Year: 2011

Stocks in early trading in Asia slumped on Wednesday after a downward revision of US economic growth in the third quarter and rising yields on Spanish bonds.

The US economy grew at a two percent annual rate, 0.5 percent less than its initial estimate, the Commerce Department said. Meanwhile, higher borrowing costs in Spain triggered renewed worries about the eurozone’s continuing debt crisis.

Despite a new Spanish government coming to power this week, investors still remain doubtful about whether the country will be able to get its budget in order. Investors particularly fear that Spain could become the next eurozone country to require financial support from its neighbours.

Spain’s 10-year bond stands at 6.58 percent just 0.42 percent shy of the 7 percent that forced Greece to ask for relief from its lenders.

For several months, measures to reduce aid to the Palestinian Authority have been on the minds of many lawmakers in the United States. In August, the measures were actually implemented, effectively cutting off roughly $200m in aid to the PA. In addition, measures were also put in place to freeze the distribution of a further $200m. While the attempt had been dismissed as political posturing on the part of a number of lawmakers under the guise of balancing the US budget, there was a general feeling that enough opposition to any cuts existed in Congress and the measure would be defeated; unfortunately, that was not the case.

Prior to the freeze, Palestinian Monetary Authority Governor Jihad al-Wazir commented on what the action would mean for the financial stability of the PA. “It would have a major impact on the economic situation in the West Bank, if the you lose $500m [in US aid] from financial support for development in the West Bank… really, the risk of a PA collapse is very real under the financial strain, without US assistance, without donor assistance in general.”

There has been speculation that the underlying reason for the measure was the intention of PA president Mahmoud Abbas to ask the United Nations to recognise Palestine as a state, sometime in September. The cut off of the funds came before the end of the governmental fiscal year, which was on 30th September and would also affect the potential for any funds to be disbursed during the upcoming fiscal year.

The response to the measure was swift, with a statement issued by the PA’s spokesperson, Ghassan Khatib. “It is another kind of collective punishment which is going to harm the needs of the public without making any positive contribution,” stated Khatib. “It is ironic to be punished for going to the United Nations”.

While the measure did not have the backing of many members of Congress, the process to overcome the freeze took time. Attempts by President Obama to work with Congress to lift the freeze were partially successful on November 7, when a decision was made to release $200m that had been set-aside as security funds for the Palestinian Authority. Still to be settled is the additional support, which is earmarked as economic funds and is still considered frozen at the present time.

Whether the remaining funds will be released is still a matter for debate. Regardless of the outcome, there is no doubt that the freezing of the aid has done nothing to enhance the image of the United States among other world powers. Approval of unilateral recognition of the PA by the UN also triggered a reduction in financial support by the US to UNESCO, owing to a 1994 law that prohibits the country from providing funds to any United Nations organisation that supports a unilateral recognition of statehood in Palestine. Depending on how lawmakers in the US move to deal with the new circumstances, the potential for economic collapse remains a real possibility in the PA, along with further damage to the international reputation of the United States.

While there has been a degree of strain in relations between Syria and Turkey for decades, recent events have created additional stress on an already tenuous relationship. Thanks to Turkish support of a change in the current regime leading Syria, a great deal of unrest has been added to the situation. While, at one point, there was talk of reworking some of the border restrictions between the two nations, that has fallen out of favour as some Syrians see Turkey’s move as being not just opposition to actions taken by the Syrian government over the last year, but actually the beginning of a plot to overthrow the country’s government and even the possibility of military intervention.  

Syria has taken issue with Turkey’s status as a safe haven for Syrian insurgents. Those in Turkey who support the sanctions see them as necessary to send a clear message that Turkey does agree with what is happening in Syria and think changes should be made. For those in Syria who support the current regime, this is seen as interference by Turkey in the country’s internal politics.

Turkish officials have been pushing for sanctions against Syria for some time, beginning in March this year. When the United Nations balked at the idea of sanctions in early October, Turkish Prime Minister, Recep Tayyip Erdogan, made it quite clear that whatever the UN decided to do, Turkey would move forward. “Naturally the veto … cannot prevent sanctions,” Erdogan commented, adding, “We will of necessity implement a package of sanctions.”

While there are now indications that the intervention of the Arab League may lead to concessions by Syrian officials that will ultimately bring closure to the current crop of issues that have led to the bloodshed and the attention of Turkey and other nations on the internal affairs of the country, there is no doubt that the relationship between Syria and Turkey has been severely damaged. Differences of opinion on water rights, and other issues interchangeably described as either human rights issues or imperialist designs, are putting great strain on the countries’ relations.

