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News : International Last Updated: Oct 21, 2010 - 12:51:12 AM


Markets News Wednesday: Norway’s sovereign wealth fund has topped NKr3,000bn - - $518bn - - for the first time; Oil producer made first transfer to fund in 1996
By Finfacts Team
Oct 20, 2010 - 9:10:52 AM

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Norway’s sovereign wealth fund has topped NKr3,000bn ($518bn) for the first time, marking a milestone for the the country of 4.8m people.

The oil producer set up the fund in 1996 when it got its first capital transfer from the Ministry of Finance. It aims to preserve Norway's oil wealth for future generations and today it owns about 1% of all global stocks and counts as the world’s second biggest sovereign wealth fund after Abu Dhabi’s.

The fund’s investments consisted of 59.6% equities and 40.4% fixed-income securities at the end of the quarter. The market value of equity investments fell NKr66bn kroner to NKr1,664bn in the quarter, while fixed-income investments rose NKr95bn to NKr1,128bn.

The market value is largely determined by inflows of capital, returns and fluctuations in the krone exchange rate. The fund had NKr2,379bn in capital inflow and NKr430bn in returns between May 1996 and 30 June 2010, while changes in the krone exchange rate reduced the market value by NKr3bn.

“A surge in oil prices since 2002 increased the size of capital inflows, which reached a record NKr384 billion kroner in 2008 before dropping in 2009 and 2010,” said Yngve Slyngstad, chief executive officer of Norges Bank Investment Management (NBIM), which manages the fund. “Increased equity investments, particularly in emerging markets, also helped the fund’s growth.”

The fund boosted its share of equity investments to 60% from 40% between the summers of 2007 and 2009, reducing fixed-income investments to 40%. It got a mandate on March 01 this year to invest as much as 5% of its assets in real estate through a corresponding decrease in fixed-income investments.

Yahoo!: Yahoo! reported on Tuesday that quarterly earnings more than doubled but revenue growth was flat compared with Google's revenue rise of 23% in the third quarter, which was reported last week.

Yahoo! said third-quarter net profit  more than doubled, to $396m or 29 cents a share, from $18m or 13 cents a share, in the year-ago quarter. Much of the increase, 13 cents a share, related to a one-time gain from the sale of its HotJobs business.

Revenue was $1.12bn after accounting for the money the firm pays to affiliates.

Google's revenue was $7.29bn in Q3.

By the time China concludes the implementation of its tightening measures, James Chirnside, CIO at Asia Pacific Asset Management, says growth in the mainland could fall to 6-8%. He speaks to CNBC's Oriel Morrison, Bernard Lo & Adam Bakhtiar:

Fed considers exotic policy tools as dollar downside mounts: Davy economist, Aidan Corcoran, comments  -- "Federal Reserve Bank of Chicago president Charles Evans yesterday (October 19th) outlined his plan to return the US to normal inflation levels. Evans favours price level targeting instead of inflation targeting as a temporary measure to stimulate the economy. The potential effects of such a policy may be too little understood for the Fed to implement, but Evans's speech does suggest that QE2 may have an exotic flavour.

The key attraction of price level targeting is that it comes with a hard-wired exit strategy: a specific level of prices. But prices are imperfectly measured, making it difficult to time the end of intervention. Moving consumer prices through asset purchases would also require 'much more' monetary accommodation than has been done so far, according to Evans. High savings rates mean that expansion of the broad money supply, if it occurs, may have a limited impact on the real economy.

Further monetary stimulus in the US will continue to weigh on the value of the dollar just as China signalled yesterday that it may be entering a tightening phase. The People’s Bank of China announced an increase in the one-year lending rate to 5.56% from 5.31%, effective today. The higher rate, particularly if it is the start of a hiking cycle, will attract foreign capital, adding further pressure on the dollar."

Why the possible risks associated with QE2 are "acceptable," with Dennis Lockhart, Atlanta Fed President:

Economic View: Age of austerity; Goodbody chief economist, Dermot O’Leary, comments  -- "As if we didn’t know already, numerous events around Europe further underlines the fact that we are in the age of austerity. The biggest of these is the announcement of the UK’s spending review, due for release at 12.30pm this afternoon.

Recognising the scale of the UK’s fiscal problems, the plan will announce that up to half a million public sector workers will be cut over the next five years, with deep spending cuts in most, but not all, departments. As we mentioned earlier in the week, the emergence of a new government provided the platform for these tough choices to be made and they will only get one shot at this. As can be seen in the strikes in France, it may not be easy to get public support for some of the measures that will be announced. While the bond market has not been exerting undue pressure on the UK, and to a lesser extent, France, to sort its public finances, market discipline has certainly been at work in Europe’s peripheral economies.

Higher bond yields have reminded countries like Ireland, Spain and Portugal that the market needs certainty that all efforts will be made to tackle the problems. This is not just about economics though; politics is very important too, as illustrated by the fact that: (1) Portugal is scrambling for support from its biggest opposition party, who will make a decision by the end of the month; (2) Spain looks to have just about got the support it needs for passing its Budget by coercing politicians from the Canary Islands to back it, and; (3) the leaders of Ireland’s political parties will sit down later today in an attempt to find some common ground on the four-year plan for the public finances. As we said yesterday, this is a big leap from the position a little over a week ago. For a while, Ireland was on its own in its efforts to tackle its public finances. That is certainly not the case now."

US Markets

In New York Tuesday, the Dow Jones fell 165 points or 1.48% to 10,979.

The S&P 500 slid 1.59% and the Nasdaq slipped 1.76%.

Investors were spooked by China's decision on Tuesday to raise its benchmark interest rate by 0.25% and a poor earnings report from Bank of America.

Asia Markets

The MSCI Asia Pacific Index lost 1.0% Wednesday.

The Nikkei 225 fell 1.65%; China's Shanghai Composite dropped 0.08%; Australia's S&P/ASX 200 Index feel 0.66% and India's Sensex declined 0.25%.

Asia benchmarks

Finfacts Reports

Fingleton told Government 10 days before issue of State bank guarantee, INBS was 'well managed' and 'very profitable'
Germany's Construction Contraction: Number of employees halved since 1991; Only two German companies among the top 50 construction groups in Europe
Peter Morici says Democrats don’t deserve re-election; Report shows Republicans stimulating ignorance while being for and against 2009 stimulus plan
Markets News Afternoon: Chinese rate hike and poor US earnings reports spook investors; US Treasury to sell 1.5bn Citi shares
US home starts rose in September
UK manufacturing sector losing momentum but outlook is positive
ZEW Indicator of Economic Sentiment for Germany dropped slightly in October

In Europe, the Dow Jones Stoxx 600 is down 0.25% Wednesday.

The ISEQ has risen  0.29% in Dublin.

CRH is up 0.38%; Elan has dipped 2.31%; AIB is down 2.48% and BoI has added 0.85%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies 

The euro is trading at $1.3795 and at £0.8771.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index  fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak; on Tuesday this week, the BDI fell 12 points or 0.43% to 2,744.

Crude oil for November 2010 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $80.02 per barrel down 53 cents from Tuesday's close. In London, Brent for November delivery is trading on the International Commodities Exchange at $81.56.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,339.40, up $4.10 from Tuesday's close.


© Copyright 2010 by Finfacts.com

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