Financial Pacific: The Week in Review (third party) september 27,2010


Published on

Visit our website for more information:

Financial Pacific: “The Right Wave to Invest”
In today’s global economy it is important to be fully aware of the intricacies of international investments and the opportunities that these have to offer. Financial Pacific offers proven overseas investment opportunities.
If you are interested in a reliable investment service look no further because Financial Pacific provides: Wealth Management, Online Trading, Institutional Services and Investment Banking. With cutting edge technology we are capable to support highly specialized derivatives instruments such as: CFDs, ETFs, ETCs, Futures and Options. In addition investors have access to a wide range of investment opportunities through: Structured Notes, Fixed Income, Reverse Convertibles, Preferred Stocks, and Institutional Hedge Funds.
Fully regulated by the National Securities and Exchange Commission since 2003; allow us to provide you with the necessary tools to take advantage of the global markets.

Published in: Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Financial Pacific: The Week in Review (third party) september 27,2010

  1. 1. Brian O'Reilly, strategist, UBS AG Caroline Winckles, CFA, analyst, UBS AG Mark Bulsing, strategist, UBS AG Wealth Management Research 27 September 2010 UK economics The week in review...the week ahead s Another strong week for equity markets: In London, the FTSE 100 gained 1.6%, closing just below the important 5,600 level. In the US, the S&P 500 is at 1,146, up 1.8% in Friday mid-day trading, buoyed by good durable-goods orders. s Government bonds moved higher on confirmation that both BoE and the Fed have left the door open for more quantitative easing (QE). UK 10-year Gilts ended the week at 3.04%, while 10-year US Treasury yields were back down to 2.59%. s The pound weakened against the euro, losing 2% following the more dovish BoE minutes. GBPEUR is now at 1.174. Sterling gained against the dollar, moving back up to 1.578. s Gold reached an all-time high of USD 1,295/oz, up 1.6%. Oil is at USD 76/bbl. Volatility as measured by the VIX index was flat at 22. Overview This week was dominated by both the MPC minutes and the outcome of the FOMC meeting. As expected, both UK and US central banks kept rates on hold, but somewhat surprisingly signaled that, if required, they were on hand to do additional QE. We had expected such a comment from the Fed, but were surprised to see such a dovish tone from the BoE. While the spending review due 20 October is a concern, we give a low probability of further QE actually occurring, in light of higher inflation and solid 2Q10 growth. Ireland's economy also remained in focus, with 2Q10 GDP coming in weaker than expected, dropping 1.2%. With the 3Q10 earnings season not fully underway, next week's attention will continue to focus on macroeconomic indicators. Fed Chairman Ben Bernanke testifies before the Senate Banking Committee on Thursday, and the market will be looking for further signals to determine if QE2 will be launched. On the data front, PMI is due on Friday from the UK, the US and China. We expect to see a further deterioration, continuing the recent trend, with only China likely to see an improvement on last month. This report has been prepared by UBS AG. Please see important disclaimers and disclosures that begin on page 4.
  2. 2. UBS Wealth Management Research 27 September 2010 UK economics The week in review... s Dovish tone from the MPC: The latest MPC minutes again showed members voting 8-1 to keep rates unchanged at 0.5% at the Septem- ber meeting, and to keep QE at GBP 200bn. Despite inflation remain- ing above 3%, only Andrew Sentence voted against the proposal. The one surprise from the meeting was the more dovish tone by some of the members stating that "the probability that further action would become necessary to stimulate the economy and keep inflation on track…had increased." With the government's spending review due to be published on 20 October, the BoE will continue to err on the side of caution, in our opinion, until the full impact of the fiscal aus- terity measures is evident, the focus of which will have increased since the public sector net borrowing was at GBP 15.3bn, worse than the expected GBP 12.5bn. s Don't fight the Fed: In the US, the FOMC also left rates unchanged at 0.25%, and did not extend quantitative easing. However, members acknowledged that "the recovery remains modest in the near term." It also stated that it is "prepared to provide additional accommodation if necessary." Some welcome positive news came from the housing sector, with housing starts beating expectations at 598,000 for the month, and existing homes sales up 7.6% m/m. However, labor mar- ket data was disappointing, with initial jobless claims rising to 465,000 from 450,000 the prior month. s Ireland: From prosperity to austerity: The state of Ireland's econ- omy continues to remain in the spotlight. 2Q10 GDP fell 1.2% q/q, significantly below the market's expectations of 0.4% gain, signaling that the economy remains in recession. The true extent of capital re- quired by the banking sector compounds the already significant chal- lenges Ireland faces. Encouragingly, on 20 September, the National Treasury Management Agency managed to sell EUR 500mn in four- year bonds at 4.76%, and a further EUR 1bn in eight-year bonds. We believe the government will have to do more than the EUR 3bn-4bn austerity measures planned for this year's budget to appease market concerns. s Germany disappoints on manufacturing: September PMI data from Germany was much weaker than anticipated, with manufactur- ing coming in at 55.3, down from 58.2 in August, and services record- ing 54.6, down from 57.2. A rolling-over of the data is to be expected at this point in the cycle, and the reading remains well above the cut- off to contraction. The Ifo Business Climate Index, however, improved on the prior month and slightly beat expectations. UK economics - 2
