Global ETF News Older than One Year
IMF Sees Oil Prices Staying High
Production constraints limiting increase in supply of oil
Growth in emerging markets, particularly China, boosting demand
Policies should aim at easing economies’ adjustment to increased oil scarcity
April 7, 2011--Oil prices are likely to remain high for the foreseeable future and IMF economists say that governments should be looking to back sustainable alternative sources of energy.
According to an analysis by the IMF, released as part of its World Economic Outlook (WEO), global oil markets are in a period of increased scarcity, as oil demand in emerging economies is rapidly catching up with demand in advanced economies and production constraints are beginning to bind in some major oil-exporting economies, where oil fields have reached maturity.
Improvements in oil supply have been slow, reflecting investment bottlenecks and other constraints, and the IMF expects net capacity will build only gradually.
The chapter on oil scarcity assesses the risk for the global economy in the medium term of the supply constraints. A persistent adverse oil supply shock would imply lower global output, higher revenues for oil exporters, a surge in global capital flows, and a widening of current account imbalances.
Source: IMF
Ucits Fund Assets Tripled to $90.5 Billion in 2010, Survey Finds
April 7, 2011--Ucits funds tripled assets to $90.5 billion last year as managers attracted clients seeking to put money into the more regulated and easier-to-trade alternatives to hedge funds.
Firms started 129 funds last year that comply with the European directive known by the acronym for Undertakings for Collective Investment in Transferable Securities, Hedge Fund Intelligence said in a statement today. The funds raised more than $9.5 billion, according to the London-based data provider. Ucits allow clients to withdraw money in as little as a day, place restrictions on leverage and offer investors transparency of holdings that is similar to that of mutual funds. John Paulson’s Paulson & Co., based in New York, and David Harding’s Winton Capital Management Ltd. in London are among hedge funds that started Ucits last year.
Source: Bloomberg
Contributions to GDP growth – Fourth quarter of 2010
Strong improvement in net exports sustains OECD GDP growth
in the fourth quarter of 2010
April 7, 2011--Real GDP in the OECD area grew by 0.5% in the fourth quarter of 2010. Net exports and private consumption were the main contributors partly offset by an unwinding of inventories.
This reverses the pattern seen in earlier quarters where inventory-rebuilding had contributed positively to GDP growth and net exports had contributed negatively.
Over the whole of 2010, private consumption was the main driver of real GDP annual growth, contributing 1.2 percentage point to the overall 2.9% recorded growth.
Source: OECD
NYSE Euronext Announces Trading Volumes For March 2011 And Other Metrics
NYSE Liffe U.S. Executes 480,000 Eurodollar and U.S. Treasury Futures Contracts Since March 21
Global Derivatives Averaged 9.2 Million Contracts per Day in March, Up 12% vs. Prior Year-U.S Equity Options Volumes Up 23%; European Derivatives Up 3%-European Cash Trading Volumes Up 44%, U.S. Cash Down 2%
April 6, 2011--NYSE Euronext (NYX) today announced trading volumes for its global derivatives and cash equities exchanges for March 2011[1]. Global derivatives average daily volume ("ADV") of 9.2 million contracts traded per day in March 2011 increased 11.9% versus the prior year.
The increase in global derivatives ADV versus prior year levels was driven by a 22.8% increase in U.S. equity options ADV and a 3.2% increase in European Derivatives ADV. Cash equities ADV in March 2011 was mixed, with European cash ADV increasing 44.0% and U.S. cash trading volumes decreasing 2.1% from March 2010 levels.
Highlights
NYSE Euronext global derivatives ADV in March 2011 of 9.2 million contracts increased 11.9% compared to March 2010 and increased 2.5% from February 2011 levels.
NYSE Euronext European derivatives products ADV in March 2011 of 4.8 million contracts increased 3.2% compared to March 2010 and increased 8.0% from February 2011 levels. Excluding Bclear, NYSE Liffe's trade administration and clearing service for OTC products, European derivatives products ADV increased 3.9% compared to March 2010, but decreased 0.9% from February 2011. Total European fixed income products ADV in March 2011 of 2.7 million contracts increased 1.6% compared to March 2010, but decreased 5.0% from February 2011. Total equity products ADV of 2.0 million contracts in March 2011 increased 2.9% compared to March 2010 and increased 31.6% from February 2011. Total commodities products ADV of 101,000 contracts in March 2011 increased 95.5% compared to March 2010 and increased 16.6% from February 2011.
Source: NYSE Euronext
RI’s regular round-up of responsible investing news; FTSE launches ESG ratings service
April 6, 2011-Index firm FTSE has launched an ESG ratings service that builds on the FTSE4Good index series, according to a report in the Financial Times. The FT said the service would give more detailed analysis of how global companies compare on governance and social and environmental practices. Company ratings are re-assessed twice a year by research firm EIRIS.
Société Générale’s corporate and investment banking arm has launched the group’s first Socially Responsible Investment Exchange Traded Note (SRI ETN) on the London Stock Exchange and is donating the management fees to charity. The bank said the launch followed a report published by its broker research team on the growing importance of integrating Environmental, Social & Governance (ESG) metrics into investment research to gauge a company’s management quality and risk governance.
