Daily Market Reviews by MAYZUS.com

[UWC Neeraj]

22 FEBRUARY 2013: WEAK DATA SUPPORT CONTINUED EASING

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Global markets are still bewildered and confused as to further direction after the steep plunge Wednesday. Asia is marginally up in morning trade. Yesterday’s increase in jobless claims, weak factory activity and consumer data were a stark reminder on the real health of the US economy. It seems, however, overly optimistic to give up bond buying and monetary easing. Federal Reserve’s (FED) published January meeting records, turned markets upside down and raised questions whether these policies will be terminated earlier than planned.

The new data presented convincing arguments in favor of continued monetary easing. FED is currently buying USD 85 billion in bonds monthly. It has earlier stated that these purchases are going to continue until the labor market improves substantially. 6,5% unemployment has been set as a target. FED records demonstrates that its members are increasingly divided over the wisdom of these policies. The “Doves” want to go on with monetary easing. The traditionalist don’t. This division rattles global markets.

Jobless claims increased last week with 20 000 as consumer prices rose 1,6% and business activity index plunged. These numbers make it necessary for FED to think twice before giving up on the growth stimulus policies. Commodities and precious metals which along with stocks were big losers on Wednesday, have recovered as a result of technical corrections after the steep fall earlier in the week. Gold was especially strong hit and lost its shine as safe haven. Gold is trading 0,5% up at 1582. Oil prices have stabilized with technical graphs still pointing down.

USD continues to gain ground, but slower than yesterday. Euro/USD trades at 1.3216. USD/JPY is flat on 93,3075. The Scandinavian krones have lost substantially against the USD during the week. USD/NOK trades at 5,66 compared with a low on 5,43 earlier in February. The Danish krone (DK) is for the first time in weeks trading higher than the Norwegian krone (NOK).

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25 FEBRUARY 2013: MOODY’S REDUCED A RATING OF GREAT BRITAIN WITH AAA TO AA1

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The trading session on Friday has passed more positively at the stock exchanges of the USA and Europe comparing to the days before. Investors returned to purchases, without having paid attention to statements of European Commission which reduced the forecast on growth of world gross domestic product in 2013 from 3,3% to 3,2%. Thus figures across Spain (-1,4% at a budget deficit on 6,7% from GDP), Italy (-1% at 2,1%), Portugal (-1.9% at 4,9%) really depress. However, this news didn't confuse investors, and the European indexes FTSE (+0,7%), DAX (+1,03%), CAC (+2,25%), MIB (+1,4%) carried out all day in "a green zone" and finished the session of a steady growth.

The American indicators: Dow Jones +0,86%, S&P +0,88% and NASDAQ +0,97% also finished week with a rebound, without looking neither at inconsistent information from Europe, nor on rising to the USA "the fiscal cliff" to which there is only a week.

Statistics from China added a negative sentiment in the markets this morning, where the PMI index from HSBC, in February sharply decreased from the maximum reached in last month for 2 years, but remained above important level of 50 points. Thus Asian indexes began new week in "a green zone", and NIKKEI arranged the next rally for 2% on news about planned appointment to the post of the head of Bank of Japan H. Kuroda, the known supporter of active stimulation of economy.

The situation in world economy still does not show a lot of optimism. The news coming from Moody's published in the night from Friday to Saturday became a clear proof of it. The agency reduced a rating of Great Britain with AAA to AA1. The reason of this decision of Moody's called weakness of the British economy which, according to agency, will keep sluggish growth rates at least till 2016.

Oil, however, moderately becomes cheaper today under pressure of a negative. Brent drifts next to a level 114.24, adding 0.12% and WTI is stable on 93.209. EUR/USD pair is traded on a 1.3216 this morning.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

26 FEBRUARY 2013: ITALIAN ELECTIONS BECAME A REASON FOR CORRECTION IN THE MARKETS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Yesterday the world markets showed different dynamics. So, the European indexes finished Monday’s trading session moving upwards. Meanwhile, the American indexes began week with essential decrease. As a result of sales the Dow Jones and S&P 500 indexes could not keep the key levels - 14000 and 1500 points accordingly. Following the results of Monday the Dow Jones index lost 1,55%, the S&P 500 index lost 1,83%.

Markets were correcting due to the news coming from Italy. It became known that following the results of processing about 90% of bulletins two parties received identical result. The victory was won by Pierre Bersani's left-centrist coalition and Silvio Berlusconi's right-centrist coalition. Let's remind that Bersani already declared commitment to the economic reforms which are carried out by the old government led by Mario Monty. Berlusconi's victory is extremely undesirable for the Eurozone.

One of the most expected events for today is speech which will be given by the head of FRS B. Bernanke to bank committee. The head of FRS in his speech, most likely, will give an assessment to carried-out stimulating programs of FRS, namely repayment of assets as after announcement of protocols from the last meeting of FRS fears about early turning of programs increased.

USD/JPY pair yesterday has been decreasing from a level of 94.7 to a level 91, losing 4%, but at the current time is back to a level of 92.2. Most likely such movement was caused by strong weakening of euro and, respectively, a capital overflow in traditionally protective currencies - dollar and yen. EUR/USD is traded on a level 1.3062.

On Monday we have seen rather volatile session in the oil market where the positive news on oil import coming from China (+7% in January), have boosted price back to $115.8, but at closing price went again back and this morning Brent is losing 0.63% and traded on a level of $113.719.