  3. 3. UBS Wealth Management Research 27 September 2010 UK economics The week ahead… In the coming week, the market will have to digest a busy economic calen- dar. In the UK, housing and PMI data will dominate the agenda, and we expect to see a deterioration in both indicators. In the US, Bernanke testifies before the Senate Banking Committee on Thursday. In China, September PMI data is due for release on Friday. s UK PMI expected to slow: Second-quarter GDP revision is due on Monday and is expected to confirm that the economy grew 1.2% q/ q and 1.7% y/y, much better than previously anticipated. On Friday, manufacturing PMI data is due, with consensus expecting a slowdown to 53.8 from 54.3 last month. BoE mortgage approvals and nationwide house prices will be released on Wednesday and Thursday, respectively. Both are expected to post a small decline versus the prior reading, and remain well below historical levels. Correspondingly, we expect consumer confidence to remain weak on Thursday. s US: Will QE2 set sail? Bernanke testifies before the Senate Banking Committee on Thursday. Markets will be looking for further explana- tion of the changes to last week's FOMC policy statement, and for further clues if the Fed will do more QE in the coming months. ISM Manufacturing PMI is due on Friday, and as with other regions, is ex- pected to be weaker than August, but still in expansionary territory. The market is looking for 54.5 versus 56.3 last month, and a large miss in either direction could cause a large sell-off or rally depending on which direction. Consumer confidence indicators from both the Uni- versity of Michigan and the Conference Board are expected to show broadly unchanged confidence at 67 and 53, respectively. 2Q10 GDP revision is expected to show that the economy grew 1.6% q/q annu- alized between April and June. s China PMI expected to improve: China is expected to be the only region to increase its PMI indicator this month, rising from 51.7 to 52.8. Efforts to moderate the pace of growth in China appear to have been successful. We still expect a GDP growth of 10% for this year. Key Data and Events Dat e Time Region Event Survey Prior 28/09/2010 09:30 UK GDP (QoQ) 1.2% 1.2% 28/09/2010 09:30 UK GDP (YoY) 1.7% 1.7% 28/09/2010 15:00 US Conf. Board Consumer Confidence 52.5 53.5 29/09/2010 09:30 UK Mortgage Approvals 47.0K 48.7K 30/09/2010 00:01 UK GfK Consumer Confidence Survey -19 -18 30/09/2010 07:00 UK Nat’wide House prices sa (MoM) -0.20% -0.90% 30/09/2010 07:00 UK Nat’wide House prices nsa(YoY) 2.70% 3.90% 30/09/2010 08:55 Germany Unemployment Rate (s.a) 7.60% 7.60% 30/09/2010 10:00 Eurozone Euro-Zone CPI Estimate (YoY) 1.80% 1.60% 30/09/2010 13:30 US GDP QoQ (Annualized) 1.6% 1.6% 30/09/2010 13:30 US Initial Jobless Claims 458K 465K 01/10/2010 02:00 China PMI Manufacturing 52.8 51.7 01/10/2010 09:30 UK PMI Manufacturing 53.8 54.3 01/10/2010 10:00 Eurozone Euro-Zone Unemployment Rate 10.00% 10.00% 01/10/2010 14:55 US U. of Michigan Confidence 67 66.6 01/10/2010 15:00 US ISM Manufacturing 54.5 56.3 Source: Bloomberg UK economics - 3
  4. 4. UBS Wealth Management Research 27 September 2010 UK economics Appendix Global Disclaimer Wealth Management Research is published by Wealth Management & Swiss Bank and Wealth Management Americas, Business Divisions of UBS AG (UBS) or an affiliate thereof. In certain countries UBS AG is referred to as UBS SA. This publication is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis and/or may not be eligible for sale to all investors. All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness (other than disclosures relating to UBS and its affiliates). All information and opinions as well as any prices indicated are current as of the date of this report, and are subject to change without notice. Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of UBS as a result of using different assumptions and/or criteria. At any time UBS AG and other companies in the UBS group (or employees thereof) may have a long or short position, or deal as principal or agent, in relevant securities or provide advisory or other services to the issuer of relevant securities or to a company connected with an issuer. Some investments may not be readily realizable since the market in the securities is illiquid and therefore valuing the investment and identifying the risk to which you are exposed may be difficult to quantify. UBS relies on information barriers to control the flow of information contained in one or more areas within UBS, into other areas, units, divisions or affiliates of UBS. Futures and options trading is considered risky. Past performance of an investment is no guarantee for its future performance. