European concerns have returned to the market, as fears over
the health of the Spanish economy and the future of France after
upcoming elections pressured equities today. China's
lower-than-expected GDP numbers overnight also weighed on
markets.
The Economistreports on renewed fears of a European crisis
stemming from Spain
European markets have been particularly volatile over the past
few weeks as a result of the re-emergence of concern over the
fiscal health of periphery members of the euro zone. In
particular,
the Economist
discusses the fundamental problems with the Spanish economy that
will persist barring major reform. Simply, Spain will be unable
to borrow at these rates for long, and the Spanish economy will
be particularly handicapped if growth shrinks as a result of
recently implemented austerity measures. Combined with weak
banks
, it is likely that Spain will soon have to tap into the European
rescue fund to shore up its banks. Evidently, Spain (
EWP
,
quote
) continues to face manifold problems, and long-term investors
should avoid trying to pick a bottom just yet.
Neil Munshi and Girija Shivakumar for
the Financial Times
discuss the opening of India and Pakistani economic
ties
In spite of decades of antipathy and ongoing disputes over
Kashmir, India and Pakistan have finally started to take
meaningful steps towards broad economic cooperation: Pakistan has
granted India Most Favored Nation status; India's Minister of
Commerce has announced his country's intentions of opening up to
foreign direct investment from Pakistan; further, India (
EPI
,
quote
) has allowed Pakistani businessmen to procure visas. This is a
positive development for both nations, as increased economic
co-dependence would drastically reduce the possibility of another
armed conflict between these two historic foes. The less likely
the chance of a war between India and Pakistan, the more
attractive the countries become for foreign investors.
Bloomberg
comments on China's lower-than-expected GDP numbers
Overnight, Chinese GDP growth for the first quarter came in at
8.1%, lower than analysts' forecasts of 8.4%. This slowing growth
in the Chinese economy (
FXI
,
quote
) put pressure on global markets today, even though these numbers
suggest that
China may have avoided a hard landing
.
Scheherazade Daneshkhu in
the Financial Times
reports on the how failed promises could come back to haunt
Sarkozy
French President Nicolas Sarzoky looks set to suffer defeat in
the second round of French presidential elections in a few weeks'
time, as disillusioned French voters are frustrated by Sarkozy's
failed efforts to increase employment opportunities, particularly
amongst French youth. Investors in France (
EWQ
,
quote
) should tread carefully, as Sarkozy's primary opponent and
likely winner of the second round election, François Hollande has
campaigned on a platform that is overtly hostile to business,
including a proposed 75% effective tax rate on France's top
bracket. A victory for Hollande could see French equities
continue to slide.
The Economist
discusses employment and growth in Asia
A post in this week's edition of
the Economist
describes a fall in productivity amongst employees in Asian
economies in spite of the fast rate of growth in these countries.
According to the British newspaper, "the job yield from growth
has dropped across most of emerging Asia." In other words, it
will be more difficult for emerging markets in Asia to make
incremental gains in productivity going forward.
Disclosure: Author owns EWQ puts
;
immediate family is long EPI.