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Spreading the word – Market Update by David Rogers.

Global – World stocks slipped on Friday as European shares halted a four day rally, while government bonds in Europe climbed, with investors bracing for U.S. jobs data that could reinforce concerns the world’s biggest economy is losing momentum.

Signs that Greece will miss its 2011 deficit target of 7.6percent underscored concerns about the euro zone debt crisis, prompting investors to lighten their risky assets.

Global - Global import and export growth rates slowed in the second quarter of 2011, signalling a faltering recovery worldwide, according to the Organisation for Economic Cooperation and Development (OECD).

Total imports of the G7 nations (Japan, France, Germany, Italy, the U.K., the U.S. and Canada) and the Bric countries (Brazil, Russia, India and China) increased by just 1.1% between April and June. This is a big drop from the 10.1% recorded in the previous quarter.

These countries also say exports grow by just 1.9percent compared with 7.7percent previously.

China and Brazil were the only two OECD members to register an increase in imports, while only China also experienced export growth.

Asia – In 2011 and 2012 it is expected that India and China together will contribute more than 40percent of global growth, according to a new report from Julius Baer.

The first Julius Baer Wealth Report to focus on Asia, was published on Wednesday, it provides an analysis of the High Net Worth Individuals (HNWI) in the Asia region.

In the report, Julius Baer said it expects the estimated 1.16 million HNWIs in Asia, with wealth of around USD5.6tn in 2010, to more than double to 2.82 million by 2015, with these individual’s wealth expected to triple to USD15.81m over the same period. China alone is forecast to have 1.4 million HNWIs with wealth of USD8.76tn by 2015.

However, Indonesia stands out as having the highest expected rate of growth for HNWIs over the five year period, with an expected increase of 25percent, bringing the total number of HNWIs to 99,000, with wealth of USD487m by 2015.

Spreading the Word – Market Update by David Rogers

Blacktower Financial Management (International) Ltd

If you have a question for David or require any further information request it here.

Greece – The Greek parliament narrowly voted in favour of a drastic package of austerity measures on today, intended to save the country from defaulting on its debts.

The proposed tax hikes and spending cuts have been deeply unpopular with the Greek public. A nationwide 48-hour strike is under way and violent clashes are continuing in the streets of the capital, Athens.

Greece is heavily in debt and the package is needed to win the latest tranche of a EUR110bn loan. There will be a second vote on Thursday for the implementation of different parts of the package, such as tax rises and the sale of state assets.

Global – French Finance Minister Christine Lagarde has been officially chosen to lead the International Monetary Fund (IMF). She will become the first female managing director of the global lending organisation.

Before the IMF’s 24-member board voted to appoint her to the position, she was endorsed by the Obama administration. She had also won support from Europe, China and Russia.

Lagarde takes over at a tumultuous time. Europe’s debt crisis is intensifying.

Asia Pacific – Credit ratings for companies based in the Asia Pacific region are likely to remain stable for the rest of the year, investors have been told.

Moody’s Investors Service points out the first half of 2011 saw little change in the ratings of the area’s non-financial corporates and predicts this trend will continue over the coming six months.

In the year to date, the share of rated companies with ‘stable’ outlooks in the region has risen to 83percent, a 3percent increase on the same period in 2010.

Brazil – The government bond ratings of Brazil have been upgraded from Baa3 to Baa2 by Moody’s Investors Service. Brazil’s rating was last moved by Moody’s on September 2009, when it was lifted from Ba1 to Baa3 and given a positive outlook.

The ratings agency says its new decision is based on Brazil having a sovereign credit profile consistent with ratings in the higher Baa range and a moderate susceptibility to credit boom-related event risk.

Want to know how to make money or save tax through these trying times: Call David Rogers on 0034 952 816 443 or 0034 622 345 558 or email david.rogers@blacktowerfm.com

To default or not to default – that is the question.

As the markets focus once again on Greece’s ability to repay its debt, last month’s pop up in both Spanish and Italian yields caught the markets by surprise and posed the question –“Could Spain be the next bailout candidate?”

Spain has always been the canary in the coalmine and if it ever sought a bailout no type of rescue package would be big enough to save it – and if we did reach this stage then it’s highly likely the euro would simply have no further value as a currency.

Spain is fairly unique as it’s governed by 17 autonomous communities alongside a decentralized government. Each one of these has its own budget and the markets concern is that central government still does not have a true handle on the debt exposure of these 17 communities. The “hidden debt” problem first popped up in Catalonia after elections last autumn resulted in Catalan nationalists unseating a Socialist-led coalition. In December, the central finance ministry said the region’s debt-to-regional-GDP ratio was 1.7% as of the third quarter. The old government later disclosed the full-year deficit could be as high as 3.3%.

