| Uncertain
economic climate: |
| Confluence
of global threats adds to economic angst |
agencies
The
eruption of a new Middle East crisis has combined
with bombings in India and fears about Iran's
nuclear ambitions to swamp financial markets
with risk just as they are adapting to a more
uncertain economic climate.
As Israel widened its reprisals on Thursday for
Hizbollah's seizure of two of its soldiers by
striking Beirut airport and enforcing a naval
blockade on Lebanon, asset markets took typical
evasive action.
Strong demand for safe-haven government bonds
drove prices up while many stock markets fell.
The Swiss franc gained. Oil prices hit records
above $75 a barrel. Gold rose $4 an ounce.
For the most part, though, this is likely to
be a short-term scramble. Financial moves driven
by geopolitical events have tended to reverse
quite quickly over the past few years.
On Wednesday, for example, India's stock market
recovered its poise and ended 3 percent higher
less than a day after fatal bomb explosions in
the financial capital Mumbai.
"
Usually these things tend to calm down again," said
Andreas Utermann, global chief investment officer
of Allianz Global Investors, adding that the
danger for investors is if some unexpected crisis
hits and then deteriorates.
Financial markets also tend to move quickly
from one focus to another.
A week ago, for example, Japan's Nikkei stock
average fell as a series of missile tests by
North Korea raised fears about security in
Asia.
But on Thursday, investors in Japan were fixated
on something else entirely -- whether the Bank
of Japan was set to raise interest rates from
zero for the first time in six years.
MORE PRESSURE
That said, there are plenty of geopolitical
worries on display for investors at the moment.
Israel-Lebanon and Mumbai come on top of the
North Korean missile tests, the tense diplomatic
standoff between the West and Iran over the
latter's nuclear program, and ongoing trouble
in Africa's
oil-rich Niger delta.
What is significant for investors about such "event
risks" this time is that they come when
markets are generally jittery about the future
already.
"
You have a confluence of stuff at the same time," said
Bob Parker, vice chairman of Credit Suisse's
asset management arm. "You have got the
market and economic factors ... and this geopolitical
overlay."
In American football parlance, it would be
called piling on -- jumping on a player when
he is already
down.
Volatility swept through markets in May and
June as uncertainty about the future shot
up among
global investors as it became apparent that
the world was heading into an era of higher
interest
rates.
The U.S. Federal Reserve is poised for its
18th consecutive rise while the European
Central Bank
and Bank of Japan have also embarked on monetary
tightening campaigns.
The uncertainties are two-fold. First, how
high and how rapidly interest rates are going
to rise
-- key integers in calculating the speed
of global liquidity withdrawal.
Second is the impact of higher rates on economic
growth. Some investors fear central bankers
will overstretch, raising rates too high,
stifling growth.
MORE CAUTION
One result of this is that many investors
have already taken risk off the table regardless
of the surge in geopolitical pain.
"
We have been doing it all year," said John
Ip, senior economist at Morley Fund Management.
This can be seen in the markets themselves.
Riskier assets such as those in MSCI's
emerging market
equities index have underperformed safer
developed markets over the past three months.
But with excess liquidity not fully withdrawn
from markets and the premium paid on assets
for taking risk rising only slightly, increasing
geopolitical tension will likely encourage
more
caution.
"
Geopolitical events are unfolding to support
credit risk-free assets like developed-country
government bonds," said Andrew Bosomworth,
a senior vice president with bond investors PIMCO
in Germany.
At the very least, the geopolitical turmoil
is expected to keep oil prices high enough
that
they threaten to take the bite out of
consumer spending and feed the worries
about a global
economic slowdown..
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| Hollywood
report: |
| Jolie to
play widow of journalist Daniel Pearl |
agencies
Actress
Angelina Jolie will star in a movie as the widow
of murdered Wall Street Journal reporter Daniel
Pearl, trade paper Daily Variety reported in
its Thursday edition.
"
A Mighty Heart," adapted from Mariane Pearl's
memoir of the same name, will begin shooting
within the next five weeks, the paper said. The
book details Pearl's search for her husband,
who was abducted and beheaded by militants in
Pakistan in early 2002.
"
I am delighted that Angelina Jolie will be playing
my role in the adaptation of my book," Daily
Variety quoted Pearl as saying. "I deeply
admire her work and what she is committed to."
English filmmaker Michael Winterbottom, famed
for such war-based films as "Welcome to
Sarajevo" and "The Road to Guantanamo," will
direct. Jolie's boyfriend, actor Brad Pitt, will
serve as a producer of the project, which is
set up at Paramount Vantage, the art-house arm
of Viacom Inc.'s Paramount Pictures.
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