc, profits were up for 2013. Mr. Buffett again proved that you can teach an old dog new tricks by keeping his company on track, if a little under par for the current earning season. Reported profits of $19.5Bn up from $14.8Bn in 2012 prove that Buffett, who is the 4th richest person according to the Forbes "Rich List" still has what it takes to guide his fund in the direction it needs to be. Critics will shout that he didn't manage to outperform the S&P 500's growth in 2013 (S&P 500 = 32.4% - BRK-A = 18.2%) however when looking at the 6 year cycle he prefers to compare himself on, he has managed to meet his goals. Shrewd investments in the insurance, rail and energy sectors helped keep his company in the black.
In the UK, RBS made headlines all week with several announcements on their long over due and some would say lack luster turnaround. Whether it is the ending of free banking for accounts in profit or the disappearance of teaser rates to entice new business many will say that it is too little too late. The admittance that the bank will need to spend over £7bn over the next few years to rectify is technology issues is a major concern. One bright piece of news was that they stand to clear around £1Bn when they complete the sale of their shares in Direct Line Insurance Group. Although this in no way covers the reported £8bn loses for 2013, it is at least a step in the right direction. With the local Government holding 81% of RBS and rumours abound that they are looking to realise some of that capital, industry watchers are going to keep a close eye on future statements from Mr. McEwan the new boss at RBS.
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