BetterTrades

October 30, 2009

As the U.S. markets fluctuated throughout the start of the week ending October 30, the International markets also did not fare as well. Although consumer confidence is on the rise globally, investors are still concerned about economic implications that have affected trade.

In Europe, stocks throughout the exchanges slipped to a three-week low, as investors were bombarded by a slew of earnings reports, with energy and banking shares showing the worst results. By the close of the October 28 trading session, the pan-European FTSEurofirst 300 index was down 0.8% at 991.28, after falling to its lowest reading since October 8 of 990.33.

The push lower was exacerbated by energy shares, manufacturing companies and banks posting less-than-stellar earnings reports. Oil Company BG Group saw its shares fall more than 3% during the day on the London Stock Exchange, as the company posted a 44% decrease in net earnings in the midst of falling gas and oil prices throughout Europe.

Added to the list of disappointments was the world’s largest steelmaker, ArcelorMittal (MT), which posted a net profit of $1.59B in the 3Q, well below analysts’ projection of $1.67B. The stock slipped more than 5% by the end of trading on the Amsterdam Stock Exchange.

Lastly, the Eurozone’s largest bank, Banco Santander S.A. (STD) dropped more than 1% in market value, following the company’s announcement that net profits retreated nearly 3% during the nine-month review. CEO, Alfredo Saenz commented on results, "As a whole we have a quite positive view for Latin America compared with 2009 ... with significant growth, versus our expectations for Spain and Portugal, which, we could say, will be more poorly."

Across Europe, the FTSE 100 index was lower by more than 2% at 5,080.42, while Germany's DAX slipped to 5,496.27, down 2.5% and France's CAC 40 was lower by more than 2%, ending at 3,663.78.

In a report from the Nielsen Global Consumer Confidence Index, the survey showed that consumer confidence around the world rebounded from its reading of 77 in April to its October reading of 86. The 3Q increase was led by Brazil and certain Asian markets posting double-digit advances in consumer sentiment. Although confidence is higher, actual spending remains a laggard.

Nielsen’s Global Consumer Confidence Index tracks major concerns, as well as consumer confidence and spending habits among more than 30,000 Internet users throughout 54 countries. The recent quarterly reading in consumer confidence was propelled by Hong Kong, up 14 points, along with South Korea, up 13 points, and Brazil, up 12 points.

James Russo, Vice President, Global Consumer Insights at The Nielsen Company, remarked on the current reading, “A nine-point surge in consumer confidence signifies a welcome return to positive territory. It really demonstrates that in the last six months, a majority of consumer sentiment across the globe has shifted gears from recession to recovery -- the tide has turned. In this economic climate, sentiment is closely correlated to actual sales.”

Russo further added, “For example, in Australia, consumer confidence was up 11 points in the third quarter, and strong economic conditions prompted the Reserve Bank of Australia to raise rates, becoming the first G20 country to do so. Correspondingly, we have seen sales increase 2 percent in each of the last two months in defined fast moving consumer goods (FMCG) categories while online sentiment (buzz) regarding the recession is at the lowest levels since we began tracking that dynamic in January 2009.”

Elsewhere, in Hangzhou, China, officials from the U.S. and China met to discuss commerce and trade, as relations between the two countries remains strained. Not more than 25 years ago, Chinese products accounted for only 1% of all U.S. imports.

My how things have changed. In 2008, a grand total of $69.7B worth of exports was earmarked for China, while the U.S. imported nearly $340B of goods from the former-Communist country. The unprecedented trade balance with China has steadily increased since 1985. In 1985, the trade imbalance was a mere $2.14B. Today, China sends nearly 5 times the amount of goods to the U.S. than we send them.

Looking inside the Forex markets, the U.S. Dollar was mixed in trading, as investors were disappointed by U.S. economic news earlier in the day. By late afternoon, eastern daylight time, the 16-nation Euro retreated in value against the greenback, buying 1.4711, down from the previous session’s price of 1.4770.

Elsewhere, the Dollar slipped against the British pound and the Japanese yen, as the Sterling bought 1.6402, up from last night’s 1.6394, while the greenback dropped to 90.77 yen, down from Tuesday’s price of 91.78.

2009 Better Trades Article

brought to you by

BRIAN MULLIN