The Good, the Bad and the Ugly
Month-to-date over recoveries on fuel currently stand at 45 cents per litre for 95 ULP (petrol) and 24 cents per litre for 0.05% diesel with the latest daily over recovery being above 70 cents per litre for petrol. This has primarily been driven by the we
The good: respite of the order of above 50 cents per litre for petrol is in the offing, unless Greece decides to leave the Eurozone, or if ongoing political strife persists in that country and indeed elsewhere in the region. So domestic consumers and producers alike will feel a degree of easing pressure on their wallets and income statements come the new month. And long may it persist although the potential threat from strikes during coming months around salary negotiations may serve to derail this modest improvement.
Much of Europe is in recession and prospects for the balance of the year are for the region to eke out barely positive growth. On top of this, the health of Spanish banks poses further risks to financial markets. Given that domestic momentum is slowing and is only expected to improve in late 2012, local manufacturers and exporters are desperate for a recovery in other vital areas. Japan’s leading indicator ticked up to its highest level in more than two years in March at 101.1 from 100.9 a month earlier while that for the US did likewise at 101.3 from 101.1 in February.
From a trade perspective however, the rise in political risks in Africa cannot be ignored.
The bad: Sudan, Mali, Guinea Bissau, as well as Syria in the Middle East. This leads to uncertainty, volatile currencies and potential forex delays, all of which traders can ill afford. Progress is thankfully being seen in Senegal, Malawi and Côte d’Ivoire amongst others, but to wilfully trade on open terms or without some form of payment protection can result in substantial losses.
Protectionism has been rising at a faster pace since the financial crisis as countries seek to ensure that domestic industries are protected. Consequently, the Doha round of global trade negotiations has yielded slow progress on a multilateral trade pact and hence bilateral or regional deals are set to dominate for some time.
The ugly: Bolivian and Argentinean nationalisation of power grid operator Red Electrica and oil producer YPF respectively, both Spanish subsidiaries. This is likely to result in heightened uncertainty, thereby deterring investment and inviting retaliatory measures, all of which may lead to lower trade with that country. Similarly, delving into such markets without credit protection is not advisable.
