SIR Alex Ferguson’s retirement has sparked an interesting debate across the square mile. What is the secret behind good leadership? Is it a winning mentality? The ability to know when to adapt? Or just plain old simple experience?
Sir Mervyn King may not have won 38 trophies but his reign as Governor of the Bank of England has been just as much of a talking point. The Aston Villa fan was delighted to have some good news up his sleeve for once this week when he presided over his final quarterly Inflation Report before stepping down at the end of June.
According to the Bank, growth will be stronger this year and inflation slightly lower. The improved outlook was welcome news, but whether it actually materialises is another matter. Economists I know said the Bank’s revised forecasts of 1.2pc this year and 1.9pc in 2014 might well prove to be too optimistic. However, it is worth noting that Sir Mervyn continues to advocate more quantitative easing and I’m told by my City sources that another dose is probably around the corner. It is likely that the MPC will wait until Mark Carney, the next Governor, is in place before pumping more money into the economy.
As the economic situation appears to be easing at home, there is a sense that the global picture is generally improving too – although France’s slide back into recession in the first quarter is a reminder that there is still a long way to go. Elsewhere, commodities have been the worst-performing asset class so far this year and despite some respite from positive Chinese economic data earlier this month, look likely to slide even further.
China’s trade growth accelerated in April, which is a positive sign for the underlying economy, but demand for commodities looks set to continue to wane. The precious and industrial metals sectors have been the biggest losers. China provides some hope for industrial metals, although the wider view is that the rising US dollar is likely to continue to gather pace. This is a bad sign for gold, with its recent recovery starting to stutter.
Platinum also looks likely to dip after Anglo American’s plans to restructure mines in South Africa were scuppered by its government. The miner is going to scale back its mine closures and job losses and will now only shed 6,000 workers instead of the planned 14,000. The political situation in South Africa is complex because Anglo is the largest private sector employer in the country. This is not healthy for the platinum market as a whole.
Of course, commodities are always volatile and can take investors on a rollercoaster rise. But the old City saying “never catch a falling knife” looks appropriate at the moment. That’s all for now, time to reflect a little bit more on Sir Mervyn’s rein at the Bank. How do you feel about the 65-year-old? What kind of a state has he left the UK economy in?
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
Is the Economy in Match-Fit Condition?
May 20, 2013 at 7:09 pm in Market Commentary by City Insider
SIR Alex Ferguson’s retirement has sparked an interesting debate across the square mile. What is the secret behind good leadership? Is it a winning mentality? The ability to know when to adapt? Or just plain old simple experience?
Sir Mervyn King may not have won 38 trophies but his reign as Governor of the Bank of England has been just as much of a talking point. The Aston Villa fan was delighted to have some good news up his sleeve for once this week when he presided over his final quarterly Inflation Report before stepping down at the end of June.
According to the Bank, growth will be stronger this year and inflation slightly lower. The improved outlook was welcome news, but whether it actually materialises is another matter. Economists I know said the Bank’s revised forecasts of 1.2pc this year and 1.9pc in 2014 might well prove to be too optimistic. However, it is worth noting that Sir Mervyn continues to advocate more quantitative easing and I’m told by my City sources that another dose is probably around the corner. It is likely that the MPC will wait until Mark Carney, the next Governor, is in place before pumping more money into the economy.
As the economic situation appears to be easing at home, there is a sense that the global picture is generally improving too – although France’s slide back into recession in the first quarter is a reminder that there is still a long way to go. Elsewhere, commodities have been the worst-performing asset class so far this year and despite some respite from positive Chinese economic data earlier this month, look likely to slide even further.
China’s trade growth accelerated in April, which is a positive sign for the underlying economy, but demand for commodities looks set to continue to wane. The precious and industrial metals sectors have been the biggest losers. China provides some hope for industrial metals, although the wider view is that the rising US dollar is likely to continue to gather pace. This is a bad sign for gold, with its recent recovery starting to stutter.
Platinum also looks likely to dip after Anglo American’s plans to restructure mines in South Africa were scuppered by its government. The miner is going to scale back its mine closures and job losses and will now only shed 6,000 workers instead of the planned 14,000. The political situation in South Africa is complex because Anglo is the largest private sector employer in the country. This is not healthy for the platinum market as a whole.
Of course, commodities are always volatile and can take investors on a rollercoaster rise. But the old City saying “never catch a falling knife” looks appropriate at the moment. That’s all for now, time to reflect a little bit more on Sir Mervyn’s rein at the Bank. How do you feel about the 65-year-old? What kind of a state has he left the UK economy in?
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.