Saturday, June 16, 2012

Economic Summary for the week ended 15th June 2012

Global - Developing nations should brace themselves for weak growth and "tougher times", the World Bank has warned this week.
It said that there may be "a long period of volatility in the global economy" as the eurozone debt crisis escalates. The bank forecast that developing economies will grow by 5.3% this year, down from 6.1% in 2011.
It urged policymakers to take adequate long-term measures to ensure that they can sustain growth.
"Developing countries should focus on productivity-enhancing reforms and infrastructure investment instead of reacting to day-to-day changes in the international environment," said Hans Timmer, director of development prospects at the World Bank.
Japan - Japan's core machinery orders, a key indicator of capital expenditure, rose more than forecast in April in a positive sign for the economy.
The figures come amid fears that a slowing economy coupled with a strong yen might see manufacturers shift production overseas. However, analysts said the data showed that firms were confident about growth.
"The machinery orders are an early indicator of how the economy is doing, giving us an hint of investment trends," Martin Schulz of Fujitsu Research Institute in Tokyo said.
China - The International Monetary Fund (IMF) has flagged "significant downside risks" to China's growth outlook, but stands by Beijing's ability to support the world's second largest economy. Concluding its latest annual economic health check of the country, the IMF predicts that growth will moderate at about 8% this year, down from the 9.2% seen in 2011.
David Lipton, first deputy managing director of the IMF, says: "We support the authorities' ongoing effort to promote higher quality growth while at the same time fine-tune macroeconomic policies to help ensure that growth does not slow too much."
Emerging Markets - Emerging-market stocks rose this week, putting the benchmark index on course for its biggest weekly gain in four months, on speculation central banks will take steps to shelter economies from Europe's debt crisis.
"It looks like global central banks are already prepared for aid packages in case economies slow further and Greece's problem deteriorates," Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., said.
Emerging-market funds lured inflows of $920m during the week ended June 13 after China cut interest rates and Spain asked euro-region governments over the weekend for as much as EUR100bn to help shore up its banking system.
Ratings - The credit ratings of Spain and Cyprus have been cut by rating agency Moody's. The move follows a EUR100bn ($126bn) bailout of Spain's banks by fellow eurozone countries agreed over the weekend. Cyprus is expected to seek its own bailout in the coming days.
Spain's government faces its highest borrowing costs in debt markets since joining the euro, as lenders fear for the country's future in the eurozone.
Spain's rating was cut three notches, from A3 to Baa3 - one notch above junk.
Cyprus' rating fell two notches, from Ba1 to Ba3, pushing it deeper into junk status.
Greece/Global - 10 million Greeks will vote on Sunday for a decision that may determine the fate of the world's first democracy and the future of the Euro.
The June 17 vote will determine whether Greeks, in a fifth year of recession, accept open-ended austerity to stay in the euro or reject the conditions of a bailout and risk the turmoil of becoming the first to exit the 17-member currency. World leaders have said they'd prefer a pro-euro result, underscoring concern over global repercussions.
"I want Greece to remain in the euro zone, but Greeks must understand that this requires a relationship of trust," French President Francois Hollande said. "If the impression is given that the Greeks want to distance themselves from their agreed commitments and to abandon every prospect of recovery, there will be countries in the euro zone that will prefer to terminate Greece's presence."
Commodities - The price of oil rose the most in more than two months on speculation the Federal Reserve will loosen monetary policy to spur growth and as OPEC (organisation of the Petroleum Exporting Countries) members were asked to cut production that exceeds their current output ceiling.
Oil advanced 1.6% as a worse-than-expected jobless claims report fuelled expectations that Fed policy makers will announce new stimulus measures next week. OPEC Secretary-General Abdalla El-Badri said the group's production is approximately 1.6 million barrels a day above the 30 million target renewed on Thursday.
Spotlight on: Investor trends & fighting inflation
Despite rising concerns about meeting investment goals, most investors are "stuck in place" with current portfolio allocations, according to findings released from the latest "Barometer" survey of investors and advisors conducted by BlackRock.
Only around one in 10 investors is making portfolio adjustments, as the results suggest uncertainty in the face of volatility is battling optimism about the future direction of the market.
While trying to manage the challenges of uncertain and volatile markets, many of the investors surveyed are also grappling with the profound financial management challenges of retirement planning.
Nearly half of investors, 46%, say they are considering a later retirement than they initially planned, up from 30%a year ago. Their advisors, polled in a separate survey, point to concerns about longevity of savings, severe loss of portfolio, and market volatility as the top three factors affecting retirement timing.
Of those surveyed, 62% of investors said they were optimistic about the market's performance over the next six months. Yet when asked to describe today's environment, investors are most likely (57%) to characterize conditions as "uncertain," and only 15% described the markets as full of opportunity.
As a result, investors are sticking with their current portfolio allocations, with nearly half, 46%, making no changes. The percentage of investors adjusting portfolios has dipped from 21% six months ago, to 11% today.
Investors are uncertain not just about the markets generally, but also about how specifically to deploy their money. The number one reason investors are holding onto cash, according to the survey, is "uncertainty about where to invest" followed by a belief that it's a poor investing environment and fear of losing money.
"Uncertainty is often a crippling factor when it comes to investing and all too often, when uncertain, investors do nothing at all," Mr. Porcelli commented. "However, many investors don't realize that when you factor in inflation, staying in cash can lead to a deccumulation of assets rather than accumulation of assets over time."
56% of advisors and 67% of investors said that while they consider the impact of inflation on their savings, they are not focused on it. However, most advisors (87%) anticipate inflation will increase over time.
"Inflation risk is the danger that an investor's portfolio returns will not keep pace with inflation, eroding the purchasing power of income over time," added Mr. Porcelli. "Inflation is harder to notice on a one, two, or three-year basis, but our research has shown that inflation of just 3% can reduce the purchasing power of a portfolio by 50% over a 25-year time frame."
*BlackRock's "Barometer" research is conducted online, two times per year, with support from research firm Market Strategies International. For the latest wave of the research, conducted from April 23 to May 7, 353 investors and 377 financial advisors were polled. All of the investors surveyed work with financial advisors, and 93% are age 56 or above, reflecting a general focus on investors in their peak wealth accumulation phase and dealing with the potential or actual financial management implications of retirement. All those surveyed had $250K or more in investable assets.

No comments:

Post a Comment