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[UWC Neeraj]

27 FEBRUARY 2013: BERLUSCONI “DERAILED” WORLD STOCK MARKETS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Yesterday we again could not see a uniform dynamics on the world stock markets. The European indexes fell off on news on outcome of the Italian elections, having lost on the average 2,5%. At the same time the American indexes could show ascending dynamics, having added about 0,7%.

There were a few reasons for activity of buyers in the American market. First, speech of the head of the Federal Reserve System (FRS) Ben Bernanke. The banker sounded the position concerning influence of a new round of the program of quantitative easing (QE3) on economy of the USA. Bernanke focused attention of investors on advantages of QE3, among which economic recovery against control of inflation at the level of 2%. According to the head of FRS, benefit from soft monetary policy outweigh the related risks so turning of stimulating measures is not necessary at the current stage.

Besides that, another source of a positive was data coming from the market of real estate of the USA. So, sales of new houses in the country unexpectedly grew by 15,6% in annual expression. Let's note that last year became the most successful in the housing market in the USA after 2009. In 2012 growth of sales of new buildings became maximum since 1983, having made 19,9%. It is necessary to note, that we can expect that real estate market will continue to develop this year as well, but definitely much slower.

Meanwhile, in Europe the main subject for discussion there are parliamentary elections in Italy. They caused a lot of noise and confusions in the financial markets. Profitability of the Italian bonds in the secondary market flew up to 4,8% that became a maximum level since the beginning of December, 2012. Besides, political risks in Italy led to euro exchange rate falling to a minimum level since the beginning of year. This morning, we can see EUR/USD pair traded on a level of 1.3076.

Risks of strengthening of debt crisis dragged off down world prices for oil. Brent is bargaining on a level 112.66$ and WTI on 92.78$ per barrel.

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[UWC Neeraj]

28 FEBRUARY 2013: BERNANKE AND DATA LIFT WALL STREET

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Stocks rose on Wednesday with major indexes posting their best daily gains since early January, as Federal Reserve Chairman, Ben Bernanke, gave robust support for continued stimulus policy and data pointed to modest economic improvement. In his second day before a Congressional committee, Bernanke defended FED’s buying of bonds to keep interest rates low to boost growth. Bernanke’s comments helped market rebound from its worst decline since November. Dow Jones Industrial closed at a level not seen since 2007.

A relatively smooth auction of Italian government bonds further helped temper concerns about the country’s political deadlock. The Euro held its ground against both dollar and Japanese yen on Thursday. The common currency edged up 0,1% to USD 1.3147 after steep losses following the Italian elections. The Euro hit an eight-week low on 1.3018 on Tuesday. Solid sales of Italian government bonds yesterday helped soothe the jitters that the political deadlock could destabilize Europe’s second biggest sovereign debt market.

Strong US business spending data also boosted investors’ sentiment easing worries about looming US fiscal spending cuts and prompting the yen to resume its decent after a brief spell of sharp gains earlier in the week. In Washington positions between President Barack Obama and congressional leaders over the budget crisis hardened yesterday as last ditch talks to prevent harsh automatic spending cuts beginning March 1st, failed to make substantial progress.

British sterling (GBP) is still weak trading at 1.5169 against the dollar. The Australian dollar is stronger and oil has regained some ground. Brent crude is trading above USD 112 a barrel. Also gold is somewhat stronger trading close to the critical USD 1600 level an ounce.

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[UWC Neeraj]

01 MARCH 2013: EURO FALL STEADIES IN ASIAN TRADE

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Euro steadied in Asian trade Friday morning after steep losses yesterday and after notching its biggest monthly fall – 4% - against the dollar in nine months. This as investors digested slightly disappointing Chinese data, political uncertainty in Italy and impending US government spending cuts. These combined factors sapped investor’s risk appetite and put the Euro under increased pressure.

China’s official purchasing managers’ index for February showed manufacturing activity at its slowest pace in four months at 50.1 against the predicted consensus poll of 50,2 slightly lower than expected. The data is not dramatic. Risk-off sentiment doesn't usually help the Euro, but the Chinese data is not a major factor. The unclear situation in Italy is the basic worry. Euro/USD is trading at 1.3073 well above the 1.3018 hit earlier in the week. The European Central Bank (ECB) will consider interest rates today. A further cut will put the Euro under new pressure.

The Japanese yen was relatively steady against both Euro and USD. USD/JPY trades at 92.64. The yen which usually is regarded as a safe haven in times of heightened market stress, continue to under perform after Prime Minister Shinzo Abe nominated an advocate of aggressive growth and stimulus policy to head the Bank of Japan.

The big worry in global markets is nevertheless how the sweeping US budget cuts worth USD 85 billion starting from this month, will hit growth in the world’s biggest and the global economy. The International Monetary Fund (IMF) has warned that the cuts would hit US biggest trading partners especially hard. In Washington the blame game between Republicans and Democrats are in full swing with both parties accusing each other for failure to prevent the fiscal crisis.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

04 MARCH 2013: ASIA TUMBLES ON CHINA WORRY

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments


Asian shares slipped on Monday as China tightened its grip on the property sector. Beijing increased Friday required down payments and loan rates for buyers for second homes in cities where prices have been quickly increasing in an effort to contain housing costs. This had immediately a negative effect on the Chinese markets and led to a tumble in Asia. The MSCI-index for SIA-Pacific shares are 1,3% down after Shanghai shares slipped 2,3%.

