2015 First-Quarter Review


Dear PGM Capital Blog readers,

In this weekend’s blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the first quarter of 2015:

  • USA, DOW-Jones down, Asian and European markets up in Q1-2015.
  • Asian and European markets up in Q1-2015.
  • Disappointed USA March jobs report.
  • Greece running out of money.


USA- Index:
U.S. stocks closed the month of March, with sizable losses on Tuesday March 31st, leaving the Dow industrials in the red for the year’s first quarter as can be seen from below chart.

As can be seen from above chart, the USA blue-chip gauge closed the short trading week on Thursday April 2nd at 17,763.24 and is down YTD 46.83 points, or -0.34%, snapping a three-quarter winning streak.

European Markets:
The leading European markets, the German DAX, the French CAC and the Dutch AEX all end the first quarter of 2015, with double digit gains as can be seen from below chart.

Blue chart = DAX-30 Index, Pink chart = CAC-40 Index, Red Chart = AEX-25 Index

Asian Markets:
China’s Shanghai Composite rocketed 2.6% higher on Monday, March 30, after the People’s Bank of China cut downpayments on second homes to 40% from 60%, a move to spark growth in the property sector.

PBOC Governor Zhou Xiaochuan suggested on Sunday that the central bank had further “room to act,” a hopeful sign of more monetary easing on the horizon.

As can be seen from below chart, the Chinese CSI-300, has soared this year already with 17.4% and is currently at a 7-year high.

Based on the stimulus package of Japan Central Bank, the Japan Nikkei-225, has soared this year already with 11.3% and is currently at a 15-year high, as can be seen from below chart.

Nikkei YTD

Below table shows the performance of some other important Asian Markets Year-To-Date:

 Market             Current      End 2014    Pct Move
 Singapore         3,447.01      3,365.15      +2.43
 Hong Kong        25,275.64     23,721.30      +6.55
 Kuala Lumpur      1,830.78      1,761.25      +3.95
 Bangkok           1,505.94      1,497.67      +0.55
 Jakarta           5,518.67      5,226.95      +5.58
 Manila            7,940.49      7,230.57      +9.82
 Ho Chi Minh         551.13        545.63      +1.01

On Friday, April 3rd, the USA Labor Department reported that the country’s economy only added 126,000 jobs in March, the lowest since December 2013 and well below the analysts forecast of 244,000 jobs.


The biggest disappointment is that wage growth stayed sluggish. Average hourly earnings went up only 2.1% over last year. The goal is to see 3.5% — or better — wage growth. To put that another way, Americans made US$24.34 an hour a year ago. That only bumped up to $24.86 an hour now.

Lackluster wage growth is a major reason why many Americans still aren’t feeling the economic recovery and why they aren’t spending much lately.

On Thursday, April 2nd, Greece has told its creditors it will run out of money on April 9 and due to this no longer has enough money to pay the IMF €458m on April 9 and also to cover payments for salaries and social security on April 14, unless the eurozone agrees to disburse the next tranche of its interim bail-out deal in time

Greece is negotiating with its eurozone creditors to get more aid before the indebted government runs out of cash. Here’s what Greece owes, when.

Sources close to the ruling Syriza party said the government is determined to keep public services running and pay pensions as funds run critically low. It may be forced to take the unprecedented step of missing a payment to the International Monetary Fund next week.

The USA Economy and Capital Markets:

Friday’s disappointing USA labor figures, the weakest showing in two years, means that it will take longer for the country’s economy to reach a level most analysts consider close to full employment.

On top of this:

  • The unemployment rate for black communities is at a crisis level, while white unemployment dropped to 4.5 percent in the last quarter of 2014, black unemployment remained at 11 percent.
  • Long-term unemployment also remains a problem for older workers even as more seniors are hanging on to their jobs well into their 60s. A report issued by the AARP Policy Institute this week noted that last year, on average, 45 percent of job seekers aged 55 and older were out of work for 27 weeks or more.
  • The number of people who dropped out of the labor force in March rose by another 277K, up 2.1 million in the past year, and has reached a record 93.175 million, with the consequence that the labor force participation rate dropped from 62.8% to 62.7%, a level seen back in February 1978 as can be seen from below chart.

The above shows that their is a complete disconnect between main-street and wall-street.

While the USA stock-markets have soared in 2013 and 2014, bringing the multiples of these markets to figures we haven’t seen since the ICT bubble of 1999, the underlying economy hasn’t improved.

On the other hand, markets in Asia are trading at very low valuations.

As a consequence of this, in Q1-2015, the Asian as well as the European markets outperformed the USA index as can be seen from below charts.

China’s CSI-300 (light blue chart) and Japan’s Nikkei 225 (purple chart) versus the USA’s DOW-30 (dark blue chart)


German DAX-30 (light blue chart), France’s CAC-40 (purple chart) & Dutch’s AEX-25 (red chart) versus USA’s DOW-30

The USA markets were closed on Friday April 3rd, however the Dow futures fell 165 points and S&P 500 and Nasdaq futures are down about 1% based on the disappointed USA jobs report.

Greece Syriza’s radical-Left government would prefer to confine its dispute to EU creditors but the first payments to come due are owed to the IMF. While the party does not wish to trigger a formal IMF default, it increasingly views a slide into pre-default arrears as a necessary escalation in its showdown with Brussels and Frankfurt.

A senior official of the Syriza’s party said last Thursday April 2nd:

“We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer,”

“We may have to go into a silent arrears process with the IMF. This will cause a furore in the markets and means that the clock will start to tick much faster,”

Going into arrears at the IMF – even for a few days – is an extremely risky strategy. No developed country has ever defaulted to the Bretton Woods institutions. While there would be a grace period of six weeks before the IMF board declared Greece to be in technical default, the process could spin out of control at various stages.

The situation is now critical. Even if Greece manages to cobble together enough money to cover the April deadline, it owes the IMF a further €200m on May 1 and €763m on May 12.

Due to the above we can expect the European markets to go retreat when they open open on Tuesday April 7th 2015.

On the other hand both the USA jobs report as well as the European and Greece jitter are good for Gold bulls.

Until next week.

Yours sincerely,

Suriname Times foto

Eric Panneflek

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