Economic Fundamentals

WEEKLY COMMENT 10-03-2016

By Barry Edwards

Economic Fundamentals

The Peterson Institute for International Economics (PIIE) is renowned for their analysis of world finance. They published recently a report that looks at the economic statistics of all the major countries around the world to demonstrate that the condition of government finances is not as bad as the markets are projecting. The report explains that, in the main, most countries are coping with the aftermath of the ‘Great Recession’ quite well and the economic fundamentals are much sounder than the recent turmoil in markets suggests. read more

Global Trade

WEEKLY COMMENT 3-03-2016

By Barry Edwards

Global Trade

 

One of the best ways to tell whether the world economy was growing was to look at the world trade statistics and see if the quantity of goods being transported was increasing. The cost of shipping was another guide to demand around the world. The recent figures for both these indicators are not encouraging; the IMF and the OECD both forecast lower global trade growth and the shipping rates are as low as they have been for many years.

The conclusion would have been that the world is headed for serious recession and preparations should be made to counteract this event which some commentators are suggesting now. This may be why some people are nervous of markets and could go some way to explain the recent gyrations in stock markets around the world. However, a report out this week by McKinsey Global Institute has a very different explanation which states that digitization has transformed world trade and now accounts for about one third of all activity and increasing rapidly. read more

EU Strategy for Growth

WEEKLY COMMENT 25-02-2016

By Barry Edwards

The Italian Ministry of Finance published a paper this week entitled ‘A Shared European Policy Strategy for Growth, Jobs, and Stability’ which is a recommendation to encourage the EU authorities to do more to stimulate growth in the Eurozone. The first surprise is that it is an Italian paper which is a country that has tended to ignore some of the economic structural recommendations from the EU Commission ever since they have been a member of the EU and its predecessor the EEC. read more

Restructuring Finance

WEEKLY COMMENT 18-02-2016

By Barry Edwards

Restructuring Finance

 

This week an interesting commentary was published on the Project Syndicate site by Joseph Stiglitz and Hamid Rashid about ‘What’s Holding Back the World Economy’ (two pages). It was inspired by the United Nations ‘The World Economic Situation and Prospects for 2016’ (148 pages) which was also published recently. You can read both if you click on the links below, I would recommend that you read the executive summary of the UN report which is only 5 pages; read more

Bank Reassessment

WEEKLY COMMENT 11-02-2016

By Barry Edwards

Bank Reassessment

 

The markets this week have taken another unexpected fall reflecting the reassessment of the future profitability of the banking sector. The negative rate that central banks are paying banks to deposit funds with them now includes Japan which inspired a worldwide review of the viability of the whole sector. Most fund managers believe that banks will not charge customers to deposit money with them and therefore will take the loss on deposits while the rates are negative. Clearly, that means banking will be much less profitable in the near future and consequently the share prices are currently overvalued. read more

Small Business Report

WEEKLY COMMENT 4-02-2106

By Barry Edwards

Small Business Report

The British Business Bank (BBB) has published its report headed ‘Small Business Finance Markets’ this week which is a very comprehensive review of the sector with detailed statistics of the funding provided. It is well written and worth reading even if you only read the executive summary, click on the link below to see the report;

http://british-business-bank.co.uk/wp-content/uploads/2016/02/British-Business-Bank-Small-Business-Finance-Markets-Report-2015-16.pdf read more

The future of the EU

WEEKLY COMMENT 28-01-2016

By Barry Edwards

The future of the EU

This week has been dominated by the immigration problem, Brexit and the small amounts of tax that is paid by the technology multinationals in the EU. There is also another discussion evolving from many member countries about the future of the EU and whether it can survive the many difficulties that it is now facing.  Many commentators are saying that if a resolution is not found to the pressing problems, the continued existence of the EU in its current form is seriously threatened. Ever since the financial crisis, the challenges that keep on confronting the politicians are testing the structure and concepts of the union to the extent where it is not easy to predict the likely outcome. read more

A Reassessment of Markets

WEEKLY COMMENT 21-01-2016

By Barry Edwards

A Reassessment of Markets

The continued selling in markets seems to have halted and all world stock markets have regained the losses incurred during the week. The reason for this was the announcement by Mario Draghi, the ECB president that the central bank will do all that is required to get inflation back to around 2% in the EU. As we discussed last week the reason for this sudden pessimism last week was blamed on China but the conference at the World Economic Forum in Davos where the leaders in the business community have gathered this week has suggested there are other reasons for this correction. read more

Looking Ahead in 2016

WEEKLY COMMENT 14-01-2016

By Barry Edwards

Looking Ahead in 2016

The challenging start to the New Year has created an aura of uncertainty amongst fund managers and commentators who have been surprised at the sharp decline in stock markets around the world. The culprit was clearly China with the stock markets and currency declining consistently as each day passes dragging down all major developed markets around 10% establishing a severe correction which was not predicted by anyone.

The strange thing is that there has been no sudden bad news or event that could be identified as the main cause. It appears that the continued decline of the Chinese stock market following on from the end of last year has unsettled investors who have reacted by selling shares all around the world. Most of the bad economic news from emerging markets has already been discounted in the markets making this correction even more unusual. read more