Feb 14, 2011

Day 1, Post Mubarak

February 14, 2011

Equity markets are opening flat this morning with the macro news being somewhat quiet this morning. Bond and commodity markets are also flat this morning.

Credit Suisse announced a direct, $6.2 billion investment from Qatar Holding and Olayan Group in the form of convertible bonds. Emergency Medical Services’ stock is down 10% after agreeing to be acquired by Clayton Dubilier for $64 per share in cash-a 9% discount from Friday’s $70.66 per share close. Onex is the company’s largest shareholder.

The news out of Egypt should pale in comparison to the riot coverage of the past few weeks, however, this will be when the real work begins. The country is being run by the military for now, and the constitution has been suspended and the parliament, dissolved. The new government is focusing on economic stimulus measures to expand employment and head off further turmoil. The anarchists may be patient for a short while, but will quickly expect improved conditions and lower food prices, which may lead to further unrest.

President Obama delivered his 2012 budget proposal to Congress this morning. Although this is an initial proposal and there will be much debate going forward, the initial view looks pretty fat at $3.7 trillion. In typical DC fashion the “savings” are built into the long term, not the near term. The elephant in the room, entitlement spending, wasn’t addressed. The deficit as a percent of GDP now sits at 11%, the highest level since the end of World War 2. By comparison, Germany’s deficit is 3.7% of GDP, 2.9% for Canada, and 8.9% for Japan.

A severe drought in China has put even more pressure on wheat prices. The country’s drought-control office (you read that right) called conditions across northern China’s wheat belt “grim”. The country is looking at emergency measures to increase irrigation.

APAC markets were up strong last night on the back of Mubarak’s resignation The Nikkei, Kospi, Hang Seng, Taiex, and Shanghai were all up over 1% last night.

Have a great Monday


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