Slower growth in Chinese increasingly important services sector had also an impact. The growth in this sector was slower than in five months, reinforcing the view that the Chinese recovery remains modest. The slower Chinese growth had an immediate effect on Australia where the AXJO index fell 1.2%. Japan was the only positive spot. The Nikkei 225 rose 0,6% as the sole gainer in the region. Export companies were boosted by a weaker yen and surprisingly strong US manufacturing and consumer sentiment.

The new Governor of Bank of Japan (BOJ) stated that BOJ is ready to take whatever measures necessary to get Japan out of the vicious deflation circle. USD/JPY trades at 93,33. In spite of its budget problems USD is trading on a six months high against a basket of currencies. Currency speculators have over the last week increased their bets in favor of the US dollar.

Evidence of Europe’s problem with Spain at risk needing a state bailout is weighing in on the Euro. Data presented on Friday showed that Germany and Ireland are the only Euro zone members with factory output growth last month. Joblessness within the Euro zone rose to an all-time high. The Euro steadied at 1.3015 after slipping to a low of 1.2966 on Friday, the lowest level seen in 3 months.

Concerns about the negative impact from the S spending cuts also weighed in on US crude which is down to USD 90.59 a barrel. Brent is trading at 110,50. Gold and silver prices are hurt by the strong dollar.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

05 MARCH 2013: WALL STREET HIGHER IN CLOSING RALLY

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

In a late-day rally Wall Street pushed major stock indexes near all-time highs despite concerns about growth and China’s housing market. Any slowdown in China could affect US growth. Commodities and US-materials have a big exposure towards China. This goes especially for giants as Caterpillar and Alcoa which lost respectively 1,8% and 1,1% and were the big losers in yesterday’s trade.

Asian shares followed suit and rebounded strongly on Tuesday after a sharp sell-off triggered by slumping Chinese stocks the previous session. The MSCI-index for Asia-Pacific shares won back 1.1% of the 1.3% lost on Monday. In a prepared statement for the opening of China’s annual parliament meetings, outgoing Premier Wen Jiabao, stressed that China would boost fiscal spending in 2013 in a bid to deliver on the promised 7,5% economic growth for 2013.

This boosted the Australian stock market which rose 1,5% outperforming its Asian peers. Japan’s Nikkei stock average rose 0,8% to 53 month high. At least for now markets continue to be bullish in spite of spending cuts in the US, lack of any kind of political resolution in Italy and weaker data from China including an overheated property market. Markets are flush with capital due to monetary easing and continuous low interest rates. For the time being this seems to trump every other concern.

There are no big movements in the currencies. Euro/USD is steady on 1.3015. EU Finance Ministers met yesterday to discuss bail-out terms for Cyprus (see separate article). USD/JPY is at the same 93,50 levels as seen at the start of the week. British pound, GBP, has avoided to slump below 1.50 and trades above 1.51. Oil prices have recovered from yesterday’s low. New York crude, NYMEX, is above USD 90 a barrel. Brent crude trades at 110,25. Gold and silver are marginally higher than at the start of the week. Gold at USD 1580 an ounce.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

05 MARCH 2013: SPECIAL REPORT: CYPRUS STARTS BAILOUT TALKS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Michailis Sarris, the newly appointed Minister of finance in President Nikos Anastasiades’ government, met yesterday with his Western European colleagues in Brussels in an effort to hammer out a bailout agreement with international lenders. Cyprus needs about Euro 17 billion in aid of which 10 billion is needed to shore up the banking sector. That is fraction of what has been pledged to Greece. For Cyprus with a gross domestic product (GDP) on 18 billion it represents a colossal sum.

Speaking prior to the Ministerial meeting which is expected to focus on options to address the debt crisis in Cyprus and over renewed concerns over the future of the Euro following the Parliamentary elections in Italy. In the elections one week ago Italy rejected in large numbers reforms and austerity measures demanded by the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). Mario Monti, a former EU-commissioner which for the last year has headed a caretaker government, obtained only 10 % of the electoral votes.

Cyprus is following in the footsteps of Greece, Ireland and Portugal as the fourth country inside the Euro zone to ask for a bailout. Cyprus faces a bond repayment of Euro 1,4 billion in June. The European Union wants consequently that Nicosia reach a deal with the so-called troika of international lenders (EU-Commission, ECB and IMF) by end of March.

Troika-representatives have negotiated with the previous AKEL, a communist-led government for the last months. These talks stalled at disagreements on terms including the privatization of government assets. The Christofias-government sought aid from Russia before finally accepting a European bailout. Christofias succeeded two years ago in obtaining a Euro 4 Billion loan from Russia on favorable terms. There are now negotiations on prolonging this loan from 5 to 10 years.


Mr. Sarris stated that he did think it is necessary to make major changes to a draft bail-out agreement reached with the previous government. Sarris warned against taking an overly aggressive approach to combating money-laundering which he feared could only worsen the fragile economy of the island.

Worried by the threats for a “hair-cut” on investors deposits billions of Euros have over the last months left Cyprus for safer banks and locations as Latvia. Sarris stressed that these outflows already had been very damaging to the Cyprus banking system and worked against the common objective to stabilize the banking system. Sarris who served as a Minister of Finance between 2005 and 2008, is a former World Bank economist.

