18th June 2014 Market and Global Economic Review
Markets continue to remain positive despite a hiccup in economic data from several countries and increased concern over Iraq and the Ukraine.
Chinese indexes were quiet today after announcements on Direct Foreign Investment saw it drop to the lowest level in sixteen months. FDI was seen to be $8.6bn for the month of May, down 6.7% on May 2013 and the lowest seen since January 2013. This will no doubt add weight to the fact that the Chinese economy is slowing down and that the 2nd largest economy will need to shore up its disparity in finances to encourage further foreign investment. As news of this was released the Chinese PM was in the United Kingdom signing trade agreements to the tune of £14bn. The PM sat with member of parliament and other government officials as they looked at infrastructure and energy projects. The two nations are looking at solar power and next generation nuclear power plants along with a substantial liquid natural gas deal between BP and CNOOC which see's a $20bn deal for BP to supply China with LNG over the next 20 year. One area the UK was keen to see a collaboration was the on the High Speed 2 rail network as the UK looks to utilize China's expertise in this area. The Nikkei managed to prop up the region with over 1% in gains as the national deficit was seen to reduce by over $1bn to around $8.9bn from April. Lower import and export figures helped and also confirmed that Japanese consumers are reducing their spending substantially. Exports were down 2.7%, its first dip since February and Imports dropped 3.6%, a nineteen month low.
European markets opened higher today as expectation that the FED will keep to its current line of stimulus add confidence to the regions markets. Reversing the losses seen on Monday the markets performed as expected with a week of little economic data coming forward. What will be on the minds of investors is the situation in the Ukraine and whether Putin's new move to resolve the issue will placate the tensions in the area. With continued violence in the East and GazProm turning off the gas supply the situation continues to spiral with no real end in sight. Now that Iraq and oil supplies are back in the picture Europe will need to be extremely cautious over the coming months as they head to winter. Making sure that the continent has sufficient energy stocks will be a main priority as the Ukraine is not the only country sitting in a precarious position regarding fuel supplies. Several eastern Eurozone members could face shortages should the crisis not be resolved by Moscow and Kiev.
US markets continue their good spell despite the situation in Iraq and their Commander in Chiefs comments with regards to action he may take. The two day FOMC meeting closes today and it is expected that Ms. Yellen's latest statement will run along the same rhetoric as her previous announcements. The only difference may be the reference to the labour market and its importance to the economy. Estimates predict that the market will be near full by the end of 2017 however it is still seeing over 6% unemployment and a generation of baby boomers leaving the workforce does skew the true picture. CPI, Consumer Price Inflation was double expectations at 0.4% yet this did little to investor confidence as the major indexes kept close to all time highs across the board.
Major Indexes as of 18th June:
Index % Change Close/
DOW Jones (+0.16%) 16,808.49
FTSE 100 (+0.18%)
CAC 40 (+0.58%)
Nikkei 225 (+1.09%)
Hang Seng (-0.01%)
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