Whilst in recent years the two countries had seemed to reach a position that enabled them to carve out a working relationship, the chances are that the events of the last several months will take some time to resolve. How this will affect the balance of power in the Middle East over the coming years and what the action of Turkey means in terms of the nation’s strengthening ties to the West, remains to be seen.

The Republican and Democratic leaders of a 12-member congressional “super committee” are set to declare defeat in a joint statement to be released after three months of talks failed to bridge deep divides over taxes and spending.

After a year of bruising budget battles, it is another sign that U.S. lawmakers are too entrenched to compromise on the tax increases and benefit cuts that budget experts say are needed to set the country’s finances on a stable path.

The panel’s failure will cement notions of a dysfunctional Washington among voters and investors already disenchanted with the brinkmanship that brought the country to the edge of a first-ever debt default in August.
Lawmakers likely will not return to the problem until 2013 at the earliest as they shift their attention to the 2012 presidential and congressional elections.

Budget skirmishes will continue over the coming months.

Democrats will try to extend short-term economic stimulus measures, such as enhanced unemployment benefits and a payroll tax cut, that they had hoped to roll in to any super committee deal. Analysts say the economy could slide back toward recession if they expire as planned at the end of the year.

Republicans will scramble to shield the military from $600bn in automatic spending cuts that are triggered, beginning in 2013, in the absence of a deal.

Asian stocks and US stock futures fell as news of the collapse weighed on markets. Market expectations for a deal were low, and investors have viewed the United States as a relative safe haven from the debt crisis in the euro zone.

But failure could remind investors of the risks posed by gridlock in Washington.

“As is the case with policymakers in Europe, US politicians need to be doing more than investors expect, not less,” said Michael Gapen, senior US economist with Barclays Capital.

President Barack Obama kept his distance from the talks, choosing instead to emphasise a job creation package that was blocked by Republicans in Congress. Aides believe Obama will be able to use the super committee’s failure to paint Republicans as obstructionist as he seeks re-election.

Congressional leaders set up the super committee during a bitter budget fight last summer that hammered consumer confidence and prompted a first-ever downgrade of the United States’ AAA credit rating by Standard & Poor’s.

Aiming for the big deal
Blessed with extraordinary powers, the committee was supposed to forge the sort of deficit-reducing deal that had eluded Obama and House Speaker John Boehner, the top Republican in Congress, over the summer.

The panel was tasked with finding at least $1.2trn in budget savings over 10 years, enough to demonstrate that Washington could tame a debt load that last week hit $15trn – equal to the size of the US economy.

The threat of the automatic cuts, falling equally on military and domestic programs, was supposed to ensure that a deal would be reached.

Committee members met for dinners and several even took bike rides together in an effort to build the trust that would enable them to make decisions that could anger powerful industries and interest groups before the 2012 elections.

They had a clear blueprint for agreement. Other budget-cutting panels, including one set up by Obama, had concluded that lawmakers need to wring out the loophole-laden tax code and rein in health benefits that are set to balloon over coming decades as the population ages.

In the end, Republicans were unwilling to sign off on tax increases while Democrats balked at a dramatic benefits overhaul.

Lawmakers were doubtless mindful of the political fallout from the deals that led to the budget surpluses of the late 1990s. A 1990 deal that raised taxes and cut spending prompted a conservative rebellion within the Republican Party that weakened then-President George H.W. Bush and contributed to his defeat two years later.

A similar 1993 deal, forged without Republican cooperation, led to a landmark defeat for congressional Democrats the following year that handed control of Congress to Republicans.

For the first time since 2009, unemployment in Germany is on the increase. While the increase was minimal, the upward shift was enough to raise concerns about what will happen in the coming months. With internal factors within Germany’s economy, as well as issues that have to do with what is happening in the Eurozone, there is some validity to the fears that what was a slight increase may be the beginning of a new trend.

One of the reasons for the unemployment increase in Germany has to do with changes in the manufacturing segment of the economy. Simply put, there is not much hiring going on, while some jobs have been eliminated, due to plant closures, shift cutbacks or temporary layoffs caused by falling demand for the goods produced. The losses were sufficient to create fears among German investors, who are already somewhat wary of making many changes in their portfolios, owing to the precarious financial status of some of the other nations within the EU. Coupled with concerns that there may also be cutbacks within the banking industry, employment has taken quite a beating.