Cyprus has since the breakthrough of the Soviet Union been one of the preferred “safe havens” for Russian flight capital which have contributed heavily to Cyprus prosperity and made it possible for the three banks, Bank of Cyprus, Laiki and Hellenic bank, to take big exposures in Greek treasury bills and unsecured loans to Greek individuals. Totally the loans given to Greece over the last years are estimated to Euro 27 billion.

Prominent European politicians and especially Germans have lately stressed that Cyprus with its low taxes (10 5 flat taxation on company net profit) and lax banking regulation, have made the island a hub for money laundering.

This has been strongly rejected by the previous government. The new government also rejects these accusations. In a token that Cypriots want to maintain some level of banking secrecy to lure investors and financial services (the FX industry in Cyprus has boomed over the last years), Mr. Sarris said that there was great skepticism in Cyprus about money-laundering investigations. That would mean that anybody who has any money in the banking system has to have their name analysed and reported when they have nothing to hide.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

06 MARCH 2013: INCREASED RISK APPETITE ON DOW’S RECORD-HIGH

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Asian shares extended gains on Wednesday following Wall Street’s record close. The Industrial average index, Dow Jones, ended at an all-time high as the pan-European Euro first 300 index closed at its highest level in 4-and-a-half year. The MSCI-index for Asia-Pacific added 0,9% while the Japanese Nikkei surged 1,3%. Copper, crude oil and commodity related currencies are all up. The USD DXY-index eased 0,2% against a basket of currencies.

The markets were spurred by fast February growth in the huge US services sector and bolstered by China’s announcement of record government spending in 2013. These factors boosted investors’ sentiment and hopes of economic growth and increased demand for gods. EURO, British sterling, GBP, and JPY which have been the big losers over the last weeks, have consolidated and gained some ground. Euro/USD trades at 1.3065. USD/JPY is at 93.22.

The strong rally in the stock markets is partially a product of the monetary easing policies conducted by the US Federal Reserve since last summer and followed intentionally and in practice by several other Western central banks. There have been a lot a spare capital on the side lines waiting to strike. Over the last weeks and months we have witnessed a recirculation of capital into the more risk prone equity market. The new records are a result of this recirculation. Major investors are gambling on a turnaround in the global economy and pushed their free cash into stocks in spite of the problems in the Eurozone and an overheated Chinese property market.

Oil prices are also up this morning. Venezuela’s President Hugo Chavez lost his two years long fight with cancer and passed away this morning 58 years old. Venezuela is one of the biggest oil producing countries in the world, and Chavez has led a policy where a substantial part of the country’s oil riches have been transferred to the poor and have-nots. Chavez has also been a guarantor for domestic political stability and encouraged other Latin American countries to follow his suit. It remains to be seen whether the power vacuum created by his death is filled in such a way that political unrest and renewed pressure on oil prices are avoided.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

07 MARCH 2013: GBP AND EURO FACE STRONG PRESSURE

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

A solid job report showing that US private employers added a larger-than-expected 198 000 jobs in February, gave the dollar a strong boost yesterday, trading at its highest level against a basket of currencies in 6-1/2 months. Both the Euro and Pound sterling (GBP) are under strong downward pressure. Euro/USD dipped below 1.30 and trades at 1.2990 prior to meeting in the ECB, European Central Bank, later today. USD/GBP traded below the critical 1.50 level on rumors on monetary easing.

While the job data fueled hopes that the US economy is improving, the British pound fell to its lowest level in 2-1/2-year as market players positioned for more stimulus from the Bank of England (BOE). The strict austerity measures introduced by the British government over the last two years have not been working, and the UK economy is facing the threat of triple-dip recession. While BOE and other central banks are considering the same monetary easing policies as the US FED has practiced, US is debating whether to exit their bond buying program.

After the dollar index, DXY, hit, a bottom level of 78,918, in the beginning of February it has rallied 4% since. The stronger employment data along with better housing figures are likely to fuel speculation that fed will end its bond buying program sooner than expected in spite of FED Chairman, Ben Bernanke’s strong statement to the contrary only weeks ago.

Of the three major Western central banks; ECB, BOE and FED, BOE is the most likely to act in favor of more easing. Three of BOE’s members voted in favor of quantitative easing last month. It is expected that a majority this week will opt for a moderate 25-billion-pound balance sheet expansion. That would put sterling under further strong pressure. ECB meets in Frankfurt today on the backdrop of a political deadlock in Italy and prospects for a further fall in the Euro. It is, however, expected that ECB will keep its policies unchanged.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

08 MARCH 2013: USD/JPY RALLIES BEFORE US JOBS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The dollar surged to its highest level against Japanese yen in 3-1/2-year before US job numbers for February are going to be presented later today. USD stands at 95,43 yen up 0,6% since yesterday. It is expected that that the US economy last month created net 160 000 new jobs. The unemployment rate still stands at 7,9% far from the 6,5% which the Federal Reserve (FED) has set as target for ending monetary easing.

