25 May 2012: Stocks begin to recover, Indian growth forecasts cut

  • Stocks recover ‘cautiously’, Copper crashes 40% over the month: After a volatile week, markets are looking like they might end the week positively, but ‘wary about risk’ is still the underlying theme. There is little positive catalysis, yet the mood has turned slightly bullish, probably arising from the opportunity to invest in growth-focussed assets that are undervalued, due to the selling pattern earlier in the week.
  • Stocks: FTSE All World is up a net 0.1% after a turbulent week as FTSE Eurofirst attracts buyers and rises 0.3%; In Asia mood remained cautious as FTSE Asia Pacific lost 0.2% to its year low while Tokyo managed to advance 0.2% but is on its worst run in 20 years; S&P 500 is expected to rally 0.5% later in the day, but with Monday a holiday in the US, the traders might look to only hedge their positions over the long weekend; FTSE 100 has lost 0.3% today and is at 5335 after it had a shocker on Wednesday, losing over 2.5%
  • Currencies: Euro has perked up 0.4% over the day against Dollar at $1.2579, but sits just above its lowest level in 22 months
  • Debt: German Bunds are up 2bp to 1.41%; US 10-years drop 1bp to 1.77%
  • Commodities: Brent Crude has recovered 0.4% on the day to $107.09/barrel; Copper has lost a staggering 40% this month but added 0.8% today to sit at $3.46/pound; Gold advanced 0.2% at $1561/ounce
  • Economists cut Indian growth forecast: Goldman Sachs and BofA Merill Lynch today cut India’s growth outlook. GS group revised their forecast (for the fiscal year ending March 2013) from 7.2% to 6.6% while BofA settled for 6.5%. The fiscal and the trade deficit are rising and are at 5.8% and 9.9% of the GDP, while inflation is in double digit figures. The industrial output contracted 5.3% in March, and exports have gone down too.
  • India warns EU over airline tax: India have warned the EU over airline sanctions and have threatened to ban EU carriers from Indian airspace. EU has subject all non-EU carriers to the carbon emission tax, which has been seen very negatively by India, China and Russia. EU risks global trade wars with this scheme, something the eurozone has been made aware of.
  • EU escalates dispute with Argentina: EU has escalated its dispute with Argentina after its seizure of a Spanish company’s stake in the national oil group of Argentina. A complaint has been filed by the EU to the WTO regarding this. Repsol had a 51% stake in Argentina’s national oil group, YPF. Argentina last month underwent nationalisation of this group. As this is a bilateral deal, EU has no authority to intervene in the case, but the EU maintains that those €8.3 billion affects all of EU.

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