Sunday, 30 May 2010

“Death to America” was not what Iranians shouted when their President addressed a public meeting last week. They chose to demand employment instead. That should worry US-EU more than equities, currencies and commodities taken together. The eurozone crisis is far from over as Portugal, Italy and Ireland are yet to happen. Sweeping austerity measures have been announced by Spain and Italy and more are in the offing but outcome is uncertain. Italy seems to be heading for Greece-like political upheaval as public employees wouldn’t be “the only ones to make sacrifices.” Possibility of the entire Europe facing a political uprising can now hardly be ruled out.

The dollar is the safe heaven yet again, notwithstanding China’s commitment to maintain its exposure to the euro. The big surprise last week was recovery of oil.

Higher taxes on high incomes is being seen as a way of placating people, though history says it doesn’t work. Money cannot be collected back for redistribution beyond a limit; its concentration has to be prevented, not cured.

The reality is that the developed world cannot export enough to cover what it needs to import. Except for an orderly move towards what they call recession, there is no way US-EU can reduce the pain of their people. Germany is pushing for a formal process for sovereigns’ bankruptcy in Europe and it is preparing to extend ban on naked short selling to all stocks. However, global consensus on leashing of financial magicians is still nowhere on the horizon. Lofty words spoken at the Capitol are leading to nowhere in particular, Obama is passive and confused as ever, and in Europe the Sarkozys and Berlusconis are too busy living their glamorous lives to the hilt.

Share of services in Hong Kong GDP has risen from 86.1% in 1999 to 92% in 2009; services exports were $85 bn last year. China holds US Treasuries worth $895 bn now, compared to Japan’s 785 bn. An economist says China stocks can rebound only if real estate crashes. Citi and BNP have forecast 20% drop in home prices this year.

Japan’s unemployment is refusing to decline and more job cuts are in the offing. Govt has waived high school tuition fees as a direct transfer of money to the people. India GDP grew 8.6% annualised in Q1-2010 while car sales rose 40%. Zambia is to raise $1 bn from sovereign bonds for rail and power projects. Zimbabwe inflation is down to minus 7.7% and GDP growth this year is estimated at 7%. Rwanda also expects to grow 7% this year. Africa just may be in for a mercurial makeover as cash-laden corporates and banks have no parking places left. Russia, which has become as sensitive to oil as OPEC countries, is pushing companies to invest in what it calls single-company towns.

BP continued to be the most talked about company in the world last week as oil kept gushing from its damaged well in Gulf of Mexico. Obama’s popularity has plunged as Americans are unhappy with his handling of the spill. Overall impact for BP is being estimated in tens of billions. Shell is buying East Resources (shale gas) of US for $4.7 bn; its plans to drill wells near Alaska are being put on hold because of environmental concerns.

Apple’s market cap has grown ten times in last ten years and last week it surged past Microsoft, to $222 bn; Apple says consumers in Australia and Japan waited 40 hrs in queues to buy iPad. Dell has launched Streak tablet computer that can double as a mobile to compete with iPad, Facebook has started offering more privacy options to users and Intel capacity utilization has risen to 80% from last year’s 50%. IBM is buying Sterling Commerce unit of AT&T for $1.4 bn cash to expand software and has announced plans to spend $20 bn on M&A over the next five years.

Foxconn, Taiwanese owned contract electronics manufacturer with 800,000 employees in mainland has decided to raise wages 20% after several suicides. J&J has recalled 40 non-prescription childrens products after its Pennsylvania factory was found ill-maintained. Lehman has sued JPMorgan for having seized collateral worth $8.6 bn days before 15 Sep 2008. Societe Generale is pursuing the case against one of its traders whose unauthorised trades (loss $6 bn) were discovered in Jan ’08.

Prudential continues to pursue AIG’s Asian business; if it goes through, it would be the largest life insurer in HK, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines.

M&S sales rose 3.2% to about $13 bn last year. Tiffany has reported rise in sales of $50K plus products; total revenue in quarter to 30 Apr was up 22%. Heinz sales last quarter were up 8% to $2.72 bn. Wal-Mart is buying 193 Netto stores in UK for $1.13 bn. Daimler expect sales in China to grow threefold from current 100,000 units by 2015. Tata Motors is planning to produce Jaguar and Land Rover in China.

Duchess of York (Fergie) was captured on camera demanding money for introducing somebody to Prince Andrew. British confectioner Hotel Chocolat is raising $7.2 mn by issuing chocolate bonds that offer holders interest in chocolates rather than cash. Research says 65 mn suffer high blood pressure in US and 38 mn of driving license holders are unfit for roads. US Space Posture Review says space has become so congested that satellites orbiting earth may begin experiencing collisions, bringing communications to a halt. A rebel Somali leader has hired 100 German mercenaries to train his forces.

Skirmishes between US and China on yuan are continuing, though US exports to China have already started growing. Euro it seems has to soften further. Tension in Korea has become palpable; US is firmly behind South while China is trying to soothe ruffled feathers. A political volcano just may be in the offing. Africa and LatAm should be in news in not too distant a future.

xxxxx