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ETFS Precious Metals Weekly: US Economy Firing On All Cylinders, Silver Price Soars to New 31 Year High
April 4, 2011--US unemployment rate drops to a 2-year low, adding further evidence that the US economy remains in recovery mode. A strong March US ISM report confirms the trend.
Continued robust global growth helps drive the silver price to its highest level since the Hunt Brothers' cornered the silver market 31 years ago.
Gold continues to hold just below record highs as deteriorating conditions in the Middle East drive oil prices to over two and a half year highs, and peripheral European debt default risks continue to rise.
Platinum group metal (PGM) prices pick up on continued strong global growth momentum and reduced fears that Japan auto supply-chain disruptions will have a sustained impact on final PGM demand.
Silver price rises to its highest level since February 1980. Stronger than expected US manufacturing and employment data have helped to assuage concerns about the impact of Japan's earthquake on global growth and industrial demand for silver. Silver also continues to capitalize on its store of value/"alternative currency" properties alongside gold (see below).
Gold price holds just below all-time high of $1,447/oz as intensifying Middle East and peripheral European risks keep markets on edge. News that Portugal missed key fiscal deficit targets and four Irish banks will likely need further capital injections unsettled credit markets last week. Credit risks combined with oil prices hitting over two and a half year highs as Middle East unrest continues to spread is keeping demand for hard assets high. Gold held back from pushing to new record highs as strong US data raised expectations of higher US interest rates.
Platinum and palladium prices recover as global growth picks up. Platinum and palladium prices increased last week, recouping earlier post-Japan earthquake losses, as US manufacturing growth - often a lead indicator of global growth - held at high levels in March. Investors have looked through near term supply chain disruptions emanating from the Japan earthquake, instead focusing on continued strong final demand for automobiles in China, the US and Europe.
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Probabilities of Default and the Market Price of Risk in a Distressed Economy
April 4, 2011--Summary: We propose an original method to estimate the market price of risk under stress, which is needed to correct for risk aversion the CDS-implied probabilities of distress. The method is based, for simplicity, on a one-factor asset pricing model.
The market price of risk under stress (the expectation of the market price of risk, conditional on it exceeding a certain threshold) is computed from the price of risk (which is the variance of the market price of risk) and the discount factor (which is the inverse of the expected market price of risk). The threshold is endogenously determined so that the probability of the price of risk exceeding it is also the probability of distress of the asset. The price of risk can be estimated via different methods, for instance derived from the VIX or from the factors in a Fama-MacBeth regression.
view Probabilities of Default and the Market Price of Risk in a Distressed Economy paper
Investors Ask World’s Largest Companies to Reduce Their Greenhouse Gas Emissions
Carbon Disclosure Project launches new Carbon Action initiative
April 4, 2011-- Institutional investors are this week calling on the world's largest companies to implement cost-effective greenhouse gas emissions reduction initiatives. The request is being made through the Carbon Disclosure Project's new Carbon Action initiative, launched today in response to investor requirements to protect their investments and accelerate company action on carbon reduction activities.
A vanguard group of 34 investors with US$7.6 trillion in assets including Aviva Investors, CCLA Investment Management and Scottish Widows Investment Partnership (SWIP) are making this first request for company action which will be sent by the Carbon Disclosure Project (CDP) this week to the world’s largest companies in the FTSE Global Equity Index Series (Global 500). The efficient management of energy and lower carbon emissions not only helps investors to mitigate financial risk, but also has the potential to reduce costs for business.
CDP, an independent not-for-profit organization, gathers primary corporate climate change information from thousands of businesses around the world so that it can be incorporated into business, investment and policy decision making. Through this new Carbon Action initiative companies will be encouraged by investors to:
Make year-on-year emissions reductions;
Identify and implement investment in greenhouse gas emissions reduction initiatives which have a satisfactory positive return on investment; and finally,
Any companies that do not already have an emissions reduction target will be asked to set and publicly disclose this.
BATS Global Markets Reports Strong Gains Across All Markets In March
BATS Options Records Best Month To Date With 2.9% Market Share - U.S. Equities Market Share Reaches 11.1%
April 4, 2011-BATS Global Markets (BATS), a global operator of securities and derivatives markets, today reported its best month ever in U.S. equity options market share with 2.9% matched market share in March 2011. The company’s equities business in the U.S. and Europe also had a strong month, reporting matched market share of 11.1% and 5.9%, respectively.
BATS operates two stock exchanges in the U.S., the BATS BZX Exchange and BYX Exchange; BATS Options, a U.S. equity options market; and BATS Europe, an FSA-authorised multilateral trading facility in Europe. March 2011 highlights for each of these markets are outlined below.
BATS U.S. equities markets: BATS U.S. equities market share of 11.1% was the third best month in company’s history. The company’s best month was May 2010 when the company reported 11.4% matched market share.
e-Atlas of Global Development Launched by World Bank Easy Mapping with New Data Visualization Tool
April 4, 2011--The World Bank today launched the e-Atlas of Global Development, a free, online, interactive tool, which maps and graphs more than 175 indicators from the World Bank’s development database. The launch coincides with the release of a new print edition of the Atlas of Global Development, a concise and up-to-date reference for journalists, teachers, students, and anyone interested in better understanding today’s critical development issues.
