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Investors move back into commodities
May 9, 2011--Investors are moving back into selective growth-focused assets as hopes for the US economy encourage buying of recently battered commodities.
Copper and oil, the global industrial benchmarks that endured heavy selling last week after fears of slowing demand triggered wholesale dumping of previously buoyant resources, are up 2 per cent to $4.05 a pound and 6 per cent to $103.05 a barrel, respectively.
ETFS Precious Metals Weekly: Silver price rebounds as strong US jobs data boosts confidence
May 9, 2011--Silver price drop of 30% last week reverses on the back of stronger than expected US Payrolls on Friday, with follow through into the new week.
Other precious metals prices and flows have held relatively firm through the sell-off indicating investors' are not viewing this as the beginning of a broader commodity price downtrend.
Metals consultancy GFMS publishes forecast of $1800/oz average platinum spot price and $800/oz average palladium price over 2011.
Silver supported by strong US payrolls data after COMEX-led sell-off
Silver price falls fastest since at least 1975 as COMEX futures margin tightening prompts position liquidation. New regulations by the CME group have seen COMEX silver futures margin requirements raised five times over the past two weeks, increasing trading costs by 84%. The hikes caused a massive liquidation of long speculative positions in silver and sent the spot price plummeting from near $50/oz at the end of April towards $35/oz by the end of last week. However, with the release of stronger than expected payrolls numbers on Friday, the silver price rebounded with carry-through into this week.
New Opportunities Emerge in Africa as China Graduates from Lower Skill Manufacturing
May 9, 2011--In this year’s WIDER (World Institute for Development Economics Research) Lecture, titled “From Flying Geese to Leading Dragons: New Opportunities and Strategies for Structural Transformation in Developing Countries” and given in Maputo, Mozambique, on May 4, 2011, World Bank Senior Vice President and Chief Economist Justin Yifu Lin predicted that the graduation from low-skilled manufacturing activities in China and other new large MICs will open up a unprecedented industrialization opportunities for African and other low-income countries.
Speaking to a broad audience of several hundreds of researchers, policymakers and development practioners in Maputo, Mozambique, where the WIDER lecture took place—the first time on African soil--Justin Yifu Lin compared China’s current GDP per capita (measured in PPP terms) to that of Japan in the early 1960s or that of Korea in the early 1980s. Because of its dynamic growth over the past three decades, China will have to move up the industrial ladder, like Japan did in the 1960s and Korea did in the 1980s—a “graduation” that will free up large manufacturing employment opportunities for lower-income economies, and mark China’s conversion from the flying goose it once was in the footsteps of other Asian economies into a leading dragon in its own right. China currently employs 85 million workers in low-skilled manufacturing jobs that will have to be relocated elsewhere because of rising wages and productivity levels, compared to Japan’s 9.7 million in the 1960’s and Korean’s 2.3 million in the 1980’s. It is estimated that China’s currently monthly wages for unskilled labor is about $350, compared to less than $100 for most African countries, whose main comparative advantage is in labor-intensive industries.
NASDAQ OMX Group and IntercontinentalExchange Issue Letter to NYSE Euronext Stockholders
May 9, 2011--NASDAQ OMX (NDAQ) and IntercontinentalExchange (ICE) today issued the following letter to NYSE Euronext stockholders:
What's the Rush?
Why are NYSE Euronext stockholders being asked to approve a high-risk, low-value transaction without all of the facts?
Why is your board rushing you into a vote?
And why are they refusing to even meet with NASDAQ OMX and ICE to explore a clearly financially superior alternative?
Stockholders of NYSE Euronext who own shares as of today will be eligible to vote on the proposed Deutsche Boerse transaction. But both NYSE Euronext and Deutsche Boerse have made clear in public filings and interviews that they are not expected to have definitive information regarding their EU competition status until year-end or later. Yet your Board has set the stockholder meeting date for approval of the combination for July 7th, 2011.
OECD composite leading indicators point to diverging pace of economic activity across major economies
May 9, 2011--Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend, are pointing to some divergence in the pace of economic activity across major economies. Compared with last month’s assessment, this month’s CLIs point to a slower or stable pace of expansion in most EU countries and continued expansion in North America, China and Russia.
The CLIs for Canada and China signal regained momentum in economic activity and the CLIs for the United States, Germany and Russia, continue pointing to expansion relative to trend. Based on the CLIs, the pace of expansion in France and the United Kingdom will be stable, albeit slow. The CLIs for Italy, Brazil and India are pointing to slowdowns in economic activity relative to trend.
Because of the exceptional circumstances the country is facing, it is not possible to provide reliable estimates of the CLI for Japan at this stage.
Sales soaring high despite regulatory concerns
May 6, 2011--Structured product providers are emerging from a period of heightened regulatory scrutiny in bullish mood – and seeking to win arguments about transparency, performance and capital protection – according to leading industry figures.
Since the collapse of Lehman Brothers in 2008 – and, with it, the value of structured products based on its bonds – banks and wealth managers across the globe have been the subject of prolonged reviews of the way they market these investments to retail clients. Much of the focus has been on the selection, and disclosure, of the counterparty banks used to underwrite investors’ capital.
New Shocks and Asset Price Volatility in General Equilibrium
May 6, 2011--Summary: We study equity price volatility in general equilibrium with news shocks about future productivity and monetary policy. As West (1988) shows, in a partial equilibrium present discounted value model, news about the future cash flow reduces asset price volatility.
We show that introducing news shocks in a canonical dynamic stochastic general equilibrium model may not reduce asset price volatility under plausible parameter assumptions. This is because, in general equilibrium, the asset cash flow itself may be affected by the introduction of news shocks. In addition, we show that neglecting to account for policy news shocks (e.g., policy announcements) can potentially bias empirical estimates of the impact of monetary policy shocks on asset prices.
view IMF Working paper-New Shocks and Asset Price Volatility in
General Equilibrium
Why ETFs give an uneasy sense of déjà vu
May 5, 2011--When the Financial Stability Board was established a couple of years ago, it declared that one of its goals was to produce better “early warning” systems of looming financial trouble spots. Now it is starting to turn this rhetoric into reality. Investors should pay attention.
Last month, the FSB issued a small advisory report entitled “Potential financial stability issues arising from recent trends in Exchange-Traded Funds”. Unsurprisingly, this did not cause a storm. After all, ETFs seem as dull as ditchwater to most politicians; almost as boring as the world of CDOs (collateralised debt obligations) looked back before 2007.
Climate Change Already Hurting Agriculture
May 5, 2011-- As the planet warms, dire predictions of coastal flooding, inland droughts, ruined farmland, and global food shortages fill the news and research journals. But for all the talk of the future, scientists have little data on how climate change has already affected agriculture. A new study hopes to shed some light on this area.
"It's a frustration having to always answer questions about the future and having everyone think of climate change as something in the future," says David Lobell, an agricultural scientist at Stanford University in Palo Alto, California. "It's not something we have to anticipate. It's something we have to learn from and deal with right now."
CME launches London clearing house
May 5, 2011--CME Group is considering offering clearing services to exchanges in Europe as the largest US futures exchange establishes a beachhead in the region by launching a new clearing house in London on Friday.
The move into clearing in Europe highlights the Chicago-based operator’s ambitions to expand into Europe, where CME’s two biggest rivals, IntercontinentalExchange (ICE) and Deutsche Börse, have established clearing businesses.