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Alternative Market Briefing

FRM predicts a period where good data could be bad for markets

Monday, September 09, 2013

Beverly Chandler, Opalesque London:

The latest "Early View" from FRM, Man Group’s $16.7bn fund of hedge funds and managed accounts business, finds that investors are heading into interesting times as the Federal Reserve starts to instigate tapering mechanisms, "the beginning of the end for the largest monetary stimulus ever seen."

FRM writes: "Europe remains beset by fiscal weaknesses of its peripheral nations and is only marginally out of recession. Last month, Greece was forced to concede the necessity of a third bailout package (albeit much smaller than the first two), and there is some concern that other states are postponing a full discussion of their needs until after the German federal election on 22 September."

The firm warns that for the emerging markets, the situation is arguably more serious. "In particular, countries such as India, Brazil, Turkey, and Indonesia are potentially beginning to show balance-of-payments issues that suggest an overdependence on foreign capital flows. These four countries alone represent over 8% of nominal global GDP, and have each seen their currencies depreciate versus the dollar by 20-40% over the past 2-3 years."

FRM also notes that last month, the S&P 500 returned -3.1% and the US 10yr yield widened by 20bps. Growth figures in the US, UK and Europe all exceeded expectations, and data on jobs, homes, manufacturing and consumer confidence were all broadly better......................

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