Electrolux ZC24/10F Instrukcja Użytkownika Pobierz pdf (Strona 21)

PARWORLD (Société d’Investissement à Capital Variable)

Management report

Background

A year ago the global economy was recovering from the soft patch which had hit in the summer of 2010. The Fed had just embarked on another

round of quantitative easing, which was treated positively by equity markets. However, the upturn was not sustained. Global economic growth

has cooled in the past six months. Japan has entered a recession following the tsunami and the earthquake which hit the country in March.

However, the supply disruptions following the tsunami were felt on a global scale. Rapidly rising oil prices due to tight market conditions

and political unrest in North Africa and the Middle East (and even a civil war in Libya) and bad weather in the US also weighed on growth.

Meanwhile, the Fed has stopped purchasing Treasuries on a large scale at the end of June and the government bond crisis in the eurozone

has continued. The main difference though is that inflation is slowly creeping higher. Central banks in emerging economies have tightened

monetary policy significantly, while the ECB has raised rates once and announced it will do so again. The Fed has stayed put.

United States

In the second half of last year the US economy recovered from the growth slowdown seen in the first half of the year. Even the labour market

improved, with employment rising more strongly and unemployment falling quite rapidly towards the end of the year. After decent growth

in the second half of the year, the US economy slowed again this year. Private consumption, the housing and the labour market weakened

significantly. While this was initially seen as temporary, due to rising oil prices and supply disruptions following the Japanese earthquake

and tsunami, the slowdown has proven to be sticky and recession fears have re-emerged. A downgrade of US government debt by one of the

rating agencies after severe political bickering about the government debt ceiling dealt another blow to already fragile confidence. Confidence

is low among consumers, homebuilders and small businesses and only a bit better among bigger companies. Fiscal stimulation may prove to

be difficult, due to the political impasse. Monetary policy is less effective as consumers are repaying debts and companies are already short

of cash. Thus, the US economy looks set to grow slowly at best in the next few quarters.

Europe

Growth in the eurozone was modest in the second half of 2010, partly due to severe winter weather in the final quarter of the year. As a result,

the eurozone economy posted a very strong growth number in the first quarter of this year. Growth was fuelled by strong business investment

spending, while consumption growth stayed modest. Germany continued to be Europe’s bellwether with exceptionally strong growth, but

growth was also strong in other core countries including France, the Netherlands and Belgium. Italy and Spain posted only modest growth,

while Portugal’s economy shrank. Greece’s beleaguered economy surprised with a small gain, but this was most likely an aberration. Leading

indicators for the eurozone have come down though, in some cases significantly. They continue to signal stronger growth in the core than in

the periphery. This should not be surprising as fiscal tightening is much more severe in peripheral countries. But even in the core countries

growth has slowed. The sovereign bond crisis has continued and Greece, Ireland and Portugal have now been bailed out. Eurozone leaders

reached a deal in July, which includes an additional bail out package for Greece, an increase and more flexibility for the EFSF – the eurozone’s

bail out fund – and easier terms for bail out loans to Greece, Ireland and Portugal. However, as it also involved private sector participation

and the EFSF was still seen as too small, it did not convince markets. In fact, risk spreads on Spanish and Italian government bonds widened

and the ECB had to step in by buying those bonds to prevent an unsustainable increase.

Japan

The Japanese economy had already shrunk in the final quarter of last year, before the earthquake and the tsunami hit. GDP shrank further in

the first and the second quarter of this year. Thus, the Japanese economy has entered a recession. Industrial production and household spending

plunged after the disaster, but have partly recovered later on. Leading indicators have also gained strength after the tsunami-related plunge.

However, in the past few months the improvement has stalled, as the Japanese economy is impacted by the global slowdown. Rebuilding of

villages, factories and roads will be supportive in the short term. This is not positive from a longer-term perspective though, as reconstruction

must be financed to a large extent by a government that already faces huge debts and deficits.

Emerging markets

During the past twelve months central banks in emerging markets have taken the lead in battling rising inflation. Growth in emerging markets

has not been able to fully withstand the recent global slowdown and monetary tightening in many of these countries. However, with real

interest rates low or even negative in some of these countries, monetary policy is not tight yet and growth seems to be moderating instead of

strongly decelerating. Nevertheless, leading indicators point to less momentum than seen in coincident indicators. In China headline inflation

may have peaked as food prices are set to rise at a slower pace. Non-food inflation looks stickier. Meanwhile, worries about a property bubble

and about high debts of local and regional governments have appeared. However, as the economy appears to be moderating and credit growth

has slowed, the end of the monetary tightening cycle in China appears to be near. The central bank of Brazil has increased interest rates

significantly in the past 14 months, but high credit growth continues to point to possible overheating of the economy. It came therefore as a

surprise that the Banco do Brasil was the first of emerging market central banks to cut rates recently.

Monetary policy

In the past twelve months, the sovereign bond crisis has been one of the main concerns for the ECB. To keep peripheral government bond

markets functioning, the ECB has in total bought EUR 164 billion of government bonds since it started the programme in May 2010. Bond

buying by the ECB was especially heavy in the summer of 2010. Another smaller wave was seen around the Irish bail out in November 2010.

In 2011 the ECB bought limited amounts of bonds in March to support auctions of Spanish, Italian and Portuguese bonds. As the ECB has

always been reluctant in buying bonds, it refrained from doing so during most of the summer of 2011. But when risk spreads on Italian and

Spanish bonds started to rise in August, the ECB was forced to step in massively. It has continued to buy bonds until the end of the reporting

period. Despite the sovereign crisis the ECB was the first of the major central banks to hike interest rates. It did so by 25 basis points in April

and again in July. As the moves were signalled in advance, they hardly caused a ripple in financial markets. Inflation increased strongly from

1.9% in November last year to 2.8% in April. This was mostly due to rising oil prices, although VAT-hikes also played a role. Inflation has

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