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested or may be required to pay more. Changes in FX rates may have an adverse effect on the price, value or income of an investment. We are of necessity unable to take into account the particular investment objectives, financial situation and needs of our individual clients and we would recommend that you take financial and/or tax advice as to the implications (including tax) of investing in any of the products mentioned herein. This document may not be reproduced or copies circulated without prior authority of UBS or a subsidiary of UBS. UBS expressly prohibits the distribution and transfer of this document to third parties for any reason. UBS will not be liable for any claims or lawsuits from any third parties arising from the use or distribution of this document. This report is for distribution only under such circumstances as may be permitted by applicable law. Australia: Distributed by UBS Wealth Management Australia Ltd (Holder of Australian Financial Services Licence No. 231127), Chifley Tower, 2 Chifley Square, Sydney, New South Wales, NSW 2000. Austria: This publication is not intended to constitute a public offer or a comparable solicitation under Austrian law and will only be used under circumstances which will not be equivalent to a public offering of securities in Austria. The document may only be used by the direct recipient of this information and may under no circumstances be passed on to any other investor. Bahamas: This publication is distributed to private clients of UBS (Bahamas) Ltd and is not intended for distribution to persons designated as a Bahamian citizen or resident under the Bahamas Exchange Control Regulations. Canada: In Canada, this publication is distributed to clients of UBS Wealth Management Canada by UBS Investment Management Canada Inc.. Dubai: Research is issued by UBS AG Dubai Branch within the DIFC, is intended for professional clients only and is not for onward distribution within the United Arab Emirates. France: This publication is distributed by UBS (France) S.A., French "société anonyme" with share capital of € 125.726.944, 69, boulevard Haussmann F-75008 Paris, R.C.S. Paris B 421 255 670, to its clients and prospects. UBS (France) S.A. is a provider of investment services duly authorized according to the terms of the "Code Monétaire et Financier", regulated by French banking and financial authorities as the "Banque de France" and the "Autorité des Marchés Financiers". Germany: The issuer under German Law is UBS Deutschland AG, Bockenheimer Landstrasse 2-4, 60306 Frankfurt am Main. UBS Deutschland AG is authorized and regulated by the "Bundesanstalt für Finanzdienstleistungsaufsicht". Hong Kong: This publication is distributed to clients of UBS AG Hong Kong Branch by UBS AG Hong Kong Branch, a licensed bank under the Hong Kong Banking Ordinance and a registered institution under the Securities and Futures Ordinance. Indonesia: This research or publication is not intended and not prepared for purposes of public offering of securities under the Indonesian Capital Market Law and its implementing regulations. Securities mentioned in this material have not been, and will not be, registered under the Indonesian Capital Market Law and Regulations. Italy: This publication is distributed to the clients of UBS (Italia) S.p.A., via del vecchio politecnico 3, Milano, an Italian bank duly authorized by Bank of Italy to the provision of financial services and supervised by "Consob" and Bank of Italy. Jersey: UBS AG, Jersey Branch, is regulated and authorized by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. Luxembourg: This publication is not intended to constitute a public offer under Luxembourg law, but might be made available for information purposes to clients of UBS (Luxembourg) S.A., a regulated bank under the supervision of the "Commission de Surveillance du Secteur Financier" (CSSF), to which this publication has not been submitted for approval. Singapore: Please contact UBS AG Singapore branch, an exempt financial adviser under the Singapore Financial Advisers Act (Cap. 110) and a wholesale bank licensed under the Singapore Banking Act (Cap. 19) regulated by the Monetary Authority of Singapore, in respect of any matters arising from, or in connection with, the analysis or report. Spain: This publication is distributed to clients of UBS Bank, S.A. by UBS Bank, S.A., a bank registered with the Bank of Spain. UAE: This research report is not intended to constitute an offer, sale or delivery of shares or other securities under the laws of the United Arab Emirates (UAE). The contents of this report have not been and will not be approved by any authority in the United Arab Emirates including the UAE Central Bank or Dubai Financial Authorities, the Emirates Securities and Commodities Authority, the Dubai Financial Market, the Abu Dhabi Securities market or any other UAE exchange. UK: Approved by UBS AG, authorized and regulated in the UK by the Financial Services Authority. A member of the London Stock Exchange. This publication is distributed to private clients of UBS London in the UK. Where products or services are provided from outside the UK, they will not be covered by the UK regulatory regime or the Financial Services Compensation Scheme. USA: Distributed to US persons by UBS Financial Services Inc., a subsidiary of UBS AG. UBS Securities LLC is a subsidiary of UBS AG and an affiliate of UBS Financial Services Inc. UBS Financial Services Inc. accepts responsibility for the content of a report prepared by a non-US affiliate when it distributes reports to US persons. All transactions by a US person in the securities mentioned in this report should be effected through a US-registered broker dealer affiliated with UBS, and not through a non-US affiliate.Version as per January 2010. © UBS 2010.The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. UK economics - 4