Investors waiting for more dovish signals from the European Central Bank (ECB) at its press conference yesterday was disappointed. The single currency posted its biggest rally this year and jumped more than 100 points against the dollar and stands at 1.3092 after flirting with 1.29 figures earlier in the week. ECB President Mario Draghi plaid down the threat of contagion to other euro members following the Italian political stalemate. Draghi stressed growing market confidence in the Euro which had EURO bears quickly to cover short positions.

The Euro skyrocketed 2% to 124,57 against the JPY. It stood at 118,74 last week. The 34 month peak of 127,71 set last month is thereby brought back in play. The rally might, however, be short played with investor’s attention back on Chinese trade data and whether the US unemployment rate will stay at 7.9%.

Bank of England (BOE) kept its guns yesterday and held fire on the expected more economic stimulus. The downward pressure on British sterling (GBP) continues, however. USD/GBP trades again below 1.50 after seeing some recovery yesterday. There is no change in the choppy trading pattern in commodity related currencies. Oil prices are steady. Gold fell back from USD 1583 an ounce reached yesterday to 1567 this morning.

The stock rally in the United States continue. Dow Jones ended at record high for the third straight day boosted by expectations of a pick-up in the payrolls report. Growth oriented sectors led the gains with strong jumps in Bank of America (up 2,9%) and JP Morgan Chase (1,2%). Worries about the path of US fiscal policy and the Euro zone crisis loom, however, in the background. For the moment the Bulls are in advance.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

11 MARCH 2013: US-DOLLAR KEEPS THE UPPER HAND

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The USD keeps the upper hand in the currencies markets and continue to gain both against a currency basket and major currencies as Euro, GBP and JPY. USD/JPY traded at 96,10 – a 3-and-a-half year high following surprisingly strong USD labor data on Friday. US employers added a more-than-expected 236 000 workers to their payrolls in February. The jobless rate fell to a four year low of 7,7%.

There is still a way to go before the unemployment numbers reach the 6,5% target set by the Federal Reserve (FED) and monetary easing is reconsidered. Before this target is obtained the US economy must produce more than 200 000 monthly jobs for the next three consecutive months. The strong February data has, however, created a momentum and new optimism that the US economy finally is turning and lying the financial crisis from the autumn 2008 behind.

Risk appetite was, however, curbed by a mixed bag of economic data from China painting a patchy recovery in the world’s second-largest economy. The data signaled a looming dilemma for policymakers, as inflation stood at a 10 month high in February. Factory output and consumer spending were weaker than forecast. The data caught commodity prices between growing optimism of increased consumption and a stronger dollar. Non-dollar holders are buying dollar-denominated commodities.

In Asia the MSCI-index for Asia-Pacific was up 0,1% while Shanghai fell 0,3%. The Dow Jones industrial average posted its fourth consecutive record high on Friday. European shares also jumped on the strong US labor data. The strength of the dollar is also a reflection of more fundamental money flows out of the yen and euro. These developments nudge the dollar higher. Currency speculators are boosting their bets in favor of USD and raised their short positions in most other currencies as yen, pound sterling GBP and Euro. Oil and precious metal prices keep steady.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

11 MARCH 2013: SPECIAL REPORT ON CYPRUS: CRITICAL TROIKA TALKS CONTINUE IN CYPRUS

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Cyprus will this week continue to fight for the terms and conditions of the bail-out principally agreed in Brussels. While the new president, Nikos Anastasiades, during the election campaign stressed that semi-governmental organizations (SGOs) would be left untouched this is now coming to a crucial test.

It also seems that the international lenders have turned up the heat, asking Cyprus to raise its corporate tax and introduce a tax (levy) on capital gains and a financial transaction tax to ensure it can repay a bailout.

No final decisions are taken, but Eurozone officials stress that these options are on the table. In his former interviews Anastasiades has stressed that privatizations of CYTA telecommunications, the Electricity authority, Port Authority and Cyprus Tourist Organization might be postponed for might be three years depending on recovery and progress on other reforms.

A privatization of CYTA is said to give approximately Euro 2 billion in state coffers, but has created an outcry among unions which fear loss of working places.

Eurozone officials have also indicated that Cyprus would have to give up its favorable 10 % tax on net profit which corporations are enjoying today. An increase to 12,5 % has been indicated. The low corporate tax rate is one of the few competitive advantages that Cyprus enjoy compared with other EU destinations. The low corporate tax is one of the major reasons why especially companies from Northern Europe over the last years since Cyprus entered the EU has settled daughter companies here.

During a meeting between the Governor of the Cyprus Central Bank and the International Monetary Fund (IMF) at the end of last week, IMF reportedly rejected the figure needed for a recapitalization of the Cypriot banks. While the government has stressed that the international financial company, PIMCO’s figure were too, high, IMF is of the opposite opinion. IMNF claims that PIMCO’s figures are far, too, optimistic.

The capital gain tax which the Governor of CBC indicated last week shall be applied to domestic and foreign depositors alike, and is expected to provide the government with an extra revenue of 200 – 3000 million Euro. The tax is said to be set at 0,01 % of the value of trades for derivatives and 0,1 % for stock and bonds.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

12 MARCH 2013: ASIAN STOCKS HIGHER ON RECORD WALL STREET

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Wall Street’s record close overnight bolstered most Asian shares on Tuesday. Growing confidence in the US economy underpinned investors risk appetite. The Japanese yen slipped to fresh lows on speculation over imminent monetary easing. USD/JPY stands at a new low of 96,51. JPY is losing ground also against Euro and Australian dollar. Euro/USD is trading at 1.3027.

