Even the Queen Gets in on the Act!

12/04/2008 12:01 am EST

Focus: GLOBAL

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

You know it’s serious when Britain’s monarch decides to discuss economic policy!

Queen Elizabeth II spoke out in support of the 13 new legislative measures designed to aid the UK economy, but focused specifically on the banking bill, which the government hopes will provide financial stability for the markets.

Last week, Britain announced government spending projects and tax cuts of £20 billion ($30 billion) over the next 18 months, which will result in an increase in public debt to £118 billion ($178 billion) in 2009.

Who knows how much more will be needed, since economic reports continue to fall in the bad news category? Last month’s Chartered Institute of Purchasing and Supply/Markit purchasing managers’ index came in below the consensus estimate of 41.2, to 40.1, and considerably down from October’s 42.4. Additionally, the British Retail Consortium announced that annual British shop price inflation for November fell to the lowest since June, to 2.7% from October’s 3%.

Economists are expecting a further 1% rate cut by the Bank of England on Thursday (its base rate stood at 3% earlier in the week), which gave the markets a little boost. The FTSE 100 index closed up 47.10 points (1.1%) on Wednesday, following another small increase (1.4%) the day before.

Meanwhile, the economic situation in continental Europe continues to deteriorate. The German Economic Institute released a survey in which only 52% of east German and 45% of west German businesses said they plan to keep all their employees next year. Additionally, the monthly Ifo Business Climate Index indicator has posted its lowest reading since February 1993, coming in at 85.8, considerably lower than expected.

However, all in all, most global markets fared pretty well last week, but this week seems to be a bit more challenging. The FTSEurofirst 300 index edged up 0.5% higher in Wednesday’s trading.

The terrorist attacks in Mumbai, which left 190 dead, reminded the world that economic crises and stock market maladies are not the only problems we face around the globe. And these acts of terrorism not only destroy innocent lives, but the uncertainty they raise about India’s security will undoubtedly hurt the country’s economy for some time to come.

Meanwhile in China, another once-high-flying emerging market, retail sales are definitely slowing, particularly in the cell phone and automobile industries, as consumption falls. The government’s $586-billion stimulus package will try to boost consumption, but the lion’s share of that money will go to new highways, railroads, and airports.

Japan’s Nikkei average added 1.8% on Wednesday, as a result of a brokerage upgrade on—of all things—a retailer, Seven & I Holdings (Tokyo: 3382)! Nozomi Securities noted that investors are showing increased interest in stocks not dependent on spending in the United States and Europe.

Russia’s markets have declined by 70% in the past six months, and now its state-controlled development bank in charge of the government’s $200- billion bailout, Vnesheconombank, has requested $34.0 billion from the state, for its own bailout! But since Prime Minister Vladimir Putin is the chairman of the board, this one looks like a shoo-in.

Further demonstrating that Russia has fallen a long way from its go-go BRIC days, is the $48.2 billion that has fled the country in October alone, according to the Russian Central Bank.

Our world is faced with many challenges, but as our Q&A guest, John Rutledge, chairman of Rutledge Capital, says, ‘the best companies in the world are on sale today’.

Timothy Lutts, publisher of Cabot Wealth Advisory, weighs in on India’s investment potential. Allan Nichols, editor of Morningstar InternationalInvestor, recommends a leading European utility, while Benj Gallander, president of Contra the Heard, explains why a seemingly dead merger deal is not the end of the road for a Canadian telecom.

And if you want to read more on global investing, take a look at our Best of Show article and videos from the recent World Money Show in London, which featured some of the world’s leading investment advisors.

Nancy Zambell edits Global Investing for MoneyShow.com. Her opinions are her own and not necessarily the views of InterShow or MoneyShow.com.

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