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MONDAY, JUNE 23, 2014 BUSINESS Yellen did not reproduce the Carney effect NBK WEEKLY MONEY MARKET REPORT KUWAIT: The FOMC continued to taper thing important? The net sales of long-term US assets Germany on upward trajectory the market has now priced a 50/50 and for the third consecutive time, made The most relevant ‘hawkish’ com- notched $24.2 billion in April following a even with slower speed chance of a hike in December 2014. minimal changes to their formal state- ments in Yellen’s Q&A were those in net inflow of $4.1 billion the month Investor confidence in Germany fell Going over the Bank of England speech, ment. In addition, the reduction in their response to a renowned US newspaper before. Long-term US Treasuries showed for the sixth month in a row, despite ana- there’s no denying that central banks are unemployment forecasts was not aggres- question about market complacency. an outflow of $13.59 billion from an lysts expected a rise. The ZEW sentiment starting to sound more hawkish motivat- sive. This was just not enough to concern She said, “I don’t know if overconfidence inflow of $25.86 billion in March. China’s survey showed the indicator for econom- ed by the combination of strengthening markets and Yellen’s press conference or complacency is one of the reasons. But holdings of U.S. Treasuries also declined ic expectations fell to 29.8 in June from recoveries and an increased focus on downplayed any inflationary concerns I guess I would say it is important as I during the month by $8.9 billion, but it 33.1 in May compared to markets expec- financial stability. In this context, com- and offered little insight into consider- emphasized in my opening statement for remained the largest holder with $1.263 tations of 35.0. The indicator has been ments from the Bank of England’s Carney able time debate. market participants to recognize that trillion in April, from $1.272 trillion in dropping since January, with mainly the are one of the most important develop- Yellen did note that if employment there is uncertainty about what the path March European political crisis weighing on the ments in recent weeks, as this could a comes in better than their expectations, of interest rates, short-term rates will be. indicator in recent months. On the other clear indication of a more widespread then they would tighten soon than is cur- And, I want to emphasize, as I have, that change in tone. rently expected. However, the overall the FOMC will adjust policy to what it outcome was bearish volatility. Equities actually sees unfolding in the economy Asia and commodities rallied, the dollar came under heavy pres- over time and that necessarily gives rise The recent economic data demon- sure and emerging markets currencies to uncertainty about what the path will strate that the Japanese economy has continued their ascend. Equities moved be, and it is important for market partici- weathered the impact of the introduction to a new high for 2014 and volatility is at pants to factor that into their decision of the sales tax earlier in the year. Faith in the lowest level since 2007. The coming making” the Japan trade has been further buoyed US employment reports are clearly by recent news flow on Government important but we will need consistently Strong durable goods Pension Investment Fund asset realloca- strong data to move the Fed away from thanks to defense sector tion plans, with the head of its investment its current stance Jobless claims held near the post- committee saying last week that Japan’s On the market side, although the euro recession lows and covered the June $1.26 trillion public pension fund will like- is becoming an increasingly more attrac- employment survey period. Indeed, ini- ly announce their decision to increase tive currency for funding purposes, the tial claims decreased by 6,000 to 312,000 stock and foreign-bond investments in currency has not been able to find its in the week ended June 14. The figure is early autumn, “potentially sending tens of way lower. On the other side, Europe definitely a proof of the continuing March’s net bond flows turned negative improvement in the labor market and billions of dollars into new markets”. The on a three-month cumulative basis for matched expectations by analysts. head of the Government Pension the first time since August 2013. Should Weekly claims are hovering around levels Investment Fund’s investment committee, the recent weakness in European data be not seen steadily since mid-2007, before Europe side, in a report released earlier this also mentioned that he thinks that new sustained, it would add to the growing the recession began. IMF pressuring ECB to perform QE week, Germany’s central bank said the portfolio allocations need to be complet- evidence of strong capital flow support On a different front, Philadelphia Fed After the package released by the ECB German economy continues to move in ed “in September or October.” As the latest for the currency has started to wane as business survey “reported continued during their last press conference, mar- the right direction. “The underlying eco- meeting of the BoJ did not produce any lower levels of peripheral bond yields increases in overall activity, new orders, kets were hit in the beginning of the nomic trend looks set to remain on a meaningful action in June, market partici- make respectively those markets less shipments, and employment this month. week by reports that the ECB was likely to clear upward trajectory,” it said, even if pants have started pricing more easing in attractive to global investors. The index has been on the upswing since refrain from adding any new measures in the pace of growth in the current quarter July, and speculation of easing in October. In summary, on the foreign exchange February, when it stood at minus-6.3. The coming months. Also the bank reiterated will be slower than the first quarter. side, Markets closed the week with a rela- report’s main measure, an index of cur- that the effect of any measures could be Premier Li promises no tively stronger euro and GBP against the rent business activity, rose to 17.8, from blunted by the reluctance of banks to Change of tone from Bank of England hard landing for China dollar. After reaching a high of 1.7070 on May’s reading of 15.4. Index readings increase lending during a review of their The major news in Europe came at the Chinese Premier Li Keqiang said on Friday, the Pound ended the week near above zero indicate growth. Finally, the balance sheets in the coming months. end of last week from the governor of the Wednesday that China’s economy would the high of 1.7013. Euro on the other side employment component came also On the other side, IMF managing director Bank of England Mark Carney. Indeed, we not suffer a hard landing and would contin- behaved in a more tamed manner as strong at 11.9 and prices paid rose to 35.0 Christine Lagarde said inflation’s resist- cannot under-estimate the significance ue to grow at a medium to high pace in the investors hesitate to buy the currency. versus 23.0 the prior month ance to the ECB’s latest measures would of the governor’s speech. Carney long term without strong stimulus. Li said The currency closed the week at 1.3600. represent the “stubbornness” that trig- acknowledged that the policy decision he expected China’s economy to grow at a In the commodities markets, the Foreigners shun US treasuries gers quantitative easing. She also men- was becoming more balanced as minimum clip of 7.5 percent. On the data geopolitical problems in the Middle East and corporate bonds tioned, “If inflation remains stubbornly opposed to the commitment to more side, China’s average home prices fell for have started to affect oil prices with inter- According to data released this week, low, the ECB should consider a large- accommodative policy and then added the first time in two years in May and price national newspaper suggesting a major foreigners sold US long-term securities, scale asset purchase program,” the that tightening “could happen sooner weakness spread to more major cities, price increase if Iraqi production went including Treasuries and corporate Washington- based IMF said in an assess- than financial markets currently expect.” adding to signs of cooling in the property completely off line and would cause bonds, in April. Indeed, as global ment of the euro-area economy. “This Sterling rallied hard, reaching a five and market, which are posing a growing risk to major setback to the recovery of the investors await more clarity over the US would boost confidence, improve corpo- half year high at 1.7070 while EUR-GBP the broader economy. New home prices world economy. interest rates path, we continue to see a rate and household balance sheets and has accelerated its recent decline. As the fell in May from April in 35 of the 70 cities Is Yellen trying to tell markets some- poor portfolio flow picture into the US. stimulate bank lending.” first rate hike was priced for April 2015, polled, up from eight cities in April. Maserati A6GCS Berlinetta takes ‘Auto & Design Trophy’ Al-Zayani - Concorso d’Eleganza Villa d’Este 2014: Maserati triumphant he 2014 edition of the ‘Concorso ted with a 4.5-litre 400 HP engine and award.

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