The Word from Hansard, 13th Oct 2009

The Word from Hansard

Billionaire George Soros, looking to address the "political problem" of climate change, said he will invest USD 1 billion in clean-energy technology and donate USD 100 million to an environmental advisory group to aid policymakers. Soros, the founder of hedge fund Soros Fund Management LLC, announced the investment in Copenhagen on 10 October at a meeting on climate change sponsored by Project Syndicate. The group is an international association made up of 430 newspapers from 150 countries. "I want to apply rather stringent criteria to the investments," said Soros in an e-mailed message. "They should be profitable but should also actually make a contribution to solving the problem."

Singapore raised its 2009 economic forecast after gross domestic product expanded for a second consecutive quarter, strengthening a regional recovery that has prompted policy makers to consider ending stimulus measures. The economy will shrink 2 to 2.5% this year, less than an earlier forecast for a contraction of 4 to 6%, the trade ministry said in a statement on Monday. GDP expanded an annualised 14.9% last quarter from the previous three months, the second consecutive expansion. Singapore’s central bank said on Monday it will maintain a zero appreciation stance in its currency policy, after opting for a de-facto devaluation of the Singapore dollar in April to help reverse a collapse in exports. Central banks around the world have begun to indicate a willingness to raise interest rates as inflation returns with economic recovery. "Asian economies are recovering so we may see a slow withdrawal of fiscal and monetary stimulus because they can’t go cold turkey," said Alvin Liew, an economist at Standard Chartered Plc in Singapore. "The export outlook is improving but there are still potential speed bumps such as unemployment and we may see a prolonged recovery process." Australia last week became the first among the Group of 20 nations to raise borrowing costs since the height of the global financial crisis, and US Federal Reserve Chairman Ben Bernanke said the Fed is prepared to tighten monetary policy when the outlook for the economy "has improved sufficiently."

India’s industrial production rose the most in 22 months, suggesting the central bank may have scope to make an early exit from emergency stimulus measures. Output at factories, utilities and mines jumped 10.4% in August from a year earlier after gaining a revised 7.2% in July, the statistics agency said in New Delhi on Monday. Economists were expecting a 9.7% increase. Manufacturing across Asia is showing signs of recovery, prompting policy makers to consider when they can begin to withdraw the monetary and fiscal stimulus initiated to protect their economies from the global recession. Central bank Governor Duvvuri Subbarao last week said India may need to act ahead of advanced economies due to "incipient" inflation pressures. "With doubts over the durability of India’s upswing fading all the time, and inflation pressures already high, policy rates look certain to move up soon," said Kevin Grice, an economist at Capital Economics Ltd in London. "We still expect a first hike in January but the possibility of a first move at the 27 October monetary policy meeting now looks close to a 50:50 call."

The British pound continued its decline against other major currencies on Tuesday as fears that inflation has tumbled further below target weighed. Dipping to levels not seen for over half a year, sterling hit a low against the euro of 1.065, down around a third of a cent from opening levels, marking its lowest ebb since late March against the single European currency. It also slid against the dollar in early trading, back under the USD 1.58 level at USD 1.5738 at its lowest point. The pound had already taken a hit on Monday after the UK government announced it was selling off a number of assets, including the country’s student loan book and the Dartford Tunnel, and today the trend continued as investors fretted over the impending inflation data. Arifa Sheikh-Usmani, equity trader at Spreadex, said the pound was falling further as the latest data was expected to show another drop in inflation, and confirm expectations that rates will be staying at record lows for some time to come. Sheikh-Usmani said," Sterling continues its weakness this morning on expectations that interest rates in the UK will stay low for some time to come. Investors will therefore be looking out for (the) UK Consumer Prices Index, and a low inflation figure could see sterling take a tumble again."

Spotlight on gold and other precious metals

Gold rose to a record in London and New York on speculation that a weakening US dollar and faster inflation will boost the appeal of precious metals. Platinum and palladium climbed to the highest price in more than a year. Bullion, which usually moves inversely to the dollar, is on course for a ninth annual gain after the dollar dropped 6.3% this year against a basket of six currencies. Gold reached USD 1,065.65 an ounce in London, while futures climbed to USD 1,066.70 in New York, surpassing the previous highs on 8 October.

"There’s lots of concern about the weakness in the US dollar and it’s this that has been driving gold," Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said. "The fear that central bank exit strategies will come too late to prevent inflation is giving support to gold."

Immediate-delivery bullion added USD 7.20, or 0.7%, to USD 1,064.30 an ounce early on Tuesday. Spot prices have advanced 21% this year. December gold futures were 0.7% higher at USD 1,065.30 an ounce on the New York Mercantile Exchange’s Comex division. "As we start to see more evidence of economic recovery, we might see the momentum catalyst push gold higher," said Darren Heathcote, head of trading at Investec Bank Ltd in Sydney.

President Barack Obama has increased US marketable debt to a record as he borrows to reignite growth in the world’s biggest economy. That’s boosted speculation increased money supply will debase the currency and spur inflation. The Federal Reserve has cut its main interest rate almost to zero and backed asset purchases and credit programs to combat the recession. Chairman Ben Bernanke is leading plans to buy mortgage-backed securities, federal agency debt and Treasuries.

Oil futures, used by some investors as an inflation guide, gained as much as 0.9% to USD 73.91 a barrel today in New York, after climbing 2.1% yesterday. The US Dollar Index, which last week dropped to the lowest level in almost 14 months, was almost unchanged today. Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged for a third day at 1,109.31 metric tons on Monday, according to the company’s website. Assets in ETF Securities Ltd’s exchange-traded products added 0.3% to a record 8.441 million ounces yesterday.

Gold will trade at USD 1,025 an ounce in the next three months, up from a previous forecast of USD 950, Citigroup Inc. said on Tuesday in a report, citing increased demand because of a weakening dollar. The bank raised its 6-12 month estimate to USD 1,050, from USD 975. Among other precious metals for immediate delivery in London, silver rose 1.1% to USD 17.895 an ounce. Palladium jumped as much as 1.5% to USD 334 an ounce, the highest price since 11 August 2008. Platinum added 1% to USD 1,353.70 an ounce, after earlier reaching USD 1,354.25, the highest since 8 September 2008.

Hansard has a variety of fund links across a diverse range of asset classes ranging from commodities to emerging market equities to climate change solutions. To find out more about our fund links please contact your Hansard Account Executive who will be able to assist you further.

The information set out herein has been obtained from various public sources and is sent to you by way of information only. Hansard can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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