Markets hail ‘Draghi year,’ hope for the best in 2013



AGENCE FRANCE PRESSE

Published — Monday 24 December 2012

Last update 24 December 2012 3:33 am

| نسخة PDF Print News | A A

PARIS: Financial markets began to rebound in 2012 with help from central banks, and now head into 2013 with hopes of economic growth in China and the US while keeping a wary eye on the situation in the euro zone.
“In 2012, there will clearly be a ‘before’ and an ‘after’ Draghi,” said Aurel BGC broker Jean-Louis Mourier in reference to European Central Bank (ECB) chief Mario Draghi.
Early in the year, tension on financial markets had spiked owing in part to the deterioration of the Spanish economy and the government’s financial position.
But in late July, Draghi said the ECB was “ready to do whatever it takes to preserve the euro,” and turned the tide against speculators who were betting on a full-blown euro zone crisis.
In September, the central bank unveiled one of its most effective tools to date, a bond-buying program dubbed Outright Monetary Transactions or OMTs to underpin the debt of countries that that have sought help from European rescue funds.
The program has not been used to date, mainly because its very announcement reassured investors and the fact that Spain has done its best to avoid seeking a bailout similar to those which were granted to Greece, Ireland and Portugal.
“No matter. The ECB has now built a very effective firewall. The public debt crisis is not over, countries will need years to get back within their budget limits, but the risk that represented on financial markets has essentially disappeared,” Mourier said.
The scenario of Greece being forced to pull out of the 17-nation euro zone has also faded into the background, while moves toward a common eurozone banking supervisor and structural reforms in Italy and Spain have bolstered investor confidence as well.
Major European stock markets have taken note and as of December 20, Paris showed a gain of 16 percent from the beginning of the year, while London was up by 7.0 percent and Frankfurt by 30 percent.
In New York, the Dow Jones Industrial Average showed a gain of 8.5 percent, and the MSCI emerging markets index was up by 12 percent.
On secondary markets for public debt, high tension that persisted earlier this year has eased, even though the interest rates on Italian and Spanish debt remain at elevated levels.
Looking ahead to 2013, investors are reassured, but remain prudent nonetheless.
Looming ahead is the threat of a so-called fiscal cliff in the US, a combination of automatic tax increases and spending cuts set to take effect in January barring a compromise before then by Republican and Democratic lawmakers.
Economists warn that the combination of increases and cuts worth around $600 billion could push the US economy into recession.
“US companies have held back on investment plans for three quarters. The machine has to be restarted,” said Mirela Agache-Durand at Oddo Securities.
Several unknowns exist in Europe as well.
“Where do things stand with a Spanish bailout request, a new write-down of Greek debt, or French reforms,” wondered Olivier Raingeard, head economist at the Neuflize OBC bank.
“Elections in Germany and Italy will also put some pressure on markets,” he noted.
What seems like the biggest brake however is a chronic lack of economic growth in the eurozone.
“Leaders are going to have to come to agreement to ease budget constraints that are holding countries back to give their economies some breathing space,” Raingeard said.
He forecast that would happen once it became clear that France would not reach its target of cutting the public deficit to 3.0 percent of gross domestic product (GDP) next year.
Meanwhile, the US economy and those of key emerging markets, look set for solid expansions in 2013.
In the US, business activity should “benefit from a rebound in real-estate” and a “sharp decrease in energy prices,” Agache-Durand forecast.
In China, “the perspectives are encouraging” as well, analysts at the Swiss bank Pictet said in a research note, owing to anticipated increases in construction and other investments.

What's happening around Saudi Arabia

JEDDAH: A small fire broke out on the roof of the Grand Mosque on Monday morning, causing minor injuries to five people, including members of the Civil Defense, one security officer and three workers. The fire broke out at about 2 a.m. and covered an...
JEDDAH: The director general of the Saudi Industrial Property Authority, Saleh Rasheed, has said that Sadeer Industrial City, which is regarded as one of the largest industrial cities in the Kingdom, possesses great capabilities that sets it apart as...
DAMMAM: Cheap and out of date cosmetics are causing serious health problems in the Kingdom, including skin diseases, hair loss and cancer, local doctors say.These products are often manufactured incorrectly or contain harmful fats, the doctors were q...
JEDDAH: Several young Saudis have started filming Jeddah’s historic district using cameras mounted on drones to gather professional 3D footage that can be used to build models and create virtual tours.Bandar Al-Mutlaq, owner of the Arab Foundation, w...
RIYADH: The Saudi capital is fully geared for this year’s Eid Al-Fitr celebrations that include an exciting bouquet of entertainment, heritage, sports, artistic and theatrical events.The annual Muslim festivities being organized here by the Riyadh mu...
JEDDAH: As part of its growing supervisory and investigative status, Riyadh Health Department’s forensics center examined 632 cases over the past eight months involving suspected murder, rape and abuse of women and children.Khaled bin Muhammad Hassan...
RIYADH: The Syrian Expatriates Medical Association (SEMA) expressed its thanks on Monday to Saudi organizations and individuals for donating to the campaign to help Syrians affected by the ongoing conflict.SEMA has 1,300 members in Syria and other co...
RIYADH: Inclusion of the Hail rock art in the UNESCO World Heritage List is proof of the Kingdom’s status and cultural profoundness, said the Saudi Commission for Tourism and National Heritage (SCTNH) on Monday.Reacting to the announcement of the fou...
JEDDAH: The Yemeni community has asked the Saudi government to extend the rectification process, which ends Tuesday, claiming that there are many thousands still seeking to get proper identification documents to qualify for work visas in the Kingdom....
JEDDAH: The Ministry of Municipal and Rural Affairs has set up 343 electoral constituencies for the Dec. 12 municipal council elections.This was done on the orders of Abdullatif Al-Sheikh, the minister and head of the General Committee for the Munici...
JEDDAH: Efforts are under way to electronically handle all Haj-related works to achieve speed and accuracy, as well as reduce costs an bring in transparency, Haj Minister Bandar Al-Hajjar has said.Speaking at a workshop in Jeddah on Sunday, Hajjar sa...
JEDDAH: The Board of Trustees of the King Abdullah International Foundation for Charity and Humanitarian Works on Sunday held its third meeting in Jeddah in the presence of Prince Khaled bin Abdullah, the board chairman, and Prince Miteb bin Abdullah...
RIYADH: The Ministry of Health has announced that six people were infected with the Middle East Respiratory Syndrome Coronavirus (MERS-CoV) in the period from June 28 to July 6.The ministry has now recorded 1,045 cases of MERS since June 2012, with 5...
ALKHOBAR: Patient visitations play an important role in the healing process, provided the well-wishers adopt the right approach by speaking and acting in a manner that the sick person’s morale is lifted. However, any wrong move by the visitor may aff...
MAKKAH: The price of residential land has registered a drastic 30 percent drop due to the slump in the market over the past six months, said an online newspaper.According to real estate dealers, the reason behind the decision was the imposition of 30...

Stay Connected

Facebook