It's All Greek to the London Buyers

03/04/2010 12:03 pm EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

Squinting at Europe from a parochial perch across the ocean doesn't pay. One is liable to get distracted by its loud intramural squabbles, overlooking the strong commitment to a single market and currency. Economic integration is not a zero-sum game, so aiding Greece is in the interest even of the reluctant Germans.

Without the euro, Greece would be another market lost, another low-cost competitor to German exports. Without Greece, the European Union might keep fraying. This is a threat that will be met; all that's left is the haggling over cost and the proper sequence of the rescue.

Sure enough, a scheme has leaked whereby German, French, and other banks will buy Greek bonds—perhaps enticed by European guarantees—while Greece submits to painful structural reforms. The Socialist government in Athens has staked its future on restoring fiscal discipline. Such hopes have lifted Greek stocks 8% over the last week, though they remain 30% below the peak set in October.

The bulls have owned London for a month, lifting the FTSE-100 index 8% and within spitting distance of the January highs. In contrast to the gloomy Americans, UK consumers are more confident than they have been in two years. The long-unpopular Labor government has drastically narrowed the Tories' lead ahead of an election due this spring. Helpfully for the exporters that dominate the FTSE, the pound has been getting pounded by fears of a hung Parliament. But earnings have been strong across Europe, averaging 5% above estimates, according to Bloomberg data.

A hung Parliament doesn't sound as bad as hung generals to the Turks, one reason the Istanbul market has struggled since the arrests of more than 60 past and present army officers over an alleged abortive coup plot six years ago against the country's democratically elected Islamist government. In contrast, Malaysian investors remain undeterred by the trial of a leading opposition politician on sodomy charges.

In trans-Pacific technology sparring, the Obama administration is reportedly considering a World Trade Organization complaint over China's censorship of Google (Nasdaq: GOOG). Meanwhile, Apple (Nasdaq: AAPL) may be trying to get Google's goat by suing its rival's Taiwanese hardware partner.

The economic news from Asia remained upbeat, on both ends of the growth spectrum. Rampant Australia grew faster than forecast. Stagnant Japan chipped in with a dip in unemployment and a bump in household spending.

Chile's stock market has retrenched 3% since the weekend's devastating earthquake. But the continued strengthening of commodity prices is a positive for the copper-heavy Chilean economy.

It's also good for Centamin Egypt (London: CEY, Toronto: CEE), which, as John Snowden tells it, was born from a stray glance at an ancient map pinned to a wall. It's since hit pay dirt on well-traveled turf, and should benefit from the renewed push higher by gold, which is already at a record against the British pound and the euro.

And while North American natural gas remains cheap, Roger Conrad names two Canadian funds continuing to profit handsomely from fixed gas transportation contracts. They're yielding twice as much as long-dated US bonds, and are backed by stronger fundamentals.   

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