World Market Trading
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Trading Features / Strategies from Simon Denham of Capital Spreads.
Overnight the Nikkei has advanced some 500 points after Japanese growth (far from edging towards recession as was feared) came in at double economists estimates at 3.7% annualised in the forth quarter. With analysts expecting growth to be around 1.7% the question must be asked as to how, with such a massive source of data, the statisticians with all their wonderful models to play with can have managed to get it so wrong.
An entire economy is like a massive super-tanker whose momentum takes an enormous amount of time and space to turn in another direction. Alterations of this magnitude should have shown up in shipping volumes, credit facility increases or just general boardroom chitchat.
The increase has come from the expansion of the Asian and Russian market place as Japanese exporters look for other regions to pick up the baton from the tiring North American and European consumer. Unfortunately whilst Europe and the UK still appear to be very reliant on US growth the rest of the world is moving ever further away from the American mall.
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The Chinese have been cozying up to the African nations in attempts to secure their resource supply lines and this might be just what these strife torn parts of the world require. Whilst the US and Europe sit around wringing their hands whenever one of the more extreme African leaders goes off at the deep end, Beijing is very unlikely to tolerate some rampaging warlord ripping up mining contracts or ruining infrastructure. Elsewhere, Australia’s exporters are now more dependent on the emerging markets than on Europe or the US and their unemployment rate fell to its lowest level since 1974 as demand from its mining sector continued to power the economy. Indian growth is also showing few signs of slackening off and ever increasing news of investment money flowing from the Sub Continent into Europe rather than the other way round is likely to prove just the beginning.
Yes, the UK, the States and much of Europe are struggling against the low cost economies of the Far East but this is hardly a new phenomena. The real fear is whether we have reached a pivotal point where the accumulated wealth of the developed economies is no longer enough to keep growth on track. Will demand (not supply) from the emerging markets become the deciding factor in the years to come?
In Germany we are seeing the possibility of a REAL banking crisis not the ersatz one of the Northern Rock. Over there they actually have banks on the cusp of going bust because of losses on investments (not because of the technical drying up of the Money Markets). This is a far more serious matter as it calls into question the financial stability of all banks that have lent money to the ailing units. The whole banking system is a web of interconnecting loans. Bank A lends to bank B who might have another unit lending back to Bank A and Bank C etc etc. If too many of the supports are put under pressure the fear of a domino effect of bank failures begins to rise. Ah well just another thing to worry about!!
The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
Article provided / approved by Capital Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'World Market Trading' edited by SD, updated 14-Feb-08
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