Mixed Messages

Mixed Messages

Mixed Messages 401 290 AMA Team

Screen_Shot_2013_05_07_at_12.57.24_AMGreetings one and all – I’m sure all our readers in Shanghai will be happy that our hopes for a warm and sunny May holiday that we wrote of in a recent Money Matters, were mostly spot on. While we may have been catching some sun and spring air in Shanghai, the markets certainly however didn’t take a break with the FOMC meeting in the States, rate announcements in Europe and a raft of new economic data.
Despite being armed with new data and statements from the world’s largest central banks recently, market sentiment remained largely uncertain; and this is in no small part due to the messages being received from ‘on high’. The FOMC had previously hinted that it may look to wind down its programme of Quantitative Easing, with an increasing number of voices worrying about an asset price bubble. However, in the end, they actually announced no change to monetary policy and instead vowed to ‘increase or decrease’ the current level of stimulus depending on unemployment and inflation figures going forward. As both markets and currencies reacted uncertainly to this news, by the end of the week US stock markets had resumed their rallying after eyes turned to Europe.
Screen_Shot_2013_05_07_at_12.58.27_AMThe ECB in comparison, actually announced a rate cut of 0.25% bringing the Eurozone interest rate down to 0.5%. This announcement was largely met with a negative reaction from the markets as a further signal of Eurozone economic weakness, and that a minor cut to a rate already so low would do little to change that situation. The Eurozone manufacturing index also remained below 50, a further signal of poor economic health. Despite some of this negativity, it is important to note however that not all EU economies are entirely homogeneous. This can be seen with the likes of the Scandinavian economies which continue to out-perform their continental neighbours, such as Sweden for example who posted an expansionary manufacturing index of 52.1.
Screen_Shot_2013_05_07_at_1.06.36_AMAn asset that has certainly had an interesting couple of weeks is gold, which continues to be a talking point in Money Matters. The precious metal saw some of its sharpest selling off in recent history. What happened here is that there was the possibility that Cyrpus would have to sell its gold reserves to qualify for a bailout. While Cyprus selling its gold reserves would not have a large overall effect on the global supply and demand of gold, this set a worrying precedent, and with other European economies still struggling investors began to flee the metal. However, the next chapter in the story took place on the other side of the world. As gold fell to $1,350, retail demand surged in India and China thereby resulting in individuals literally buying coins and bars on a broad basis. The strength of the demand was enough to turn the metal around and begin a price rally, and this global tug of war on the gold price continues.
In emerging markets news China continued its positive streak, the holidays clearly putting investors in a good mood! The Renminbi continued to appreciate with a ninth consecutive week of gains for the currency. The Chinese government continues to promote the Renminbi in international transactions, and reported that global Renminbi payments rose 32.7% last year; however, the currency exchange restrictions on the Renminbi will prevent the currency from challenging the USD on an international level for as long as they remain in place.
Screen_Shot_2013_05_07_at_1.13.59_AMLast but not least I’d like to say a big thank you and well done to my colleagues Evan, Shane and Kelly – together we supported a great cause and represented team AMA at the ‘More Than Aware’ 5km fun run on Saturday in Century Park,
Shanghai for Breast Cancer Awareness.
For Austen Morris Associates’ investors – talk with your advisor about any repositioning to take advantage of markets at this time. For more information about Austen Morris Associates please visit our website.
Thanks for tuning in to this week’s Money Matters!
James Bagnall
Account Manager
Client Services Department
Screen_Shot_2013_05_07_at_1.17.37_AMOriginally from the UK, James’ first emerging markets experience was in East Africa before moving to China in 2009 and joining the Austen Morris team in 2011. As an Account Manager within the Client Services Department at Austen Morris, James specialises in ensuring that his clients, wherever they are based worldwide, receive sound portfolio management, market advice, and superior customer service so that they can fully take advantage of their time as an expatriate and ensure they reach their long term financial goals.
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com

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