24 April 2013: Apple lifts Asia after false tweet

Apple climbed 4,9% to USD 425,95 in after closing trade yesterday night after reporting strong second quarter earnings. Apple also unveiled plans to double the amount of capital returned to shareholders after for a long time being heavily criticized for not sharing excessive profits. The Apple quarterly report made stock markets in Asia to rally. Wall Street recovered Tuesday after initial sharp declines sparked by an Associated Press tweet about explosions in the White House.

The false tweet by hackers of two explosions at the White House that injured US President Barack Obama, provoked a steep drop in stocks. The benchmark S&P index fell 16,6 points or close to one percent in 3 minutes. Index values of USD 136 billion were wiped out. Stocks quickly recovered minutes later. The tweet episode illustrates the advantages, but simultaneously the fall outs of an instantaneous pricing technology.

Asian shares advanced on Wednesday on the back of Apple and other solid US quarterly earnings. The Euro came under pressure by soft German data which underscored the fragile state of the euro zone economy. The Asia-Pacific MSCI-index climbed 0,8%. The Australian stock index gained 1.4% along with a firmer Aussie dollar. The positive US numbers also gave a lift to oil and other commodities. Copper is up after several day’s decline. Brent crude trades at USD 100,54 a barrel. Gold (USD 1426) and silver (USD 23,15) prices are up after falling back during yesterday’s trading.

The more positive tone in global equities markets seem to indicate that investors regard continued monetary easing by major central banks as justified. Monetary easing encourages investments in shares. But that also means that stock markets don’t reflect the real economic fundamentals. Equities continue to rally in spite of sluggish manufacturing surveys and weaker economic data from both the US and China, the two major engines in the global economy.

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19 April 2013: Volatility reflects bearish mood

Wall Street fell further yesterday after disappointing forecasts by eBay and other heavy weight US-companies. Present quarterly results raise increased doubt on the market’s recent strength. eBay dropped 5,9%, and Apple shares extended their slide from Wednesday breaking the USD 400 level. The S&P technology index fell 1,4% after two sharp declines earlier in the week. The volatility index, Wall Street’s fear index, gained 6,4 as a reflex of increased market nervousness. Other decliners included Morgan Stanley. The flagship bank fell 5,4% adding to the bearish mood.

As global policymakers started their G-20 meetings in Washington yesterday there is growing concern about currency fluctuations and volatility. Key central banks are printing money and pumping new liquidity into markets. This tends to create more speculative bubbles than working places. The yen (JPY) fell broadly Friday morning after the Japanese Finance Minister stated that Bank of Japan’s (BOJ) aggressive monetary stimulus is aimed at defeating deflation. USD/JPY trades at 98,53 with the dollar raising 0,4%.

As the G20 meeting ends today there are deep worries on what easily can develop into a currency war. In its semi-annual report on currency practices US put Japan on notice. Japan’s economic policies are watched closely to ensure that Japan is not aiming at devaluing the yen to gain competitive advantage. Competitors in South East Asia as South Korea are especially concerned. A rapid raise in dollar versus Yen at these level, seems, however, not likely. USD/JPY has already depreciated 20% since last November. A strong short term gain in USD/JPY might, however, occur after the G-20 meeting is over. G-20 is expected to confirm the pledge from February to avoid competitive currency devaluations.

Euro/USD recovered to 1.3068 after a sharp drop during yesterday. In a meeting on Thursday the EU agreed to move ahead with a system of winding down banks without changing EU law. This would give the EU bank resolution mechanism a stronger legal basis. The resolution comes after a stormy debate in the European Parliament where both the EU Commission and the European Central bank came under heavy fire for their handling of the Cyprus banking crisis. In an interview the EU Commissioner for Economic and Monetary affairs, Olli Rehn, stated that changes to EU-treaties are more a long term goal than a condition for a banking union to operate.

The recent plunge in gold prices have led to a rally in India and China to buy gold and silver coins and products. Retail buyers see the steep fall in prices as a buying opportunity. Gold trades at USD 1398 up from a bottom level on 1322 earlier in the week. Silver has rebounded from USD 22,76 to 23,46. It is, too, early, to say whether we are witnessing a more firm upward trend; or increasing prices shall be seen as a natural technical correction.

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