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There are several ways to win a war, but eventually it all boils down to economic strength. Currently the West is at war on several fronts with the battle for Ukraine and the dangers posed by ISIL being the most obvious. However, unlike previous forays, a military option is only being held as last resort.
Russia a military powerhouse is slowly being drained by low commodity prices and the slow impact of sanctions. The dangers of ISIL, on the other hand, are more difficult to counteract. However, strategic moves have to date guaranteed that oil out to war zones such as Iraq and Libya continue to flow; previously only all-out war guaranteed oil supply. This scenario highlights a significant shift in ideology from a military led global order to an economic one. This will also imply the future winners will be the holders of economic assets and that maybe it will take capitalism to guarantee sovereignty.
Elsewhere…
Goldman forecasts European equity gains in 2015
According to Goldman Sachs Group Inc. global stocks and bonds will offer lower returns in the coming years as economic growth remains subdued and interest rates remain low. In this scenario equities are expected to be the best performers.
Yields on sovereign bonds from the US and Germany will increase as economic activity regains traction while oil and gold will remain at low levels. Going forward the US is expected to grow at the same rate as in 2014, while Europe and Asia will benefit from current low energy prices. The US dollar is expected to continue to strengthen reaching $1.15 against the Euro. In this scenario, Goldman expects European firms to slowly catch up to their US counterparts. European equities are expected to gain 9 percent in 2015.
US
US stocks ended the session slightly lower yesterday as minutes from the previous Federal Reserve meeting failed to give a clear direction on the next US interest rate movement. The minutes indicate that members are debated the outlook on inflation and the economy. This somewhat surprised the market that had previously set the target for an interest rate increase for the third quarter of 2015. The debate reduced confidence in this timeline as the market is unsure whether to interpret the discussion in a hawkish or dovish manner.
Tech names were among the worst performers as Microsoft and Qualcomm retreated. Qualcomm on Wednesday unexpectedly gave a conservative five-year outlook.
The market was surprised as Nokia announced that they will be launching an android tablet. Nokia had previously sold its mobile unit to Microsoft and Microsoft has permission to use the Nokia name for 10 years. A rebound by Nokia so early was not expected, especially in direct completion with Microsoft.
Asia
Asian stocks mostly fell on Thursday morning as factory output data suggested that China’s economy was slowing. The Japanese yen continued to slide.
Europe
European stocks dropped led by a decline in commodity producers. European benchmark indices have gained over 9 percent from a low in October. Investors are awaiting further economic data to gauge the region’s economic strength.
BHP Billiton Ltd said that previous massive expansion in iron ore production has ended. The stock fell 1.5% on the news.
Techip SA fell 6.3 percent after saying it will attempt a bid for CGG SA, a French seismic surveyor of oil.
ThussenKrupp Ag posted its first annual profit in four years.
Commodities
Gold remained under pressure after a poll showed weaker support among Swiss voters for a referendum that would require the Swiss National Bank to boost its gold reserves. If the referendum passes, Switzerland will have to increase gold reserves from 7.8% to at least 20%.
US Crude oil was down 5 cents to $74.53 a barrel.
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