Source: Responsible Investor
Financial Cycles: What? How? When?-IMF Working Paper
April 5, 2011--Summary: This paper provides a comprehensive analysis of financial cycles using a large database covering 21 advanced countries over the period 1960:1-2007:4. Specifically, we analyze cycles in credit, house prices, and equity prices. We report three main results
First, financial cycles tend to be long and severe, especially those in housing and equity markets. Second, they are highly synchronized within countries, particularly credit and house price cycles. The extent of synchronization of financial cycles across countries is high as well, mainly for credit and equity cycles, and has been increasing over time. Third financial cycles accentuate each other and become magnified, especially during coincident downturns in credit and housing markets. Moreover, globally synchronized downturns tend to be associated with more prolonged and costly episodes, especially for credit and equity cycles. We discuss how these findings can guide future research on various aspects of financial market developments.
view Financial Cycles: What? How? When?-Paper
Source: IMF
What is the economic outlook for OECD countries
An interim assessment
April 4, 2011--The news has of course been dominated by the disaster in Japan following the Great East Japan earthquake and tsunami. We express our deep sorrow at the enormous loss of life and offer our condolences to those affected by this tragedy. The full cost of the disaster is not yet known, but the authorities’ preliminary estimate is that the loss of physical capital amounted to 3.3 to 5.2% of annual GDP.
It is impossible at this point to assess the effect on economic growth, and therefore this interim outlook contains no projections for Japan. As a first estimate, growth in Japan might be reduced between 0.2 and 0.6 percentage points (non-annualised rates) in the first quarter and by somewhere between 0.5 and 1.4 percentage points in the second quarter. This includes the impact of the disaster on production in the areas hit directly, the rationing of power, the hit to confidence and supply chain disruptions. Reconstruction efforts are likely to begin relatively quickly, and these could begin to outweigh the negative effects on GDP by as early as the third quarter.
Source: OECD
ETFS Precious Metals Weekly: US Economy Firing On All Cylinders, Silver Price Soars to New 31 Year High
Gold continues to hold just below record highs as deteriorating conditions in the Middle East drive oil prices to over two and a half year highs, and peripheral European debt default risks continue to rise. Platinum group metal (PGM) prices pick up on continued strong global growth momentum and reduced fears that Japan auto supply-chain disruptions will have a sustained impact on final PGM demand. Silver price rises to its highest level since February 1980.
Stronger than expected US manufacturing and employment data have helped to assuage concerns about the impact of Japan's earthquake on global growth and industrial demand for silver. Silver also continues to capitalize on its store of value/"alternative currency" properties alongside gold (see below).
Gold price holds just below all-time high of $1,447/oz as intensifying Middle East and peripheral European risks keep markets on edge. News that Portugal missed key fiscal deficit targets and four Irish banks will likely need further capital injections unsettled credit markets last week. Credit risks combined with oil prices hitting over two and a half year highs as Middle East unrest continues to spread is keeping demand for hard assets high. Gold held back from pushing to new record highs as strong US data raised expectations of higher US interest rates. Platinum and palladium prices recover as global growth picks up.
Platinum and palladium prices increased last week, recouping earlier post-Japan earthquake losses, as US manufacturing growth - often a lead indicator of global growth - held at high levels in March. Investors have looked through near term supply chain disruptions emanating from the Japan earthquake, instead focusing on continued strong final demand for automobiles in China, the US and Europe. visit www.etfsecurities for more info.
Source: ETF Securities
Probabilities of Default and the Market Price of Risk in a Distressed Economy
The market price of risk under stress (the expectation of the market price of risk, conditional on it exceeding a certain threshold) is computed from the price of risk (which is the variance of the market price of risk) and the discount factor (which is the inverse of the expected market price of risk). The threshold is endogenously determined so that the probability of the price of risk exceeding it is also the probability of distress of the asset. The price of risk can be estimated via different methods, for instance derived from the VIX or from the factors in a Fama-MacBeth regression. view Probabilities of Default and the Market Price of Risk in a Distressed Economy paper
Source: IMF
Investors Ask World’s Largest Companies to Reduce Their Greenhouse Gas Emissions
A vanguard group of 34 investors with US$7.6 trillion in assets including Aviva Investors, CCLA Investment Management and Scottish Widows Investment Partnership (SWIP) are making this first request for company action which will be sent by the Carbon Disclosure Project (CDP) this week to the world’s largest companies in the FTSE Global Equity Index Series (Global 500). The efficient management of energy and lower carbon emissions not only helps investors to mitigate financial risk, but also has the potential to reduce costs for business. CDP, an independent not-for-profit organization, gathers primary corporate climate change information from thousands of businesses around the world so that it can be incorporated into business, investment and policy decision making. Through this new Carbon Action initiative companies will be encouraged by investors to: Make year-on-year emissions reductions;
Identify and implement investment in greenhouse gas emissions reduction initiatives which have a satisfactory positive return on investment; and finally,
Any companies that do not already have an emissions reduction target will be asked to set and publicly disclose this.
Source: Carbon Disclosure Project (CDP)
April 4, 2011--US unemployment rate drops to a 2-year low, adding further evidence that the US economy remains in recovery mode. A strong March US ISM report confirms the trend.
Continued robust global growth helps drive the silver price to its highest level since the Hunt Brothers' cornered the silver market 31 years ago.
April 4, 2011--Summary: We propose an original method to estimate the market price of risk under stress, which is needed to correct for risk aversion the CDS-implied probabilities of distress. The method is based, for simplicity, on a one-factor asset pricing model.
Carbon Disclosure Project launches new Carbon Action initiative
April 4, 2011-- Institutional investors are this week calling on the world's largest companies to implement cost-effective greenhouse gas emissions reduction initiatives. The request is being made through the Carbon Disclosure Project's new Carbon Action initiative, launched today in response to investor requirements to protect their investments and accelerate company action on carbon reduction activities.
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