Global investment news now

General
Despite a headline fall in US durable goods orders for January of -0.9%, a more detailed analysis reveals a strong performance. Stripping out transportation orders (which includes volatile commercial aircraft sales) orders actually rose 0.8%, a 17% increase from last year. The summit meeting between Presidents Bush and Putin, as well as the recent meetings with the Head's of Europe, appear to be having little impact on the markets at this hour. Having said that it is worth noting that China is becoming a growing issue between the US and Europe. The lifting of a European arms embargo on China is a thorn in the US's side as is increasing co-operation between China and Europe on defense technology. This includes the development of a global navigation satellite network independent to the US GPS system.
Japan's trade surplus fell by 60% last month as hopes for a boost in exports to kick start the ailing economy faded. However a jump in imports was partly to blame for the decline, in itself a healthy sign,although some of this was the result of higher commodity prices. In fact one third of the 11.6% increase in import costs was for energy related products. Japan produces no oil of its own. Import prices in Germany rose for the first month in three and preliminary inflation reports from 2 German states indicate a slight rise in overall inflation form 1.5% to 1.7%. The powerful French trade unions refused to change the date of a national strike from March 10th; the day after the Olympic committee arrives in Paris to discuss the eligibility of France to hold the Olympics in 2012. It is thought that any disruption caused by the strike could put the committee's decision at risk. The unions are protesting the removal of the 35-hour working week legislation. Also, the French Finance minister is under increasing pressure to resign following
revelations of his extravagant government funded lifestyle that included a $18,000 a month Paris apartment.

Thursday
The Japanese and South Korean Central banks denied they had plans to reduce their reserve holdings of US dollars, and Taiwan also said it was not a seller. The announcement by South Korea yesterday that it intended to reduce its dollar holdings always seemed machiavellian in the sensitive world of currency management, so today's retractions were to be expected. The dollar has recovered most of the ground it lost yesterday. Inflation in America continues to be tame. The Consumer Price index for January rose just 0.1%, or 0.2% excluding food and energy. The favorable report boosted both stock and bond prices, the latter driving long term interest rates lower today (30 year bond 4.63%). France issued a 50-year government bond that was received well by the markets. Pension funds in general like longer dated bonds as it allows them to match future liabilities further out. This is especially the case as the 'baby boomer' population bulge approaches retirement. The government received
orders for over ?14 billion of the issue and as a result doubled the amount issued to ?6 billion. Given where the global economy is in the long-term interest rate cycle, it is likely that more long dated government will be issued. Economic news from Europe continues to disappoint. Leading the charge is the widely watched German IFO index that indicates the level of business confidence. It unexpectedly fell to 95.5 from 96.4 surprising the market. In Italy business confidence fell to a 14-month low on a drop in industrial production that shrank the economy in 4Q 2005. This was offset by retail data from France that showed consumers spending heavily in the January sales.

Currencies and Commodities
Reflecting the tight balance between demand and supply for raw materials, iron ore prices are soaring. Rio Tinto Zinc became the second large ore producer this week to lock in a 71% increase with a large
steel producer (Nippon Steel). The steel industry is not surprisingly resisting this trend as it anticipates difficulty in passing these increases on to its customers. As with oil, steel prices are once again mirroring the effects of huge new marginal demand, principally from the new emerging economies such as India and China. Since the reckless statement by the Bank of Korea this week that it would sell dollars as part of a shift into 'alternative' currencies, the Asian country along with everyone else in the region it seems has been doing its best to backtrack. Since the statement officials have come out and said that the assertion was a mistake and that it meant to say 'diversify into non-government bonds". To remark that this comment at best can be considered 'unconvincing' is an understatement, and is supported by the fact that the dollar has barely recovered the significant losses it suffered as a result. It would not be so worrying were it not for two reasons; that Korea is the 4th largest holder of dollars outside of the US, and that the entire US bond market, especially at the long end is underpinned by significant overseas buying.

Global Equities
Newmont mining reported a 19% climb in net income for 4Q2004. The world's largest gold miner also reported an 11% rise in the average price of its gold to $436 for the quarter. NEM is a good proxy for gold investments being one of the most sensitive to the gold price itself. With gold now trading firmly above $430, previously a significant technical level, it now looks set to go higher.

Global Fixed Income
European bond prices fell in anticipation of better economic growth there.

Other
Statistics released in Japan confirm what has long been predicted and discussed many times in the GR; that Japan's population is about to begin declining. Last year the number of men in Japan peaked and then fell by 9,000. The overall population will begin declining in 2006. Underlying the difficulty of stimulating the consumer in that country has been the pervasive ageing of the population. The problem is a result of a very low birth rate (well below the level needed to sustain a population) and poor immigration inflows. If nothing changes Japan is expected to reduce its population by 2/3rds to 43million by 2100, a very bearish trend for investors. A Thai monk mistook a tube of super glue for eye drops and couldn't see for a week. Fortunately he has regained his sight in one eye and needs surgery to unglue the other.
The European spaceship orbiting Mars has discovered an area that looks like a huge ice shield covered by dust. The area is relatively young in planetary terms, as it is not covered by any craters. The discovery is important as it could hold the key to the 'life on Mars 'question as well as act as a resource for any future manned mission to the planet.

NEWS ANALYSIS