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Global Economies and markets

The Markets weakened a little last month but not as much as feared perhaps. They tripped as miners weakened and banks were also indecisive, probably for different reasons. The 20 to 25% correction has not hit us yet but of course there is still time during the remainder of the year. Investors seem to be waiting for more clarity of the way things will evolve. It is predicted that US interest rates will stay low for longer than expected and this could suggest the ‘Fed’ is not wholly confident that the recovery is firmly in place as yet. In Europe, Greece and other club med economies look somewhat fragile and a permanent plaster needs to be applied to enable those dodgy economies to transfer on to the recuperated list. Things cannot be too terrible as the VIX index is at 19.9, a far cry from its 53 week high of 50 and not too far away from its low of 16.8.

A double dip recession in the developed economies is still thought to be the bogey man and it may be several months before the danger is clearly passed. Meanwhile we must hold our breath and keep some cash in reserve.

UK Economy & Politics

The poll movements in the UK seem to be moving against the Tories but one cannot see Brown as a popular leader. His efforts on camera are very poor in my opinion. The last months or possibly weeks to election day are perhaps going to be very energetic for the parties involved even if a big yawn for the electorate. A hung parliament still seems the most likely scenario which will keep the stock market down.

The Bank did halt Quantitative Easing for the time being but subsequently made it clear that it would not hesitate to print some more money if it was deemed necessary. This latter statement did seem to ease market qualms in the short term.

Commodities

Oil now seems to be trading in a $70-80 range but at least one dealer /analyst has forecast $90 for the year end. Personally I believe economic activity will have to pick up a great deal for that to happen and Opec can still open the tap. Price at the pumps is deterring the casual driver and for fuel, natural gas prices are slumping because of ample supply. This winter may still have a sting in it’s tail and recent storms in the US and Northern Europe will have kept fuel stocks off highs but spring cannot be far away. The driver for usage is currently emerging market demand which presumably could carry forward to the year end if there are no hiccups in the Bric economies. Asian markets had their best performance since week ending Jan 8 and Hong Kong had their best week for equities since last Oct. A government stimulus announced in India is expected to have a beneficial effect

Metals have generally been a little softer of late and the Baltic Dry Index at 2738 still remains firmly below 3000 even if it has risen somewhat from a low a fortnight ago which was accompanied by weak stockmarkets.

India announced that it would raise the duty on imported gold by 50%. This did not help sentiment in the gold market. However this should be read in context of their governments purchase of large quantities of gold bullion from the IMF in recent months which definitely boosted gold prices

Currencies

Differences in the monetary policies of the US and Europe are leading to cracks appearing in long term currency markets. European economic recovery has stalled and it is possible that this quarter might be worse than expected which could be a real worry for equities.

The pound hit a nine month low against the dollar and was the weakest against the yen for 11 months as it slid against almost all currencies with serious UK economic worries to blame.

UK Stocks

Fresh highs and lows have increased in number this week. New highs were 42 (including 12 conventional investment companies), while new lows were 14. This week sees the sector balance still fairly equal between risers 23 and fallers 25 this year. The highest rising sector is still Forestry & Paper +13.1% and the worst performers were General Retailers(-10.89%), Fixed line telecoms (-10.68%) and Financial Services down (-9.82%). The indices themselves are almost level with the start of the year.

Mobius investments

Mobius had an interesting meeting this week with worries about travelling to and from Bob’s in bad weather overshadowing proceedings. We met a potential new member, Tara, for the first time and introduced her to members while attempting to pass on to her a host of information about our club and investing in general.

The latest Semi-sys beauty contest was held with a decision date of 27th February. The most favoured share turned out to be Diploma which had been the subject of a previous selection process. We shall be purchasing it imminently. Interestingly one of the selections out of the five top shares was a company called Babcock which was involved in a muddy three way takeover battle with VT Group and Mouchel. It did seem that it put members off consideration of voting for it.

Shanks Group has continued to weaken recently due to the lack of progress in original bid talks and also a slight turn for the worse in Shanks’ own financial and business operations. From our point of view the dividend still looks relatively generous and secure and hopefully another bidder might appear although the bid might not be as good as originally hoped. We shall still live in hope.

Martin Longman - Acknowledgements to Daily Telegraph and FT.