The US stock indexes extended its winning streak to seven sessions and touched its highest intraday level since October 2007. Dow Jones closed at a record high 14 447. The MSCI-index for Asia-Pacific also continued up led by financials echoing US trading where finance were the best performing sector. Also Australia, Hong Kong and Shanghai were up as the Japanese Nikkei. The weaker yen is giving exporters a welcomed boost and Nikkei was up for the eight day in row.

The dollar index, DXY, has benefited from last week’s strong labor data, and continues to jump against the yen. Analysts stress that dollar/yen may take a pause in the second quarter when seasonal weaknesses typically slow US economic indicators. They see a possible USD/JPY downside on 92 yen to a dollar with strong technical support around the 90 level. For now the trend is clearly towards a continued weaker yen.

Euro/USD is steady at 1.3030 level. The Euro is under pressure from Italy’s inconclusive last month elections which are weighing in and delaying the country’s fiscal reform efforts. Gold has edged to 1883 marginally up from yesterday. In new York US crude, NYMEX, traded up 0,2% at USD 92,21 a barrel. Brent crude trades up from below 110 to USD 110,20 a barrel.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

13 MARCH 2013: FEAR OF TRIPLE DIP RECESSION PUTS GBP UNDER PRESSURE

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Fears of a triple-dip recession put new downward pressure on British Sterling (GBP) yesterday. January data showed a surprise fall in British industrial output. This pushed GBP down to a low level of $1.482. USD/GBP has since recovered and trades 0,2% to 1.4933. The state of the British economy is highly questionable. Some analysts are waiting an even weaker British sterling, and expect to see that USD/GBP can fall as low as 1.35.

Asian shares fell on Wednesday as the recent stock rally run seems to run out of steam. The MSCI index for Asia-Pacific outside Japan fell 0,6%. Stocks in Australia, Hong Kong and mainland China also fell from 0,6 to 1%. The Dow Jones Industrial, however, posted a new record high rising for the eight straight day on Tuesday. European shares retreated just short of fresh 4-and-a-half year high. Some investors fear that stocks have risen, too, quickly without fundamental support. Investors might be more risk willing, but are still scared by past events as the financial crisis in 2008 where fingers were burnt.

USD/JPY which fell to a low of 96,71 yesterday, trades today at 95,87 reflecting fears that the yen has fallen, too, steeply. The Nikkei stock index retreated 0,5% on profit taking after the last days strong rally; boosting exporters taking advantage of a weaker yen.

Euro/USD is steady in the interval between 1,3030 and 1.3040. It was weighed down on Tuesday by a warning from the Chairman of the Bundesbank, Jens Weidmann, who is also on the board of ECB, the European Central Bank. Weidmann stated that euro crisis in no way is over. In other developments drought has put the New Zealand agricultural dependent currency under pressure.

NYMEX crude is up to USD 92,71 a barrel while Brent crude is weaker at 109,64. Gold, silver and copper are all up 0,2% clinging to gains earlier in the week. Gold trades at USD 1592. In yesterday’s daily report, March 12th, gold prices due to a printing error were said to be marginally up USD 1883. The real price was 1583. Regular readers of the Daily Report would have observed that gold prices lately has been in the interval between USD 1550 and 1585.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

14 MARCH 2013: RETAIL REPORT BOOSTS DOW TO NEW HIGH

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

Surprisingly strong retail sales helped the Dow Jones Industrial to rise for the ninth straight session in a stock rally not seen since 1996. The new record high posted for DOW is 14 455. Also Nasdaq edged higher to 3 245. Trading volume was light with investors consolidating positions after a strong run up in the three first months of the year. Sign of strength in the economy and the Federal Reserve’s (FED) monetary easing have accelerated the advance of US equities, but many investors are asking whether we are in for a technical correction. The retail sales report helped underscore the impression that the economy is gaining momentum.

Asian shares fell for the second day in row with regional factors outweighing the positive sentiments from another Wall Street record close. The MSCI-index for Asia-Pacific was down 0,6%. Australia plunged 1% in spite of positive employment numbers. The Australian dollar reacted positive to the employment news and hit a five-week high. The Japanese Nikkei bucked the negative trend and added 0,4%. Net inflows in Japanese mutual funds reached USD 11 billion in February. A domestic stock rally for the last four months have increased investor’s appetite for Japanese stocks.

Monetary policy direction remains diverse in Asia as countries also watch development in Chinese economy and North Korea closely. Japan wants powerful monetary easing to get out of a vicious deflation spiral harming its economy for two decades. Other central bankers are fearful of inflation. South Korea has been holding the interest rate steady at 2,75% for the last half year.

The Australian dollar jumped to USD 1,0383 after employment soared by 71 000 in February. JPY continues to gain strengthen against USD trading at 96,03 down from its 96,71 peak on Tuesday. Euro/JPY has also retreated from its record high on Tuesday. The brighter forecast for the US economy has negatively affected the Euro trading down to 1,2947. The yield on Italian short and long term bonds increased during yesterday’s auction, the first after the rating agency Fitch downgraded Italy’s credit rating in February. Investor’s attention will today turn to the Spanish bond auction.

Oil prices, gold and silver have dropped since yesterday. NYMEX crude trades at USD 92,28 a barrel. Brent crude is down to 108,40. Gold trades at USD 1586 an ounce.