Last month’s Spanish elections saw more socialist regional governments voted out of office and the real fear that more hidden debts could emerge. Spain has made great efforts in cutting its deficit to 9.3% of GDP, however much of this has come from centralized government cuts.

The huge glut of unsold homes and the billions in bad property loans still lie on the balance sheets of mainly provincial banks that have yet to still fully disclose their liabilities. Spain certainly has a challenge ahead of it and with youth unemployment the highest in Europe at 44% it’s clear that it has a generation that will have to make tough sacrifices and decisions.
Greece remains the problem that just won’t go away. If life was simple Greece should take a haircut on 50% of its debt obligations and look to rebuild. However the risk of contagion would be far too great and this would spread to Portugal, Ireland, and even Spain. German banks would be forced to write off billions of euros and it would send the global economy back to the dark ages.

The solution the euro politicians have come up with is the term debt reprofiling. Put simply it would allow a country to roll over its debt obligations for a period of maybe 35 years. This would get round a technical default, that itself could trigger a wave of CDO claims as debt insurance would be triggered. As with anything in European politics nothing has yet to be decided but it’s clear the indebted southern nations can no longer devalue their currency, do not possess anything like the levels of growth needed to repay their debt and have reached levels of austerity that are no longer effective.

Sterling will remain under pressure as the UK economy looks like its hitting some turbulence as the consumer responds to the government’s tough austerity measures. It’s highly unlikely the Bank of England will hike rates in 2011 and the pound along with the dollar and euro will still be viewed as the 3 ugly sisters by the currency markets.

Keith Spitalnick LLB (Hons)

Regional Sales Manager

Currencies Direct

Plaza de las Orquídeas, Local 5, Nueva Andalucía, 29660, Marbella, Málaga, Spain

T: +34 952 906 581         M: +34 687 417 035

F: +34 951 279 392         E: keith.s@currenciesdirect.com

www.currenciesdirect.com

www.twitter.com/currencyblog

The truth about off-plan property

Such was the enthusiasm of holiday homebuyers during the Spanish property boom that many companies were able to cash in by offering homes off-plan. This initiative proved popular, since construction companies were able to draw up payment schedules that helped the purchaser to raise the funds in stages, meaning that the developers received regular injections of cash to finance completion of their projects.

Incomplete projects

When things went according to plan, this scenario worked well, enabling purchasers and builders to benefit from advantageous payment schemes. However, as Europe and the USA’s credit crisis worsened, some off-plan purchasers found themselves out of pocket, as incomplete projects meant that they were unable to sell or rent their property to cover their costs.

So what should you do if you find yourself in this position?

If your property developer’s company has collapsed and does not complete your Spanish property, or if a Spanish company folds without paying you, you will need to join in their bankruptcy proceedings to recover all, or part of, what they owe you. You will have to participate in the “Competition of Creditors”. This allows you to compete against other creditors for the greatest share of the available money. However, you will need a good lawyer and to move quickly.

The Competition of Creditors is overseen by an external team, who will assess whether the company’s problems are temporary and can be repaired, or whether insolvency is the only avenue open to it. In this case bankruptcy will allow for continuity through the orderly sale of assets.

Workers still owed salary will be covered by the Wage Guarantee Fund, but other creditors should fall under Bank of Spain regulations that require bankrupt companies to return 25 per cent of the money paid to the company by creditors, who will obviously be freed from paying any more fees.

A judge will appoint receivers; a lawyer with at least five years in practice, an auditor, an economist or accountant also with five years experience (in every case they must be registered with their professional body) and a creditor. These will be responsible for liquidating the company in the way that most efficiently maximises its assets that can then be dispersed to the list of creditors. They will also check that no fraud has taken place.

Once the Competition of Creditors is accepted by the judge, the receivers have two months to assess and evaluate the company’s situation, although the deadline may be extended for another month, depending on the complexity of the process.

The most favoured creditors are the former employees, the government and, finally, any body from whom the company has received a secured loan.

The buyer has the same rights as he had before the declaration of insolvency. If the company fails to fulfil its promise (such as not completing the building of the development), the buyer is entitled to a refund of the full deposit. If the development company is liquidated all the buyers should have their deposits/payments refunded in full. If the development is constructed, they will have to complete and sign the title deed of the purchase before a Notary Public against the payment of the final payment due.

Perez Legal Group has extensive experience in dealing with off plan matters and has successfully claimed back deposits in full for clients who bought property that never reached completion. If you could benefit from our assistance then please contact us via our website or by calling: +34 952 833 169.