There are those who are advising caution when it comes to interpreting how the current shift in employment figures will impact the German economy as a whole. Alexander Koch, an economist at Munich-based UniCredit SpA felt that it is too early to place too much emphasis on what may be nothing more than a temporary and short-lived phenomenon. “The latest monthly rise in the adjusted figure should not mark the end of the impressive upswing on the German labour market,” said Koch. “Despite the recent strong deterioration in the global economic environment, corporate employment plans do not signal an imminent turnaround.”

Lothar Hessler, of HSBC Trinkaus & Burkhardt AG (TUB) in Duesseldorf, also felt that taking the increase in stride would be wise. “It’s too early to call this a trend change in the labour market, but it shows that growth forces are weakening”, Hessler said in a recent interview. “The dynamism of the economic upswing is lessening more than thought.”

Some of the decrease has to do with international corporations planning to shut down German operations and move them to other parts of the world. Whirlpool Inc, for instance, plans to move approximately 5,000 jobs to facilities in Poland. Other companies, like Adidas and AMD also have plans to curtail operations, not only in Germany, but also other locations as well. Even the steel industry is expected to review operations in the months ahead, possibly resulting in employee reductions that will help to keep the current trend going.

According to the OECD, international issues are playing as much, if not more, of a role in the unanticipated rise in German unemployment figures. The outcome of efforts throughout the European Union to shore up failing economies in Greece and other nations will probably exert more influence on what happens to the German economy.

On October 31, Libya gained a new interim president that has proven to be a surprise for those watching the elections. Dr. Abel Rahim al-Keeb, a 61-year old professional with a background in education, electronics and politics was named as interim prime minister by the National Transitional Council.

Born to parents living in Sabratha, al-Keeb left Libya in 1976 while maintaining ties with the country’s opposition, even providing financial support whenever possible. While abroad, al-Keeb earned a PhD, entering the world of education at the University of Alabama in the United States in 1985. In addition to joining the university as an assistant professor of electrical engineering, al-Keeb also began to produce papers for a number of academic and electrical engineering publications. By the time he was elevated to the status of professor, al-Keeb had also served as a guest lecturer at a number of colleges and universities in the United States, as well as Libya, the UAE and other nations. The opportunity to work with the Division of Electrical, Electronics and Computer Engineering at the American University of Sharjah in the UAE led to al-Keeb leaving his tenured position with the University of Alabama in 1999, remaining with the division through 2001. Since then, he has also worked with the Petroleum Institute in the UAE, relinquishing that position to become the representative for Tripoli in the National Transitional Council in Libya during the summer of 2011.

Al-Keeb’s goals for Libya were expressed in statements made after his election by the National Transitional Council. Citing the need to pull the nation together, including working with the militias that developed in many of the cities and towns around the country over time, “This transition period has its own challenges. One thing we will be doing is working very closely with the NTC and listening to the Libyan people,” al-Keeb stated in a press interview in October. “We salute and remember the revolutionaries who we will never forget. We will not forget their families. I say to them that the NTC did not and will not forget them and also the coming government will do the same.”

That al-Keeb moved into the position of interim prime minister, with a plan, was evident from a statement made by NTC member, Abdul Majid Saif Al-Nasr, who told news agency Al Jazeera that “El-Keeb presented his plan for the next eight months to the NTC, which includes working to restore order and stability, rebuilding cities destroyed by Qaddafi, rehabilitating the rebels and starting to collect their weapons”.

Dr. Abdalla Alnajjar, President of the Arab Science and Technology Foundation, issued a statement shortly after the announcement of the NTC, expressing the sentiments of many supporters in Libya and the Middle East. “On this auspicious occasion, that coincides closely with Eid al-Adha, Dr. Abdalla Alnajjar, President of the Arab Science and Technology Foundation presents his congratulations to his Excellency Dr. Abdel Rahim Al Keeb, Libyan Prime Minister, wishing to him success in his national duty and to put sustainable development plan for new Libya Republic.”

Newly elected president of Kyrgyzstan, Almazbek Atambayev, has made it clear that there is no desire to renew the lease on the US military base located in Bishnek when it expires in 2014. While past leaders, including Kermanbek S. Bakiyev, also balked at continuing to allow an American base to operate in the country, negotiations were successful to keep it open during his time in office. Whether or not the position of the new president will change between now and the end of the current lease remains to be seen.

It is also no secret that Russian Premiere, Vladimir Putin, is not comfortable having a US base in Kyrgyzstan and there are indications that some of the reasons behind President Atamayev’s resistance to renewing the lease are due to those same concerns. They include the possibility or retaliation by US enemies that could result in harm to the country’s citizens living near the base.

