Five things investors learned in the last week

28th June 2013

1)     Not the most polite of polls from YouGov, which suggests 31% of Britons do not want to see Canadian Mark Carney as Governor of the Bank of England because he is not British. Too late now. At least 48% are supportive and he scores more highly than mythical candidates from the US or our EU allies.  More significantly is that fact that Carney supports monetary activism outlined elsewhere on Mindful Money today. In a world, panicking a little about the end of QE and higher interest rates, we think Carney, if anything will want lower rates, and signal them for a longer period of time. More bad news for savers, and investors pushed further along/up the risk curve as the phrase goes – though it may be wise to state an obvious –  Carney is not in charge of the US, where tapering is the talk of the town. And even if he faces a little, mild, British-style xenophobia, we reckon he’ll still turn up for work next week.

2)     Vodafone has bought Germany’s Kabel Deutschland for €7.7bn or €88 euros a share as Euronews reports, around a 40 per cent premium to the list price. This will give it credibility in the quad play market – i.e. the fixed line, broadband, TV and mobile service that many consumers now demand. We think this is an interesting pre-deal analysis from Nils Pratley on the Guardian from the start of June, who notes that Vodafone could have had the business for around €25 a year a couple of years back. If only it had read the runes a little earlier. It may need similar deals in other markets but could this put the balance sheet under strain. The market seems happy enough so far with shares up on the week to trade around 188p from what had been a downward trend in the last few months.

3)     There was no double dip according to Office for National Statistics revisions with growth flat for the first quarter of 2013. The preceding recession was deeper however, and as the BBC’s chief business correspondent Linda Yueh points out, output fell by £26m which is a small dip. It was just rounded up. But such are statistics these days. We would point out that Mindful Money columnist Henderson’s Simon Ward has been giving his view that we had dodged the double dip bullet for several months now.

4)     China, worried about its shadow banks, allowed the interbank interest rate to rise to a whopping 13 per cent in a bid to calm down lending in a ‘sector’ that could have $2trillion dollars in loans as CNN reported this week. It has now allowed the rate to fall back after this initial shock. Some of the shadow bank activity involves offering short term wealth management products to customers but then lending long, a close cousin of the sort of foolish lending practices which wrecked some British banks. At Mindful Money we suspect this may be the most difficult economic issue to call in world markets at the moment.

5)     The Chancellor George Osborne announced a further £11bn of cuts for 2015/2016 but one fund manager has questioned austerity. Fidelity’s Trevor Greetham pointed out that the US has embraced a radically different strategy and recovered. Greetham also pointed out that Labour have accepted the coalition’s spending limits so we have a consensus, in the UK disagreeing with the consensus elsewhere.

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