BetterTrades

April 1, 2009

The G20 summits commenced this week in London, as the world leaders are meeting to explore options on how to stave off a prolonged global economic slump, while promoting growth.

In the Asian markets, confidence within businesses in Japan posted an all-time low in March, a reading of -58, as demand for products and services weakened and corporate lending tightened severely, placing additional pressures on the Bank of Japan.

"The Bank of Japan may buy more government bonds, commercial paper and corporate bonds to help company financing. It wouldn't do much good to lower benchmark rates," stated senior economist at Shinko Research Institute Norio Miyagawa.

During the month, Japan also faced a decline in their export index, as the global economy continues to worsen. The index recorded a reading of -31 for the service sector, its lowest reading since 1999. Japan is in the midst of their worst economic recession since World War II.

Manufacturers throughout the country are bracing themselves for a severe lag in sales for the upcoming year, with expected sales to fall nearly 7% on an annual basis. The manufacturer’s sentiment index posted a reading of -55 in March, just below the median forecast of economists.

In corporate news, Japan’s largest leasing firm, Orix Corp., announced that the company is planning to collaborate with other investors to cut risk for potential acquisitions, while cutting their interest-bearing debt by upwards of $3B.

"There is a credit squeeze going on, making it difficult for us to do it on our own. There is a need to find a partner willing to help shoulder the risk," Orix President Yukio Yanase acknowledged earlier.

Furthermore, Toshiba Corp., maker of flash memory components, is in the process of reducing their capital expenditures by more than half to just over $2B after posting nearly a $3B loss in their fiscal year, which ended last month.

Japan’s major stock market index, Nikkei 100, posted a gain of nearly 3% by the end of the trading day, closing at 8,351.91.

Across the pond, the European markets were more sullen on Wednesday, as the Eurozone released calamitous data revealing the dismay of the region’s economy. In a recent report, unemployment throughout the region jumped to 8.5% in February.

By the close of the European FTSEurofirst 300, Europe’s index of top shares slipped 0.8% to 727.56. Today’s conclusion follows the previous session’s surge of 3.5% on Tuesday.

Individually, despite the dismal economic situation in Europe, bank shares advanced during the trading session, as HSBC gained 2.7%, BNP Paribas added 0.7%, and Banco Santander increased by 0.8%. However, energy stocks did not fare as well during the day, as BP declined by 3.4%, ENI slipped 2% and Total fell by 2.7%.

One of the biggest losers in the European marketplace came from Anglo American (AAUK), which is a global leader in the mining and natural resources industry. AAUK posted a 4.4% drop in share price after news that the company is requesting a loan of nearly $2B.

Throughout the rest of the Eurozone, UK's FTSE 100 index (FTSE) was higher by 0.75%, Germany's DAX index added more than 1.1%, and France's CAC 40 increased by 1.15%.

In the Forex markets, the U.S. Dollar advanced for the most part versus the major world currencies on Wednesday, as the 16-nation Euro declined in value against the greenback, buying $1.3215, down from Tuesday’s price of $1.3283. Meanwhile, the British pound advanced in price versus the Dollar, buying $1.4414, in contrast to last night’s price $1.4347.

In additional trading, the greenback slipped in price against the Japanese yen, falling from 99.07 late Tuesday to 98.60.

Due to the continuation of the global recession, world markets, much like those here in the states, declined during the first three months of the year. With the Dow Jones and S&P 500 both slipping more than 10% in the 1st quarter, the NASDAQ fared a little better, only falling 3%.

Yet overseas, the major indices posted similar losses as the FTSE 100 dropped more than 11%. The Nikkei fell more than 8%, and the CAC 40 retreated by nearly 13% during the 1st quarter. One of the few bright spots in the world markets was the Shanghai composite index climbing more than 30% over the past three months.

Within the currency markets, the Dollar/yen exchange favored the U.S. currency during the quarter, as the greenback gained more than 9% on Japan’s currency. The Dollar also managed to increase its value against the Euro as well, ending the 1st quarter at $1.3247, up more than 5% against the Euro.

Moreover, the Dollar also gained ground on the British pound as well, priced at $1.4325 by the end of the first three months of 2009, up more than 2% versus the Sterling. Lastly, the Euro did increase in value versus the yen, gaining over 3% since the closing price at the end of 2008.

2009 Better Trades Article

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BRIAN MULLIN