There is also speculation that the decision not to renew the lease has to do with an emerging trend of closer relations with Russia. Many within the government today view Russia as the most logical choice when it comes to a partner for both commerce and national security. In addition, there are no indications that a Russian military base located in the country is in any danger of being closed soon.

Among the possible ways that the relationship may deepen is the trade agreement between Kyrgyzstan, Belarus, Kazakhstan and other post Soviet Union states. The agreement provides for improved opportunities to engage in trade with the other nations, while also removing some of the current travel and trade restrictions that are in place. The agreement would also provide lower prices on certain types of imported goods and services, reduce the level of import tariffs and other fees associated with buying products produced in other countries participating in the agreement, and even make the task of obtaining travel permits and work visas much easier between the member nations. Former acting Prime Minister, Omurbek Babanov, supported negotiating such an agreement, but also noted that, “Kyrgyzstan has to put forward its own conditions when joining that union, taking into account the interests of our citizens working at the Dordoi and Kara-Suu markets.” Upon adoption of the agreement being announced in mid-October, Russian Premier, Vladimir V Putin, noted that, “we discussed [a free-trade agreement], made some corrections and adopted its final text”. The terms of the agreement now go to the parliaments of each nation involved for final approval and may go into effect as early as next year.

Since the plans of the United States government included beginning to hand over security operations to countries within the region, rather than maintain a presence, the potential ramifications of adopting the trade agreement are somewhat unclear. Depending on the final structure of the deal’s terms, the issue could have relatively little impact on trade between Kyrgyzstan and the US. What is certain is that as the base is closed, money currently introduced into the local economy by US military personnel will disappear and not be replaced, unless government officials can develop some new use for the retired base that offsets at least some of the lost income.

Northern Rock, the nationalised British bank, has become on Thursday the first bailed out lender in the UK to be sold back to the private sector, according to the treasury.

The British government has given the go-ahead for the £747m loss-making deal with Richard Branson’s Virgin Money almost four years after Northern Rock’s near collapse.

The deal, which leaves taxpayers with a loss of an estimated £400m, is considered unprofitable and suggests the UK has given up on turning a profit on the bank shares it holds.

As part of the contract Virgin Money agreed to make no further compulsory redundancies for at least three years, the government statement said.

Royal Dutch Shell has allegedly withdrawn from oil development talks with the Kurdistan regional government in an attempt to protect its southern Iraq investments, according to the Financial Times.

The FT speculates that Shell pulled out of talks in the hope of saving a possible $17bn natural gas deal which the Iraqi government cleared on Tuesday. It is alleged that the central government In Baghdad is looking to enforce a de facto ban on companies operational in Kurdistan, the FT said.

“Baghdad’s real power lies in denying future contracts and Shell still had something else on the table. They had not signed the southern gas field deal,” one unidentified source told the FT.

Growth in Europe almost came to a halt in the 3Q11 with a weak 0.2 percent increase, the same pace as in 2Q11, according to data released by Eurostat late on Tuesday.

GDP growth was driven by Germany, Europe’s largest economy, which rose 0.5 percent in the third quarter due to stronger company and consumer spending, the Federal Statistics office said late on Tuesday. Year-on-year the country’s GDP increased by 2.5 percent.

Europe’s second biggest economy, France, expanded 0.4 percent during the same quarter.

Both Spain and Belgium came to a standstill while Portugal and the Netherlands contracted by 0.4 and 0.3 percent respectively.

Overall the 27-nation eurozone grew 0.6 percent at an annualised rate in the 3Q11, Eurostat said. Approximations for Italy, Greece and Ireland are still to follow.

UBS on Tuesday confirmed Swiss-national Sergio Ermotti as permanent CEO with immediate effect.

The appointment comes just two months after Ermotti was named interim CEO when Oswald Grübel stepped down in September following an alleged $2.3bn rogue trading incident at the bank.

The group announced that chairman Kaspar Villiger will stand aside a year earlier than planned at the annual shareholders’ meeting in May 2012. Former Bundesbank president Axel Weber will take over the role.

The move by UBS comes just two days before a key meeting in New York where the group is expected to tell investors it plans to decrease its investment banking and focus more on asset management.

Speaking of the forthcoming meeting, Ermotti said: “The strategy will be centred on our leading wealth management businesses and our position as the strongest universal bank in Switzerland. A focused, less complex and less capital-intensive investment bank and our asset management business are also key elements for growing our wealth management franchise.” 