Copyright: MAYZUS Investment Company Ltd

 

[UWC Neeraj]

15 MARCH 2013: STOCK MARKET GROWTH SMILE ON US DOLLAR

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments


The Dow Jones Industrial rose for a 10th straight day in a stock rally not seen since 1996, and ended up 0,6% at 14 539. This followed a strong session in Europe. In Asia stocks rose again this morning after two loss making sessions. The rally was spurred by new US- labor market data showing a fall in the weekly numbers applying for. The data reflects that the American economy is steadily improving. A raft of recent data from retail sales and manufacturing to employment and housing have shown that the US economy is gathering steam.

In contradiction to former historical stock rallies where the green buck was used as some kind of a life jacket, the USD has this time benefited greatly on the stock market’s surge to new highs and improved economic data. Against a basket of currency, DXY, the dollar has reached a seven month high. Since January USD/JPY has jumped from 86,67 to over 96. Pound Sterling, GBP, has fallen from 1.62 to a bottom of 1.4832 earlier this week. The moves suggest that the dollar has entered a multi-year bull cycle where the dollar has outperformed nine of the major G-10 currencies.

Political uncertainty in Italy has re-ignited fear about the euro zone’s debt crisis and put new pressure on the Euro. Weak economic growth and prospects of aggressive monetary easing in Japan and Britain have driven the yen and GBP to multi-year lows. Spending cuts in Washington could for sure damper US economic growth and the FED has further pledged to keep interest rates low for the foreseeable future. But capital flows continue to rotate in the favor of US-assets and strengthen both the US economy and the dollar.

The dollar strength against JPY and Euro took a little breather on Friday. USD/JPY trades at 96,03 down from the peak of 96,71 on Tuesday. If the Bank of Japan (BOJ) follows up on its declared strong monetary easing policies, USD/JPY is likely to trade in a future range between 95 – 105. If BOJ disappoints the trading range is expected to be 86 – 96. Euro/USD was in the short term strengthened by a positive Spanish bond auction on Thursday. It trades at 1.3010. Pound sterling and Australian dollar were yesterday’s winners. The Aussie added another 0,8% after another one percentage jump on good employment numbers on Wednesday.

British pound surged yesterday as investors scrambled to cover short positions made on expectations of more quantitative easing by the Bank of England. The Bank’s Governor stated that GDP according to his opinion is properly valued and not seeking further depreciation. GDP was helped by rumors that Qatar is planning to invest billions of GBP into British infrastructure projects. The GDP yesterday’s 1% gain is the biggest seen in seven months.

These short term gains are nevertheless not expected to have any major medium or long term impact. The long medium and long term outlook point towards a stronger USD both in relation to Euro, JPY, GDP and most other currencies. These forecasts for Euro/USD point to a new test on former bottom levels 1.19 – 1.20. It is also predicted that USD/GBP can drop as low as 1.35. The corridor range 95 – 105 is the most likely medium term scenario for USD/JPY.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

18 MARCH 2013: VOTE ON CONTROVERSIAL DEPOSIT HAIRCUT TODAY

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Cypriot Parliament is later today going to vote on EU finance minister’s unprecedented decision to impose an all-out haircut on Cypriot deposits. The newly elected President Nikos Anastasiades was in Brussels with his finance minister Friday night and returned back to an uproar among Cypriot and foreigners who had entrusted their savings to the island’s banks and now found them in risk of being confiscated.

The bail-out was cut from Euro 17 to 10 Billion and implies that savers have been forced to bear the cut. Banks are by Tuesday 19th automatically going to withdraw 9,9% on deposits above Euro 100 000 and 6,75% on all smaller amounts. It is unclear whether this implies both private and corporate accounts. But most likely both. It also seems that the decision applies to accounts in all Cyprus based banks regardless of their origin country. All accounts seem to be hit in an action that best can be described as pure confiscation or theft of private savings and funds.

The unilateral action of the European Union and the Cypriot government have instituted a new practice never earlier seen in financial markets. The confiscation or “levy” which they call it, is estimated to contribute Euro 5,5 billion towards the recapitalization of the Cypriot banks. This counts for more than 50% of the bail out from the richest countries in Europe. In a televised speech on Sunday President Anastasiades defended his decision and stated that Cyprus was faced with the gravest situation since the Turkish invasion in 1974. The Cypriot government has “sugared” its measures by stressing that the confiscated funds are compensated by shares in the island’s bankrupt banks, the Bank of Cyprus and Popular Bank.

Supporters of the new president have lately stressed his good and friendly relations with Angela Merkel and other European center right leaders. “Lazy” Greeks and “irresponsible” Cypriots have for long time leading up to the German elections in September, been negative headlines in the German press. Nikos Anastasiades got his chance to prove he is Germany’s devoted friend. He might have helped Merkel’s election campaign, but does this decision serve ambitions of making Cyprus a financial center?

This is also a question of negotiating tactics. In its dealings with EURO zone finance ministers and the “troika” of representatives from the International Monetary Fund, IMF, the European Central Bank, ECB, and EU, Cyprus demonstrated that they were overeager to strike a deal. This never pays off in a Brussels nourished by confrontations and last minute’s deals. The late hours exercise in Brussels have given both Cyprus and the Euro zone members a hard lesson. It is time for blue Monday blues.

