STANLIB's Weekly Focus 12 November 2007
EXECUTIVE SUMMARY OF STANLIB’s WEEKLY FOCUS
1. US INCOMPETENCY PUTS GLOBAL BULL MARKET AT RISK:
* The credit crisis is deepening and is putting the mighty global equity bull market at risk.
* Bank share prices tumbled, with Barclays losing 11% and financials generally losing 7%.
* This has shown extraordinary incompetence from a country considered to be the most developed, at least economically, i.e. The USA.
* The two year US Government bond yield has tumbled from 5% a few months ago to 3.5%, reflecting huge fears of a broad economic slowdown in the US.
2. WHAT ABOUT EMERGING MARKETS?
* EM’s now have sufficient weight in the global economy to hopefully withstand an advanced world financial crisis.
* The fate of the global economy now rests more than ever on the success of emerging economies.
* SA has benefited from the big jump in the share price of Anglo American, up a remarkable 11% last week to record highs on the back of the Billiton bid.
3. OIL BOOM:
* OPEC oil revenues in 2007 are estimated to be five times higher than in 1998.
* The recycling of massive sums of petrodollars into the global financial system is extending the influence of producer countries into new areas such as currencies, bonds, equities and gold/resources.
ECONOMICS
* One of the key global concerns has been the ‘global imbalance’, which is mostly reflected in the extremely large current account deficit of the United States.
* This is reflected in a modest slowdown in US imports coupled with a gradual pick-up in US exports. Hence a narrowing of the US trade deficit.
* The unwinding of the global imbalance is also likely to be associated with some Dollar weakness.
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