Strategy

Despite continued efforts by European leaders to patch over their regions problems, and the Middle East remaining a concern, markets have been allowed to challenge levels last seen in 2008.
However, the Dow is struggling to close above the psychologically significant 13,000 level. This may just be to fear of an unknown event, or fear of the “Black Swan”.
We believe that these levels will be broken soon, boosted by improving economic statistics across the globe.
We remain fully invested.

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Market Comment

• German MPs voted yesterday to back the second EU/IMF bailout for Greece. However, Chancellor Angela Merkel, while urging them to back the deal, conceded there was “no 100% guarantee” it would work. In spite of the five-to-one majority, there is a great deal of scepticism about the bailouts effectiveness both among politicians and the wider population.
• The relationship between economic growth and fiscal policy is a complicated one. Myths abound that the US economy is doing better than the UK’s because it has had fiscal stimulus, while Britain has had fiscal tightening.

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UK Economics

GDP: The UK economy shrank in the fourth quarter of 2011 as firms cut back investment. GDP declined 0.2% from the third quarter, with business investment tumbling 5.6%. From a year earlier the economy grew 0.7% instead of the 0.8% forecast, meaning it has recovered barely half of the 7% of output lost during the 2008-2009 recession, with only Japan and Italy further behind among the G7 nations. Consumer spending rose 0.5% quarter-on-quarter, but fell 0.6% from the final quarter in 2010.

Banking: The UK’s biggest bank HSBC, which has a stock market value greater than Barclays, Lloyds and RBS combined, has reported a profit of £13.8bn for 2011, up 15% from 2010, and more than double the £5.9bn profit posted by Barclays earlier this month.

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Eurozone Economics

PMI Data: Both manufacturing and services sectors in the eurozone contracted in February, increasing the probability that the region is entering recession. Services PMI fell to 49.4 from January’s 50.4, while the manufacturing sector rose slightly to 49.0, from January’s 48.8.

Consumer Confidence: Eurozone consumer confidence rose in February for the second consecutive month as consumers hesitantly showed signs of increased spending.

Industrial Orders: New industrial orders in the eurozone increased more than expected in December. Orders jumped 1.9% from the previous month, when they declined 1.1%.

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US Economics

Initial Jobless: New claims for unemployment benefits in the US were unchanged from the previous week in the week ending 17 February. 351,000 people filed for benefits, the lowest reading since March 2008. The four-week moving average fell 7,000 to 359,000. Crawford’s Comment: With expectations that claims would rise, the fact that they have held steady at a near four-year low, combined with the jobless rate dropping to 8.3% in January, the signs are that the labour market is finally recovering.

Chicago Manufacturing: Despite activity decreasing in January from December, the index remained in positive territory for the second consecutive month, the first time this has occurred in twelve-months.  The Chicago Fed’s National Activity Index is a composite of 85 monthly indicators and is a monthly indicator designed to gauge overall economic activity.  

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Global Economics

China: Factory activity in China contracted in February for the fourth-month in a row, led downward by a sharp decline in new export orders. The HSBC flash PMI, the earliest indicator of the country’s industrial activity, rose to 49.7 in February from 48.8 in January, a four-month high, but still below the 50-level which separates expansion from contraction. The new export orders sub-index dropped to 47.4 from 50.4 as the ongoing crisis in the eurozone impacted Chinese exports.

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Individual Equities

Apple: Leaks from Apple’s Far Eastern suppliers suggest that the iPad 3 will be released sometime in March. It is likely to be a 7in model, a model once described by Steve Jobs as “dead on arrival”. But having noted the success of Amazon’s Kindle Fire, it seems new chief executive Tim Cook is directing Apple down this route. We added to our position last week.

Union Pacific: Concerns over the rising oil price has led us to liquidate our position in this stock at a profit.

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