The new Cyprus government has experienced – if they believed it in before - that there are no solidarity or true friends in Europe. It does not matter whether you are a goodwill pro-European or a former communist. European relations are built on interest politics. Cyprus has less than a million people and institutes 0,2% of the Gross Domestic product inside the Euro zone. But exactly the size is why European leaders could have afforded to be a little generous. Instead EU once again demonstrated an attitude which lately has brought the Southern periphery of Europe to despair.

Today the Euro is falling 100 points close to 1,29. The message is clear. Neither markets nor Cypriots any longer trust the Eurozone reliability. Why should other Western European depositors do when their banks are bankrupt? Today Cypriot bank customers are treated dis respectfully. Their deposits are stolen and they are offered valueless shares. Next time the same medicine might be ordained to Italy, Spain, Greece, and Portugal or for that sake Netherlands.

It has been sent a clear message to whole Europe. When governments are reluctant to pay for their banks speculations and excesses private property rights do not apply. Then it is up to the man in the street to pay the bill by having their accounts confiscated.

Luckily enough MAYZUS Investment Company has been wisely enough to keep our client funds in banks outside Cyprus.

Copyright: MAYZUS Investment Company Ltd

 

[MAYZUS.Neeraj]

19 MARCH 2013: DEADLOCK OVER CYPRUS BAILOUT

DAILY MARKET REVIEWS
by Arne Treholt Vice-President of Business Development and Investments

The Cypriot parliament is scheduled to vote over the Brussels agreed bailout later today. The meeting for yesterday was postponed when party deliberations showed that there was no majority in favor of the package. The President of Cyprus informed Angela Merkel last night that he had not been able to mobilize a majority for the bailout package which has created anger and fury in Cyprus and shaken international markets. The initial reactions to the so called “levy” have been disastrous. It is likely that today’s scheduled Parliament meeting again would be postponed. A reject of the bailout shall most probably create new tumults in the markets.

The Cyprus government has decided to close the banks today and most probably for the rest of the week to avoid a rush on withdrawal of deposits. The ATM machines which were emptied during the holidays have been filled up again and are functioning.

The decision to enter private banking accounts and confiscate them at will, have had far reaching effects. Major principles are at stake. The decision to put a levy on deposit accounts have scared global markets. Nervousness and risk aversion are back in play with focus on the Euro zone. Stock markets in America, Asia and Europe fell dramatically yesterday with Asia recovering this morning after digestion.

The big question is that when this could happen to euro member with a tiny economy as Cyprus; constituting 0,2% of the total euro zone GDP, who might next in line? Spain, Portugal or Italy? If the Cyprus bailout continues to be handled in an unprofessional manner this can lead to contagion and a run on the banks all over the euro zone.

The plain content of the Brussels decision is that it overstepped and violated sacred principles of private property rights. Governments should not mess with citizen’s private banking accounts regardless of which strong arguments you think you have. The “troika” representing some of the strongest capital forces in the world, has stressed that Cyprus has an overblown banking sector. Germany and other Euro countries accuse Cyprus for money laundering and that rich Russian oligarchs presumably have deposited money in Cypriot banks.

But are these news have not come to light over night? They have lived with Cyprus since the breakdown of the Soviet Union when Russian businesses without a functioning banking system at home turned its attention to the visa free Cyprus. Anti-money laundering measures are functioning more efficiently in Cyprus today then did when Cyprus entered the European Union 10 years ago and the Euro in 2006. Cyprus has been following the same rules and regulations practiced inside the European union and the Euro zone relating to money laundering.

At the same time Cyprus has been living high on Russian capital injections. Banks, law offices and auditors have prospered and so has the real estate sector. Why this sudden change of heart? What justifies that euro ministers and President Anastasiades permit to give banks a green light to intrude on and steal from clients banking accounts regardless of whether you call it a “levy” and not theft or for that sake a bank robbery.

The Cypriot government has used the last 24 hours to try sugar a decision which from the very beginning was ill thought. Brussels have seemingly blessed that Cypriots are free to decide to exempt smaller savings account from the “levy” as long as the total confiscation stands at 5.8 Billion Euro.

That does not change the sacrosanct principles involved in spite of Euro ministers and the Cyprus government now pretending to be modern Robin Hoods stealing more from the rich than the poor. Russian and British companies and private accounts are most severely hit. President Vladimir Putin and Prime Minister Medvedev are understandably furious. Russia gave Cyprus a generous loan on Euro 2,5 billion in 2011. Nevertheless neither Euro finance ministers nor the Cypriot government bothered to consult Moscow before this crucial decision was taken.

The Cypriot Minister of Finance has planned to go to Moscow on Wednesday presumably to ask for better terms. We wish him a good trip. The Minister might find that the timing for asking for more favorable terms and conditions on existing loans is ill planned when it comes on the top of a confiscation of might be 4 – 5 billion Euros. Putin has rightly called Friday’s decision “unprofessional, unfair and creating a dangerous precedent”.

For clients of MAYZUS Investment Company it is once more important to stress. Whatever outcome the planned “levy” shall have no impact on their deposits with MAYZUS Investment Company. Only a tiny portion of our funds are placed in Cypriot banks. Client funds are with prime banks outside Cyprus.

Copyright: MAYZUS Investment Company Ltd