Authers’ notes

John Authers

Does Spain really need to leave the euro? There is a pervasive argument that it does. That would restore its competitiveness, and allow the country to inflate away its debts.

But Xavier Vives, an economist at the IESE business school in Barcelona, suggests otherwise. Spain obviously has some serious problems, but an overvalued currency is not one of them. The charts he presents show that Spain’s share of  global merchandise exports has barely declined during the eurozone era – quite a feat given that even Germany’s share has declined during the rise of China. Meanwhile Spain’s services exports have gained market share quite healthily. Devaluation would help but it is not desperately needed.

 Read more

John Authers

Will the Olympics have a positive economic impact? The question is a big, and very political one in the UK at present, as London prepares to lock down for the games. But Goldman Sachs’ big analysis, just published, suggests there really could be a return on the London games. Watch the video with Huw Pill, Goldman’s chief European economist:

Among many other points covered in the report that we didn’t reach in the video interview: Read more

John Authers

Companies are talking down their earnings prospects at a record rate. For the second quarter of this year, negative pre-announcements have outnumbered positive ones by the most since the third quarter of 2001 – the quarter that included the 9/11 terrorist attacks.

That kind of shift in earnings sentiment would usually be damaging for stocks. But in this interview, Citigroup’s Tobias Levkovich comes up with an interesting argument that the worst is already over – providing the US avoids a recession.

 Read more

John Authers

Stocks have never been so correlated. The specifics of each company’s profit and loss account have become secondary to the broader factors of the market.

The figures demonstrate this beyond argument. In October last year, for example, the one-month correlation between individual S&P 500 stocks reached 90 per cent. The average since 1990 has been 30 per cent. Similarly, the correlation of different geographical indices has increased steadily. Twenty years ago, emerging markets offered great diversification from the developed world, with a correlation of almost zero. Now, that correlation is close to 80 per cent, according to MSCI indices. Read more