Archive for the ‘ Uncategorized ’ Category

Financial market coverage hyperbole vol. #1: Syria edition

As the New Statesman put it: Syria has finally seeped into financial markets. It’s horrific.

The FTSE falls 0.5 percent? And only bounces 0.45 percent the next day? The horror, the horror! If the UN proves that Assad is responsible for using chemical weapons against his own people, and if he is called to testify in the Hague (after however long evading capture), I’m sure his biggest regret, in a heartfelt retrospective confession, will be the damage done through nerve gas to all those innocent companies, the publically traded casualties of war.

Even if stock markets had genuinely tumbled by ten times what they have done, investors could count themselves lucky that they’ve come no closer to feeling the human repercussions of what’s happening in Syria. The need for perspective aside, however, what’s noteworthy from a stock market point of view is actually how muted market reaction has been to the Syria situation.

Yesterday we opened in Europe with stocks suffering broadly over concerns of intervention in Syria, and energy lending support on the higher price of oil, only to have the U.S. come in, and rally, led higher by energy stocks. The high weighting of energy stocks in the US certainly helps markets shrug off what’s been going on, and has done historically, too. Bank of America/Merrill Lynch has done a study into the effect of oil price spikes on asset returns, and the results are a bit surprising.

While equities underperform during oil price spikes, the downside, in absolute terms, is limited. During the Arab Oil embargo in 1973, the price of Brent oil increased by 237 percent. U.S. equities slipped just 2.8 percent. U.S. stocks rose during the Iranian revolution and the Iran Iraq War, and only the Iraqi-Kuwait in 1990 caused a technical correction (a fall in excess of 10 percent). It’s also been pointed out by Thierry Laduguie at e-Yield that with the last Iraq war, “when the war started in March 2003 the stock market rallied strongly, that was the start of the bull market from 2003 to 2007”.

The market is unsurprisingly nervous that a thus far geographically concentrated, dynamic equilibrium of intense suffering for a country could turn into something else, the consequences of which are unknown. Syria to date, while a horrible situation, has posed limited downside to the profit margins of European listed countries, and what downside it posed was felt two years ago. Rising oil prices would be bad for a lot of companies. But, given the limited effect of previous spikes, and the fact it’s taken just the rekindling of Vodafone/Verizon talks for the market to shrug Syria off for the moment, it’s worth bearing in mind who the gas attacks were actually horrific for.

Carney at the TSC – and it impacted the FTSE

Mark Carney finally gave his eagerly anticipated testimony to the Treasury Select Committee today, and it confirmed to me something that I’ve been thinking about for a while – that the appointment of Mark Carney as the new Bank of England Governor could have a major impact on the UK stock market. That sterling rose when he seemed cooler on easing than investors thought isn’t the biggest surprise, but sometimes people doubt that the stock market is so sensitive, being composed of many constituent companies with their individual earnings profiles which are so much more than just a proxy on monetary policy (and so detached from the condition of the domestic UK economy). Today’s stock price movements did suggest sensitivity to what he was saying, however, from weakness in the banking sector to the minute by minute chart of his speech and price movements. The picture was muddied by the conflation of his written answers and what he was saying in both media reports and investor reaction.  But the combination of at least the use macro-prudential tools to tackle asset bubbles without raising interest rates and his scepticism over QE could have interesting effects on stock prices, and potentially pressurise them in different directions. Have to shoot now: the market report I wrote on this today is here, but more soon on this, I promise…

An apology

As regular readers will have doubtless noticed, my blogging has been infrequent recently. Sorry about that; I do have an article forthcoming for Think Africa Press but they’ve been having some technical issues so it’s been delayed in posting (and I don’t want to put it up before they do…) Finals are right around the corner so I’m spending as much time laptopless as possible, so as to avoid distraction. But I haven’t forgotten about y’all, and after 7th June I’ll potentially have nothing to do with my life except blog to my heart’s content. Which is something we can all look forward to.

to my readers

I’m afraid my blogging this week will be somewhat intermittent.* Work, more work and a trip to Manchester to film a certain TV show mean something has got to give, and, for the meanwhile, it’s gonna be the blog. It should be back up to regular order by next week.

In the meantime, let’s just hope I don’t do this.

*The regular reader may decide for themselves if it is also, on occasion, erratic.

An apology

I went to a really interesting talk today, given by someone who works on the DRC, about their perspective on the elections. “Excellent!” I had thought. “This will be super on the blog!” Unfortunately, what they were saying hadn’t been published yet, and was quite controversial, and no-one in the room is realllly allowed to repeat it.

So yeah. Sorry about that.

brassed off

This

reminded me of this

Although I suppose it’s more unfair to ask such struggling companies to pay the minimum wage to their labour force…

the past and the pending

welcome to my new blog. i’ve collected some of my better articles from the last few years to create something of an archive in (roughly) chronological order, and will write new blogs soon (probably). in the meantime, feel free to sift through my previous posts and judge for yourself how badly they have aged.