A NATION remembers Baroness Thatcher – acknowledged as the force behind the most significant economic reforms in post-war Britain and a formidable political figure.
The Iron Lady earned her place in history, not least for being the first female Prime Minister. Her legacy continues to inform today’s politics and today’s Britain. Under her leadership the top rate of income tax fell sharply; government spending fell as a proportion of GDP; home ownership rose; the power of the unions diminished; and the gap between the rich and poor widened.
Love her or loathe her, senior economists I know insist that her supply side reforms – including weaker unions – have helped keep the UK unemployment rate relatively low during the current crisis. The jobless rate remains lower than usual for a recession, despite the fact that a triple-dip remains a genuine risk in the UK. We will not learn whether or not the economy shrank for a second successive quarter until the first official estimate of first-quarter GDP is published on April 25, but City confidantes tell me it will be a very close call indeed.
Over on Threadneedle Street, Bank of England policymakers made no change to policy this month and there is a growing sense they will continue to maintain the status quo until they have got the measure of the incoming Governor Mark Carney in July.
The European Central Bank also left policy unchanged, but I’m told its policymakers have been busy preparing the ground for another rate cut in the next couple of months. While the immediate panic in Cyprus has abated, Portugal’s unravelling austerity programme has forced its government’s borrowing costs back up to the highest level this year, and underlines the ongoing fragility of the single currency.
In terms of commodities, gold seemed like a busted flush last week as it flirted with a bear market, but grim jobs data from the US means the Fed isn’t likely to take its foot off the QE pedal just yet. However, any rise in the gold price is likely to be short lived, as investors eye improving economic conditions down the line. The price will find a floor, supported by central bank buying, but it looks likely that there won’t be any last hurrah in this cycle.
Strikes at ports in Chile have got people excited about a potential rise in the copper price. I wouldn’t get too excited. My contacts tell me it’s hitting fruit exports more than copper and copper inventories are at a 10-year high. There’s plenty to go around and some industrial action isn’t likely to dent supply to those who need it.
It’s all a bit bearish in agriculturals space too. Funds and professional investors in the US have been pulling money out of long positions at an astonishing rate and bullish positions in grains such as corn are at their lowest level since March 2009. Don’t bet against this trend.
That’s all for now. Once again, I’d love to hear your views on the topics of the day – this time on Baroness Thatcher’s legacy, a debate I can imagine is being had up and down the country as we speak.
Until next time….
To give our clients a different and uniquely informed perspective on the financial markets, Capital Spreads introduces “The City Insider”, a fortnightly view from a City expert, with a senior network of influential bankers, investors, economists and analysts. The identity of the Insider is anonymous – and a closely guarded secret – in order to allow our expert to express forthright, personal views and to protect the identity of the City figures upon whose opinions the Insider draws.
by City Insider
The Iron Lady: Profit from her Legacy
Apr 10, 2013 at 4:59 pm in Market Commentary by City Insider
A NATION remembers Baroness Thatcher – acknowledged as the force behind the most significant economic reforms in post-war Britain and a formidable political figure.
The Iron Lady earned her place in history, not least for being the first female Prime Minister. Her legacy continues to inform today’s politics and today’s Britain. Under her leadership the top rate of income tax fell sharply; government spending fell as a proportion of GDP; home ownership rose; the power of the unions diminished; and the gap between the rich and poor widened.
Love her or loathe her, senior economists I know insist that her supply side reforms – including weaker unions – have helped keep the UK unemployment rate relatively low during the current crisis. The jobless rate remains lower than usual for a recession, despite the fact that a triple-dip remains a genuine risk in the UK. We will not learn whether or not the economy shrank for a second successive quarter until the first official estimate of first-quarter GDP is published on April 25, but City confidantes tell me it will be a very close call indeed.
Over on Threadneedle Street, Bank of England policymakers made no change to policy this month and there is a growing sense they will continue to maintain the status quo until they have got the measure of the incoming Governor Mark Carney in July.
The European Central Bank also left policy unchanged, but I’m told its policymakers have been busy preparing the ground for another rate cut in the next couple of months. While the immediate panic in Cyprus has abated, Portugal’s unravelling austerity programme has forced its government’s borrowing costs back up to the highest level this year, and underlines the ongoing fragility of the single currency.
In terms of commodities, gold seemed like a busted flush last week as it flirted with a bear market, but grim jobs data from the US means the Fed isn’t likely to take its foot off the QE pedal just yet. However, any rise in the gold price is likely to be short lived, as investors eye improving economic conditions down the line. The price will find a floor, supported by central bank buying, but it looks likely that there won’t be any last hurrah in this cycle.
Strikes at ports in Chile have got people excited about a potential rise in the copper price. I wouldn’t get too excited. My contacts tell me it’s hitting fruit exports more than copper and copper inventories are at a 10-year high. There’s plenty to go around and some industrial action isn’t likely to dent supply to those who need it.
It’s all a bit bearish in agriculturals space too. Funds and professional investors in the US have been pulling money out of long positions at an astonishing rate and bullish positions in grains such as corn are at their lowest level since March 2009. Don’t bet against this trend.
That’s all for now. Once again, I’d love to hear your views on the topics of the day – this time on Baroness Thatcher’s legacy, a debate I can imagine is being had up and down the country as we speak.
Until next time….
To give our clients a different and uniquely informed perspective on the financial markets, Capital Spreads introduces “The City Insider”, a fortnightly view from a City expert, with a senior network of influential bankers, investors, economists and analysts. The identity of the Insider is anonymous – and a closely guarded secret – in order to allow our expert to express forthright, personal views and to protect the identity of the City figures upon whose opinions the Insider draws.