Developed in collaboration with HarperCollins, the e-Atlas of Global Development allows users to easily and quickly map and chart economic and social indicators and compare country outcomes. Users can export customized, professional quality, full color maps and graphs. Other features include scalable maps, timeline graphing, ranking tables, and import and export functions for sharing data and graphics. Critical issues such as poverty, food production, population growth, climate change, international trade, and foreign direct investment are covered. The e-atlas can be found at data.worldbank.org/atlas-global.
“We are always looking for new and innovative ways to display and disseminate our data”, said Carlos Rossel, Publisher at the World Bank. “Our atlases are evolving with the times and with the changing needs of our users. This new e-Atlas is a powerful visualization tool for anyone interested in learning more about the state of our world”
OCC Announces 19% Increase in Cleared Contracts for Record Volume Month in March
April 1, 2011--OCC announced today that total volume reached 421,466,054 contracts in March, representing a 19 percent increase over the March 2010 volume of 353,294,816 contracts. This marks a new record month and quarter for OCC cleared volume and is the second time total cleared volume surpassed 400 million contracts in one month. OCC ended the first quarter with total volume reaching 1,160,299,965 contracts, up 25 percent from 2010.
Options: Exchange-listed options trading increased 19 percent over March 2010 with 417,188,575 contracts and set a monthly trading record 3 percent higher than the previous record set in May 2010. Index options trading rose 13 percent from the previous March. The highest volume day for the month was recorded on March 17 when 28,603,262 contracts changed hands. Two of the top ten highest volume days occurred during the month.
Reconsidering the Role of Food Prices in Inflation -IMF Working Paper
April 1, 2011--Food prices are generally excluded from measures of inflation most closely watched by policymakers due either to their transitory nature or their higher volatility. However, in lower income countries, food price inflation is not only more volatile but also on average higher than nonfood inflation. Food inflation is also in many cases more persistent than nonfood inflation, and shocks in many countries are propagated strongly into nonfood inflation.
Under these conditions, and particularly given high global commodity price inflation in recent years, a policy focus on measures of core inflation that exclude food prices can misspecify inflation, leading to higher inflationary expectations, a downward bias to forecasts of future inflation and lags in policy responses. In constructing measures of core inflation, policymakers should therefore not assume that excluding food price inflation will provide a clearer picture of underlying inflation trends than headline inflation.
view the IMF working paper-Reconsidering the Role of Food Prices in Inflation-IMF Working paper
BlackRock * New Report * ETF Landscape: Industry Review - February 2011
March 31, 2011--At the end of February 2011, the global ETF industry had 2,557 ETFs with 5,802 listings and assets of US$1,367.4 Bn from 140 providers on 48 exchanges around the world. This compared to 2,091 ETFs with 3,998 listings and assets of US$1,001.9 Bn from 115 providers on 40 exchanges at the end of February 2010.
Additionally, there were 1,092 other ETPs with 1,808 listings and assets of US$175.3 Bn from 57 providers on 23 exchanges. This compared to 630 ETPs with 921 listings and assets of US$150.3 Bn from 40 providers on 18 exchanges at the end of February 2010.
Combined, there were 3,649 products with 7,610 listings, assets of US$1,542.7 Bn from 174 providers on 52 exchanges around the world, as at the end of February 2011. This compared to 2,721 products with 4,919 listings, assets of US$1,152.2 Bn from 139 providers on 43 exchanges at the end of February 2010.
Currency Composition of Official Foreign Exchange Reserves (COFER)
March 31, 2011-The COFER database
COFER is an IMF database that keeps end-of-period quarterly data on the currency composition of official foreign exchange reserves. The currencies identified in COFER are:
U.S. dollar,
Euro,
Pound sterling
Japanese yen,
Swiss francs, and
Other currencies.
FTSE Group Extends Access To Alternative Asset Classes With The Launch Of The FTSE Infrastructure Index Series
March 31, 2011--: FTSE Group (“FTSE”), the award winning global index provider, today announces the launch of the FTSE Infrastructure Index Series (FIIS); a comprehensive and complementary set of nine indices diversified across six infrastructure sub-sectors, to reflect the market’s evolving definition of infrastructure.
The FIIS enables investors to research, benchmark and gain exposure to both physical infrastructure assets and the important networks, support and conveyance services that underpin global infrastructure development.
The new index series provides investors with balanced exposure to global infrastructure whilst reducing the risk of over-concentration in individual sectors. Both core infrastructure (companies that derive over 65% of their revenue from infrastructure) and infrastructure related opportunities (companies that derive over 20% of their revenue from infrastructure) are incorporated in the index series, offering investors the flexibility to tailor exposure in accordance with investment objectives and risk appetites.