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Markets Move Up on Mixed Economic News
03/26/2009 1:15 pm EST
There was good news on several fronts in the US this week, especially housing.
The National Association of Realtors announced that sales of previously owned homes climbed 5.1% last month, surprising economists who were looking for another decline—although 45% of the transactions were short sales or foreclosures. Meanwhile, the Commerce Department reported that sales of new homes also grew in February, by 4.7%.
The housing news—as well as Treasury Secretary Timothy Geithner’s announcement of an up-to-$1-trillion plan to combine government money and private capital to purchase toxic assets on banks’ balance sheets sent the Dow Jones Industrial Average soaring by nearly 500 points on Monday. World markets rallied as well.
While we welcome the positive signs that are emerging, we still see many challenges around the world. Japan reported that dismal auto sales sank its exports by an unprecedented 49.4% in February. Toyota Motor (NYSE: TM) is expecting to lose money for the entire year for the first time since 1950, while both Honda (NYSE: HMC) and Nissan (NASDAQ: NSANY) anticipate 40%+ drops in production.
The International Monetary Fund (IMF) forecasts that the country’s economy will shrink 5.8% in 2009, and the World Bank says that the global economy will contract by 1% to 2% this year.
In Germany, the Ifo business climate index fell from 82.6 points in February to 82.1 points in March, its lowest level since November 1982. However, the companies surveyed indicated higher expectations for the next six months.
The British government was somewhat taken aback by its failure to sell all of its guaranteed bonds in an auction this week. Bids for the gilts fell short by £0.12 billion, as traders showed their concern for mounting public debt in the UK.
Not surprisingly, the Daily Mail reported that global airline companies could lose £3.2billion this year, according to the International Air Transport Association (IATA). The IATA said that North American airlines should fare best, but Asia Pacific carriers may suffer the most.
Merger and acquisition activity seems to be edging up—a positive sign. Now that the Australian government has removed the 15% foreign ownership limitation from its companies, its third largest energy company, Santos (NASDAQ: STOSY), may be is a target of both BP (NYSE: BP) and Royal Dutch Shell (RDS-B).
Meanwhile, the Australian Competition and Consumer Commission (ACCC) has approved Chinalco’s $19.5-billion investment in Rio Tinto (NYSE: RTP), but the deal won’t be sealed until the Foreign Investment Review Board finishes its due diligence, expected by mid-June.
Daimler (NYSE: DAI) agreed to sell about a tenth of its motor group (which includes Mercedes-Benz, of course) to Aabar Investments, the state-controlled Abu Dhabi wealth fund, for €1.9billion (£1.7billion).
Trying to ward off further capital calls, Barclay’s (NYSE: BCS) has its iShares unit—the world’s biggest manager of exchange traded funds (ETFs)—up for sale. Rumored suitors include Goldman Sachs and private US equity firms Hellman & Friedman and Bain Capital.
After big gains earlier in the week, Wednesday’s markets were mixed, with the FTSE 100 declining by 0.3%, the FTSEurofirst 300 rising by 0.4%, and Japan's Nikkei down 0.1%. The Dow, too, closed up about 89 points Wednesday, and was in the green Thursday morning.
No wonder some of our advisors are feeling more cheerful! In our Q&A this week, Gordon Pape, editor of The Canada Report, seemed cautiously optimistic on Canada’s economic and market prospects for 2009.
Tom Lydon, editor of ETF Trends, explained an indicator that is becoming a good barometer of global economic activity.
Carlton Delfeld, editor of Chartwell Global ETF Letter is becoming more interested in emerging markets and Yiannis Mostrous, editor of The Silk Road Investor, also delves into Asia, finding a casino/hotel that he recommends.
A personal note: This is my last week as editor of MoneyShow.com’s Global Investing section. I am returning to my roots by writing my own investment letter, where I will focus on undiscovered, low-priced stocks. Igor Greenwald, formerly a columnist and markets editor at SmartMoney.com, takes over as Global Investing editor next week.
I have thoroughly enjoyed my time with Money Show and leave behind a stellar team of folks who have great vision for continually enhancing the products that help thousands of investors like you achieve your financial goals.
I thank you for your support and applaud you for your dedication to improving your investment skills. I wish you a future filled with great prosperity, good health, and happiness.
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