IF the World Economic Forum in 2012 was “Austerity Davos” then this year it was all about pizza.
The sight of David Cameron, George Osborne and Boris Johnson laughing over their thin-crust margaritas summed up the mood of this year’s gathering – it seemed like everybody let their guard down a little after last year’s drama.
Twelve months ago, delegates at Davos were on edge: a Greek default looked a real possibility, Spain’s banks were yet to be re-capitalised and a break-up of the eurozone was very much on the cards.
This time around, Mario Draghi, the ECB president, even had the balls to claim we had seen a ‘re-launching of the euro’. No wonder there was time among the British contingent to chuckle about old times at Oxford… even with the extortionate prices being charged at the Swiss ski resort.
I gather there was more than a ripple of disapproval back at home once official figures showed the economy contracted by 0.3pc in the fourth quarter of 2012.
Another period of contraction in the first quarter of 2013 would signal an unprecedented triple-dip recession, something which my economist friends tell me is looking increasingly likely after last week’s snow.
That would be a major blow for the Chancellor and his headache is likely to get worse still if he overshoots his borrowing target for the fiscal year 2012-13, which is also looking likely. Failure to meet those deficit-cutting targets will likely see Britain stripped of its treasured AAA credit rating, a fate already suffered by the US and France.
The figures were very disappointing, but neither eating pizza nor laughing were crimes last time I looked. The economic positivity continues to infect global markets – but for how long can it continue? It may be foolish to bet on a market fall when the momentum is taking equities ever higher, but such sharp gains of late make me nervous. I guess I’m a contrarian at heart. All of this has prompted a surge in oil prices.
Brent crude is at its highest level since October last year and US oil is at a level not seen since September. It appears that investors are pricing in perfect execution by businesses, central bankers and other policy makers. But I haven’t see perfection for a long time.
If the economy does get going, copper is probably a better bet than oil, despite the fact it is near a three-month high. All of this means that gold has been in the doldrums as investors take on more risk, although there was some safe-haven buying after the US GDP figures.
That’s all for now as I’m off on a mini tour of Europe to try and make some money while the markets are up. Judging by the size of Tamara Ecclestone’s £30,000 bar bill in Mayfair this week I’d probably be best off just investing in a trendy nightspot in the centre of London. It’d certainly be a fun way to make a living.
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
Margarita time for Dave, George and Boris as the UK grinds to a halt
Jan 31, 2013 at 6:26 pm in Market Commentary by City Insider
IF the World Economic Forum in 2012 was “Austerity Davos” then this year it was all about pizza.
The sight of David Cameron, George Osborne and Boris Johnson laughing over their thin-crust margaritas summed up the mood of this year’s gathering – it seemed like everybody let their guard down a little after last year’s drama.
Twelve months ago, delegates at Davos were on edge: a Greek default looked a real possibility, Spain’s banks were yet to be re-capitalised and a break-up of the eurozone was very much on the cards.
This time around, Mario Draghi, the ECB president, even had the balls to claim we had seen a ‘re-launching of the euro’. No wonder there was time among the British contingent to chuckle about old times at Oxford… even with the extortionate prices being charged at the Swiss ski resort.
I gather there was more than a ripple of disapproval back at home once official figures showed the economy contracted by 0.3pc in the fourth quarter of 2012.
Another period of contraction in the first quarter of 2013 would signal an unprecedented triple-dip recession, something which my economist friends tell me is looking increasingly likely after last week’s snow.
That would be a major blow for the Chancellor and his headache is likely to get worse still if he overshoots his borrowing target for the fiscal year 2012-13, which is also looking likely. Failure to meet those deficit-cutting targets will likely see Britain stripped of its treasured AAA credit rating, a fate already suffered by the US and France.
The figures were very disappointing, but neither eating pizza nor laughing were crimes last time I looked. The economic positivity continues to infect global markets – but for how long can it continue? It may be foolish to bet on a market fall when the momentum is taking equities ever higher, but such sharp gains of late make me nervous. I guess I’m a contrarian at heart. All of this has prompted a surge in oil prices.
Brent crude is at its highest level since October last year and US oil is at a level not seen since September. It appears that investors are pricing in perfect execution by businesses, central bankers and other policy makers. But I haven’t see perfection for a long time.
If the economy does get going, copper is probably a better bet than oil, despite the fact it is near a three-month high. All of this means that gold has been in the doldrums as investors take on more risk, although there was some safe-haven buying after the US GDP figures.
That’s all for now as I’m off on a mini tour of Europe to try and make some money while the markets are up. Judging by the size of Tamara Ecclestone’s £30,000 bar bill in Mayfair this week I’d probably be best off just investing in a trendy nightspot in the centre of London. It’d certainly be a fun way to make a living.
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.