Russia opposes the Arab League’s decision to suspend Syria and believes Western nations are inciting opponents of President Bashar al-Assad to seek his removal, Foreign Minister Sergei Lavrov was quoted as saying on Monday.

Russian news agencies said Lavrov had also reiterated Moscow’s opposition to any new international sanctions on Iran over its nuclear programme and said other countries were whipping up tension to justify imposing unilateral sanctions.

His remarks underscored the Kremlin’s disagreements with the West and other nations on how to end months of violence in Syria and persuade Iran to address international concerns that it could be seeking nuclear weapons.

“We believe it is wrong to suspend Syria’s membership of the Arab League,” state-run RIA news agency quoted Lavrov as saying during a flight back to Moscow from a Pacific Rim summit in Hawaii, where he accompanied President Dmitry Medvedev.

“Those who made this decision have lost a very important opportunity to shift the situation into a more transparent channel,” said Lavrov, whose country often warns that too much pressure on recalcitrant governments can be counter-productive.

The Arab League suspended Syria and called on its army to stop killing civilians on Saturday, a surprise move that some Western leaders said should prompt tougher international action against Assad.

Syria has called for an emergency Arab summit in an apparent attempt to prevent the suspension.

Russia, which has close ties to Assad’s government and has sold arms to Syria, joined forces with China in October to veto a Western-backed UN Security Council resolution that would have condemned Syria’s crackdown on pro-democracy protesters.

Moscow has called on Assad to implement promised reforms faster but has said his opponents share the blame for the violence and, singling out the United States and France, accused the West of discouraging dialogue in Syria.

“There has been and continues to be incitement of radical opponents (of Assad’s government) to take a firm course for regime change and reject any invitations to dialogue,” Interfax news agency quoted Lavrov as saying.

He said there were “undeniable instances” of covert arms supplies to government opponents, Interfax reported.
“Weapons are being delivered to Syria through contraband channels via Turkey, Iraq and other countries,” he said.

After abstaining from a Security Council vote in March that led to a NATO air campaign that helped oust Libya’s Muammar Gaddafi, Russia has hardened its opposition to Western pressure on Syria and Iran.

Lavrov suggested widespread attention to a UN nuclear agency report last week that deepened Western suspicions abut Iran’s intentions was aimed to “to whip up passions in public opinion and lay the groundwork for new bilateral sanctions”.

“We consider the sanctions track on Iran to have been exhausted,” Interfax quoted him as saying.

Photovoltaics is a term that is used to describe the technology required to convert sunshine into electricity that can be stored and ultimately used as an energy source for a number of different applications. As interest in alternative energy production has increased, investors who are attracted to the idea of getting in on the ground floor of the solar energy industry have begun to look closely at companies that produce photovoltaics panels for use in such systems. In fact investors from many parts of the world, ranging from the United Kingdom to South Africa and from South America and the United States are buying stock in companies that produce these types of panels.

One of the main reasons for the interest in photovoltaics is that there is a growing concern surrounding the consumption of more traditional energy sources, such as oil deposits and coal. Where once solar energy was considered an environmentally friendly, but somewhat impractical solution to the problem, developments in technology have made setting up solar energy systems much more cost effective. This in turn has meant that not only are more individuals considering this option, but also more companies and even entire countries. From this perspective, the possibility of earning a significant return from investing in photovoltaics is tremendous.

Companies such as Con Edison in the United States, Singfo Solar in China and Axitec in Germany are only three of the companies involved with photovoltaics, both in terms of producing panels and providing financial support for research and development to enhance current technology. Many companies, focused solely on photovoltaics, are beginning to turn a profit, although in some cases that profit is modest. What is important is that stocks are still somewhat affordable and the degree of risk is dwindling, possibly down to levels that even conservative investors may want to take a second look.

The real value of investing in photovoltaics right now is the growth potential. It is safe to say that solar energy is here and it is not going to go away. All the predictions point to expansion within this type of energy production, since even some nations are looking to augment production on traditional power grids with this type of technology. This means that a savvy investor can purchase shares now, hold them for several years and likely sell them for a significant return. In the interim, as more and more solar production companies begin to generate profits, that also means dividends for investors from time to time.  

As with any type of investment strategy, investors need to investigate the background and stability of any photovoltaics producer they are thinking of investing in before making any commitment. The goal is to ensure the company is relatively stable, has the backing necessary to continue production and move toward profitability and will actually be able to compete in the world market as interest in solar energy continues to increase. While it may take some time to evaluate all the different investment options related to this type of opportunity, choosing the right photovoltaic investment and sticking with it for several years is likely to result in excellent returns.