Daily Murmur 18/11/10

by Gary Glover

Market very concerned about the European debt crisis and the current issues with Ireland have brought this back to the fore recently. Also the big concern for equity markets is China lifting rates to limit inflation. This could put the brakes on this fast growing economy and perception that this could slow down industry which will flow all the way from raw materials : commodity prices all the way to the shop floor like the car manufacturers . This could end the bull market party for a little while.

Might seem a bit trivial but Mcdonalds in China (1200 stores currently) has just raised it's prices across the board including Big Mac prices (.5 to 1 yuan) due to a rise in raw material costs. The Economists Big Mac index says that China’s Big Mac’s are still the cheapest in the world on average, the prices are $2.18 in China, while the average cost is $3.71 in the U.S. and the most expensive is $6.78 in Switzerland. My guess is from my last visit with the kids, that we are much closer to Switzerland than China.

Food prices have moved up sharply recently so some of these growing economies like ours may have to lift rates to head off inflation. Having read extensively about this commodity booms recently inflation can become rampant in these booms and usually lags the boom by 2 quarters.

It’s very odd at the moment, economies like Australia and China want to stop inflation occurring while economies on their knees like Europe and the U.S. are trying everything to avoid deflation, so any inflation for them will be perceived well, so further moves by governments to suit each economy are



Gary Glover is an Authorised Representative (Rep No. 259215) of Novus Capital Limited ("Novus"). Novus is a holder of Australian Financial Services Licence No 238 168. Novus, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.

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