Sunder’s List

United (States) Parcel Service.

 

European shares closed sharply higher: Stoxx 50 +1.2%, Germany +1.3%, France +0.9%, Italy +1.3%, Spain +1.3%, U.K. +0.8%. It was half-day for the US markets: Dow +0.43% to 12927. S&P +0.44%. Crude +4.11% to $87.19.

Expectations of more central-bank action to propel the global economy, and reports that an army general in Iran was saying the country wouldn’t “sit idly” by as the U.S. and Europe built a missile-defense shield program that could target Iran propelled oil higher. (MarketWatch)

The BRICs, will comprise 20% of the world economy this year after growing more than four-fold in the past decade. At the same time, their combined stock-market value has dropped to a three-year low of 16% of the total invested in equities. “Unless we are seeing a major collapse of those economies, it’s a huge opportunity for investors,” Jim O’Neill (Bloomberg, also)

Meanwhile, Indian real estate continues to be attractive to PE funds in spite of residential sales going down by around 10% across the country with Mumbai seeing the sharpest fall of 50% and the absorption for grade-A office space across seven largest cities down by 12% q-o-q in the first quarter. (ET)

In our continuing take-down of the China growth “miracle”, we present two articles that show the precariousness of China’s position:

Financially repressed interest rates must adjust, one way this can happen is through a sharp increase in interest rates but it can also happen by a collapse in GDP growth rates.  In either case the spread between the nominal growth rate and the nominal lending rate contracts, and so the extent of financial repression is sharply reduced.  The alternative – that the household share of GDP continues to decline as depositors subsidize rapid GDP growth and even more capital misallocation – simply cannot be sustained. (MPettis)

Chinese corporate profits are falling. State-owned enterprises reported a 10% decline in profits in the first five months. Retail investors appear to have lost almost all faith in domestic Chinese stocks. Add state interference in the operations of listed companies at the expense of minority shareholders into the mix and you get why Chinese stocks are once again confounding the bullish expectations of Wall Street. (FT)

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