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World Economic Outlook Update Global Recovery Stalls, Downside Risks Intensify
January 24, 2012--The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere. Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated. Global output is projected to expand by 3¼ percent in 2012 -a downward revision of about ¾ percentage point relative to the September 2011 World Economic Outlook (WEO).
This is largely because the euro area economy is now expected to go into a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of additional fiscal consolidation. Growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening of internal demand.
The most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area by supporting growth, while sustaining adjustment, containing deleveraging, and providing more liquidity and monetary accommodation. In other major advanced economies, the key policy requirements are to address medium-term fiscal imbalances and to repair and reform financial systems, while sustaining the recovery. In emerging and developing economies, near-term policy should focus on responding to moderating domestic growth and to slowing external demand from advanced economies.
Financial risks escalate, global growth decelerates
Global growth prospects dimmed and risks sharply escalated during the fourth quarter of 2011, as the euro area crisis entered a perilous new phase. Activity remained relatively robust throughout the third quarter, with global GDP expanding at an annualized rate of 3½ percent—only slightly worse than forecast in the September 2011 WEO.
Despite global economic turmoil, foreign direct investment increased in 2011 – UN
January 24, 2012--In spite of the economic turmoil that shook countries last year, global foreign direct investment (FDI) rose by 17 per cent, according to a United Nations report released today, which predicts it will continue to increase this year but warns of the risks posed by the frail economic climate.
The report, authored by the UN Conference on Trade and Development (UNCTAD), highlights the increase in FDI in both developed and developing countries as well as transition economies.
“Developing and transition countries continued to account for half of global FDI in 2011 as their inflows reached a new record high, driven mainly by investments in Latin America (up 35 per cent) and in transition economies (up 31 per cent),” the report states.
After three years of consecutive decline, inflows to developed countries rose last year, reaching an estimate $753 billion, up 18 per cent from 2010, largely due to cross-border mergers and acquisitions.
view report-Global Flows of Foreign Direct Investment Exceeding Pre-Crisis Levels in 2011
OPEC-Monthly Oil Market Report-January 2012
January 24, 2012--Oil Market Highlights
The OPEC Reference Basket decreased in December to settle at $107.34/b. The downward movement of the Basket was driven by revived fears about Europe's debt crisis, concerns about
economic growth in Europe and China, and a slumping euro exchange rate. Supportive bullish US economic data, as well as geopolitical concerns in the Middle East helped change the course of the market, particularly toward the end of the month and into January.
On 13 January, the OPEC Reference Basket stood at $111.75/b.
World economic growth has been revised down marginally to 3.5% in 2012 and remains at 3.6% for 2011. The US economy has gained some momentum recently and growth expectations for 2012 have been increased from 1.7% to 2.2%. The Euro-zone seems to continue its deceleration and growth expectations for 2012 have been lowered to 0.2% from 0.4%. Japan’s recovery remains fragile, but growth is expected to remain unchanged at 1.9%, mainly due to government support.
Growth in China remains resilient and, while slightly slowing, expectations for 2012 have been lowered from 8.7% to 8.5%. India is now forecast to grow by 7.4%, revised down from 7.5% in the previous month. Downside risks prevail for the world economy and close monitoring will be needed on the Euro-zone debt crisis, slowing activity in the developing economies and the improvement of the US economy.
World oil demand in 2012 is forecast to grow by 1.1 mb/d in 2012, following growth of 0.9 mb/d last year, unchanged from the previous report. The OECD region is expected to consume less oil than last year; however, non-OECD oil demand is likely to grow by more than 1.0 mb/d. The pace of oil demand growth in some non-OECD countries is expected to be lower than in the previous year.
Higher prices for retail petroleum products could also negatively affect oil demand across the globe. The transportation and industrial sectors would likely be the most affected, with the use of oil in both sectors slowing noticeably worldwide.
Industry participants have developed common standards that will restore post-trade transparency in the European equity markets.
January 24, 2012--Market Model Typology (MMT)
A broad spectrum of the industry (exchanges, BATS Chi-X Europe, Markit Boat and the main data vendors: Thomson Reuters, Bloomberg, Fidessa, NYSE Technologies and SIX Telekurs) have been working for most of this year to achieve a practical and common solution for standards on post-trade equity data.
This group brings together entities with different views on some issues (such as the business model for a Consolidated Tape provider) but who are united in their basic belief that the industry can and should act without any further delay to improve the consistency and comparability of data from different sources.
o achieve this goal, we have essentially set out to implement the CESR Technical Working Group recommendations published one year ago. To do this, we have developed the Market Model Typology (MMT) project, which translates the CESR recommendations into practical action.
New iShares ETFs promise better commodity returns
January 24, 2012--BlackRock has expanded its range of exchange traded funds linked to commodities with four new iShares ETFs that aim to deliver more efficient exposures to agriculture, energy, industrial metals and the broad commodities market.
The four new ETFs are based on S&P GSCI dynamic roll indices which are designed to take into account fluctuations in commodity futures prices.
ETFS US Precious Metals Weekly: Precious metals investment rebounds as market confidence begins to find its feet
January 23, 2012--Gold, silver prices hit 6 week highs as precious metal prices push up through key technical levels. Gold, silver platinum and palladium are now all tracking back up above their 50 day moving average levels, suggesting that markets have found renewed momentum in the New Year.