Many thanks to Raquel Pérez for this article.  If you are in need of legal advice relating to any legal matter you can contact Racquel on the details below…

Raquel Pérez

Director

raquel@perezlegalgroup.com

Perez Legal Group     www.perezlegalgroup.es

Centro Comercial Elviria, oficina 6

29604 Marbella

(T) +34 952 833 169

(F) + 34 952 830 262

(M) + 34 699 45 66 97

Threatened strike at Spanish Airports called off

The tourism industry breathed a sigh of relief as AENA, Unions and the Ministry of Development reached a tentative agreement that will avoid the 22-day strike at airports called for Easter and over the summer holidays. The deal, reported this morning, came after 17 hours of negotiation.

For the agreement to be reached between the unions (CCOO, UGT and the USO and the direction of AENA) must be approved by the assembly of the unions and workers and ratified by AENA in a referendum, which could happen in middle to the end of next week.

Agreed terms

The preliminary terms provide that the collective agreement applies to all workers regardless of which AENA company they work for, including dealerships. This collective agreement shall remain in force until 2018.

Another aspect of the deal is that AENA have agreed to have a seat on the board of directors of the new model concession airport, specifically in the airport concessions from Madrid-Barajas and Barcelona-El Prat

Also, the tentative agreement includes the maintaining of jobs and working conditions of workers of AENA, AENA airports and concessionaires.

Easter IS SAFE

Secretary of State for Transport, Isaiah Táboas, a member of the negotiating table, has welcomed the agreement under which “the tourism sector and citizens can be confident that they can travel during the Holy Week.”

Ever since the announcement of the strike on March 8, concern was widespread in the tourism industry. Táboas saw how it threatened the “slight recovery” that had been anticipated in previous months. The employers’ sector-hotels, travel agencies and other business groups, immediately expressed their firm opposition to a strike that would “cause irreparable damage to tourism and the image of Spain” urging the parties involved to agree terms to avoid the strike at airports.

The mere announcement of the strike in recent weeks has resulted in cancellations of bookings and travel arrangements. However, the tourism sector expects the negotiated settlement, reached with a sufficient margin of time before the holiday period at the beginning of Holy Week (17 to 24 April) to return to normal. This should allow for reservations and contracts within the tourist regions, which like the Canaries had been seriously jeopardized over the Easter holiday, to hang the “no vacancies” sign up once again.

Many thanks to Raquel Pérez for this article.  If you are in need of legal advice relating to any legal matter you can contact Racquel on the details below…

Raquel Pérez

Director

raquel@perezlegalgroup.com

Perez Legal Group

Centro Comercial Elviria, oficina 6

29604 Marbella

(T) +34 952 833 169

(F) + 34 952 830 262

(M) + 34 699 45 66 97

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Thought 2010 was tough?

Well if you thought 2010 was a tough year, 2011 will probably bring much the same for the currency markets, with volatility certain to be an ongoing theme.

Looking back at 2010, until the Eurozone debt crisis reignited at the start of October, Sterling had been rapidly losing ground to a dominant Euro. In September, when the Bank of England began to make noises about firing up the printing presses again with more quantitative easing, Sterling dropped back from just below €1.24 to levels as low as €1.12.

But a late showing of stronger data for the UK economy, (which quashed the threat of more quantitative easing for now), the Ireland bailout and the fear of Eurozone ‘contagion’ saw the pound recover to its current level, after briefly popping its head above the €1.19 parapet.

UK inflation remains high

To predict the direction of Sterling is a tricky call to make. Despite the UK economy struggling and unemployment levels starting to rise, inflation in the UK remains above the Bank of England target of 1-3% and is likely to increase even further in 2011. Whether inflation rises or falls is crucial for sterling, because if it remains around the 3% mark in the medium term, pressure will mount on the Bank to raise rates.

Call for interest rate hike

We have already seen one member of the Bank of England Monetary Policy Committee, Andrew Sentence, calling for an interest rate hike and the growing belief that when rates do rise in the UK they will go up very quickly which will have a positive effect on Sterling, possibly pushing it as high as 1.25-1.30 against the Euro. However any rate increase will probably not come until late 2011, so until then, the value of the pound will remain fairly range bound against currencies like the Euro.

Challenges for the Euro

The challenges facing the Euro in 2011 will be much the same as in 2010 – the need to service the debt of the southern European states. Italy, Spain and Portugal have to finance in excess of €800 billion of new and existing debt and should they find the market has no further appetite then the Euro could really start to fall apart.

China could come to the rescue of the Euro, as they certainly do not need their biggest trading partner imploding, and the Chinese are also keen to move away from having a huge dependency on the value of the US dollar.

So I am very intrigued as to the direction of the Euro over the next 12 months. The US dollar could be the surprise package in 2011 as growth rates for the US economy are upgraded, but once again this will probably not occur until late 2011.

Looking for certainty?

So if you’re looking for certainty, the only thing we can really be sure of is that volatility will once again be the key driver in 2011.

For more information click here.