Data pointing toward a rebound in US growth and a soft landing for
Chinese activity has been a shot in the arm for non-cash assets at the
start of 2012, with precious metals benefiting from both lingering
sovereign debt question marks in Europe as perceived stores of value and
waning safe-haven related USD strength. Palladium has been the largest
beneficiary, up 8% over the past 4 weeks.
Investors re-build positions across the precious metals as physical demand shows resilience. COMEX gold net speculative futures positions saw their second consecutive weekly gain last week, the first back to back gain in 2 months. Net speculative futures positioning in other precious metals has similarly lifted off their lowest levels since the credit crisis in January. Gold purchases ahead of Chinese New Year celebrations have also supported prices recently, with Indian demand also holding up despite the import tax hike in January. China surpassed India as the world’s largest gold jewellery market in 2011 according to the World Gold Council.
Gold mine production costs move towards $1,000/oz in 2011, as near double digit annual cost inflation continues. Mining analyst Thomson Reuters GFMS noted that the estimated 4% increase in mine production last year was accompanied by a 9% increase in total production costs to $935/oz, following on from 20% cost inflation in 2010. Global gold mine production in 2011 was just 5% higher than a decade earlier according to the statistics, with a 9% decline in global gold mine production between 2001 and 2008. Gold mining accounted for two-thirds of annual global production on average over the past decade.
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EDHEC Case Studies and Risk Management in Commodity Derivatives Trading
January 23, 2012--Until recently, one could only gain expertise in commodity-derivatives relationships if one had worked in niche commodity-processor companies or in banks that specialised in hedging project risk for natural-resource companies.
The contribution of this article is to help fill the knowledge gap in the risk management of commodity derivatives trading. The article emphasises the constant challenges to a trader when attempting to navigate the very dynamic flows of both the commodity markets and the prevailing risk environment. The article also emphasises that operational controls are paramount in an age of increasing legal and regulatory risk, particularly for firms involved in large-scale commodity derivatives trading.
Thomson Reuters Launches Fixed Income Global Snapshot To Provide Greater Transparency And Flexibility To Investors
January 23, 2012--Thomson Reuters today announced the launch of a new evaluated pricing capability, the Fixed Income Global Snapshot (FIGS). By re-evaluating all non US fixed income securities with updated benchmark curves and credit spreads at both 3pm and 4pm, Eastern Daylight Time. FIGS will provide investors with updated, accurate fixed income evaluations and transparency they need to meet regulatory requirements and have a full understanding of the risks associated with the investment process.
The expansion into US snap times has been driven by market volatility, customer demand and the focus on the need for appropriate and consistent evaluations, that regulations such as Basel III and the Alternative Investment Fund Managers Directive (AIFMD) have fuelled. The new fair market evaluation service will utilize Thomson Reuters standard methodologies which incorporate trade prices, broker quotes, the latest available news, and vigorous quality control checks. The Asian, Middle East, African, and European fixed income securities were previously valued intraday and at the close within their local markets.
2011 WFE Market Highlights
January 19, 2012--2011 equity volumes remained stable despite a fall in market capitalization. Derivatives, bonds, ETFs, and securitized derivatives continued to grow strongly.
Total turnover value remained stable in 2011 at USD 63 tn despite a sharp decrease of the global market capitalization (-13.6% at USD 47 tn).
High volatility and global uncertainty created from the sovereign debt crisis affected volumes all year through and made August 2011 the most active month in terms of trading value, a highly unusual annual peak for markets.
Despite overall unfavorable conditions for primary markets in several regions, WFE members increased their total listings by 1.7% totaling 45 953 companies listed.
Total number of trades decreased by 6.4% at 112 tn. This trend combined with the stability of turnover value led to a small increase in the average size of transaction which was USD 8 700 in 2011.
The high volatility and lack of confidence that affected financial markets globally probably drove the needs of hedging as derivatives contracts traded grew by 8.9%. WFE members continued to diversify their products range as other products such as bonds, ETFs, and securitized derivatives all had solid growth in 2011.
IEA-Highlights of the latest Oil Market Report
January 19, 2012--Oil markets began the New Year confronting a host of supply issues, not least a pending EU ban on Iranian oil imports and retaliatory threats from Tehran to close the Strait of Hormuz, through which flows roughly one-third of world oil exports. Oil prices jumped $4 5/bbl on the reports, but eased on mounting euro zone debt issues. Brent was last trading near $112/bbl and WTI at $100.50/bbl.
Clear signs of economic weakness tipped global oil demand into a declining year-on-year trend at the end of 2011, down 0.3 mb/d in 4Q11, its first such drop since the tail-end of the credit crunch. The significantly lower starting point has accordingly trimmed global oil demand growth to 1.1 mb/d for 2012 (from 1.3 mb/d previously).
Non-OPEC supply fell by 140 kb/d to 53.2mb/d in December, as rising North Sea output only partially offset a seasonal decline in biofuels and lacklustre supply from the FSU. Middle East unrest and other unplanned outages limited annual growth in 2011 to only 45 kb/d. A rebound to 340 kb/d growth is expected for 1Q12, and 1.0 mb/d for 2012 overall, as non-OPEC output averages 53.7 mb/d.