How Companies Can Befriend A Trend

Trend research is a booming business. Many agencies and self-appointed gurus announce the latest trends from their perspective, generating publicity and awareness. This can be particularly confusing for multinational corporations because, apart from local and regional trends, they have to identify international and cross-regional trends, and incorporate them into their strategic planning and decisions. But trends and trend research are an integral part of business int he global marketplace. If companies miss out on market developments that fundamentally change customer interactions, they are doomed to fail…

How Companies Can Befriend A Trend

Published in Marketing Management

2015 Global Markets Trends & Forecasts

Global GDP2

2014 gave us a few unexpected turns in the global economy. There was the concern over the long-lasting effects of Ebola, the ISIS, and Ukraine. Aggressive policies regarding climate change have yet to take effect. The economic recovery of Western Europe and Japan are faltering. Brazil, Russia, and China’s growth have come to a halt and are slowing down. The United States, however, has continued its positive recovery and there seems to be a lot of changes in store for international business this coming year. Let’s get ready for 2015.

  • Slow but steady growth in the global economy

The global economy is taking longer than anticipated to recover from the debt bubble. The IMF projected that the world economy would be at 4.8 percent by 2015. However, 2014 ended with only a 3 percent growth overall. While the United States has pretty much met its growth targets, the disappointments came from the BRIC (Brazil, Russia, India, China) economies, Western Europe, and Japan. Forecasts have been adjusted for the coming year with an estimated growth of 3.4 percent for 2015.

  • Emerging markets dominate

Emerging markets rather than developed economies will fuel much of the growth. The United States will still be a major player in the overall growth of the global economies. However, Western Europe and Japan will grow only an estimated 1 percent and China’s 7 percent will be its lowest in 15 years. Much of the growth will come from Asia and Africa. Specifically, Mexico, Indonesia, Nigeria and Turkey will be on the watchlist for booming economies.

  • Oil prices will continue to fall

The demand for oil will decline due to alternative sources and supply in other areas of the world. This will lead to the continued fall of oil prices affecting countries such as Iran, Nigeria, and Russia.

  • Climate change will still be a threat

Record-high temperatures continue to be seen with Antartica experiencing its coldest winter so far. Coal is still highly used and international policies to curb this practice are weak. This may lead to drastic effects such as shortages in water and the supply of world’s food system and inevitably contributing to world hunger.

  • Innovation, new technologies and hacks will continue to affect us

While spending is somewhat low and demand is weak, businesses are in a better position for recovery by investing in new technologies to get ahead of competition and for future savings. The search for more fuel-efficient machines by Boeing and Airbus is an example of this trend. Another example, is with the United States, who has contributed to innovations in oil drilling thus resulting in an oil boom and affecting world prices.

The global outlook for 2015 should be better than 2014. It may not be much, but it’s way better than negative.

How will these trends affect you and your company? Tell us what you think.

Sources:

  1. http://www.goldmansachs.com/our-thinking/outlook/2015/index.html#infographic
  2. http://www.businessweek.com/articles/2014-11-06/2015-global-economic-outlook-better-than-2014-but-not-by-much
  3. http://www.businessinsider.com/business-insider-global-20-2014-2014-1?op=1 

Global Markets Overview

We start the week on a downbeat note with a raft of disappointing headlines from the weekend putting Asia on the back foot. While non-farm payrolls surprised significantly to the upside on Friday, disappointing China data, escalating Russia/Ukraine concerns and the missing Malaysian aircraft have all contributed to a sombre mood.

February payrolls came in at 175,000 (versus 150,000 expected) and this saw the US dollar come to life. While the number of jobs added jumped, the unemployment rate ticked a bit higher. Presumably as the weather improves, jobs added rise along with the participation rate.

USD/JPY was perhaps the biggest beneficiary of the move as it rallied to 103.76, while some of the risk currencies like the AUD lost ground to the greenback. Risk will be in focus today after some key releases out of China disappointed.

China posted a 23 billion deficit on Saturday, a sharp drop from the 31.9 billion surplus recorded in January and also well below consensus. There was a sharp 18.1% decline in exports and some analysts feel this is a Chinese-New-Year-related distortion.

However, the 10.1% year-on-year import growth could signal increased activity is on the way. Import growth was quite significant in copper, natural rubber, fertilizer and airplanes. China’s CPI was also slightly below consensus at 2% with lower food price inflation being the main reason behind the fall. This is not necessarily a problem as it allows the PBoC to remain fairly accommodative.

Meanwhile, Russia isn’t backing down on the Ukraine push and now has a significant military presence and has made threats to cut Ukraine’s gas supply due to unpaid bills.

Japan to open firmer

Major risk FX pairs have gapped lower this morning as focus shifts to all the negative press from the weekend. AUD /USD dropped to around 0.9045 after having closed at 0.9065 on Saturday.

Meanwhile USD/JPY is now back testing 103 again heading into Asian trade. Japan’s Nikkei is pointing to a mildly firmer start with a few key releases due out. At 10.50 AEDT we get Japan’s revised Q4 GDP where we might see growth revised lower along with current account and bank lending data. Apart from that there aren’t any other major releases from the region.

Resources to weigh on local market

Ahead of the open we are calling the ASX 200 down 0.2% at 5,450. Today is also the anniversary from the 2009 lows for the ASX 200 when it bottomed out at 3,121. Since then the local market is up a whopping 75%. While there are plenty of positives for equities at the moment, particularly the fact that we saw a very strong close on Friday, it’ll be difficult to see investors drive risk higher given everything that’s taking place at the moment.

Additionally, a couple of States, including Victoria, have a public holiday today and this might impact volume. As a result, I wouldn’t be surprised to see a risk-off tone for the local market.  Iron ore dropped a whopping 2.3% to 114.20 and this will remain a significant concern for local iron ore names. This, along with disappointing China data is likely to weigh on the resources today. There was also a sharp drop in gold on the back of the better-than-expected NFP data. For the rest of the market I expect to see some choppy trading as investors await clarity.

Market

Price at 6:00am AEST

Change Since Australian Market Close

Percentage Change

AUD/USD

0.9056

-0.0030

-0.33%

USD/JPY

103.2050

0.2200

0.21%

ASX (cash)

5448

-14

-0.26%

US DOW (cash)

16429

-9

-0.05%

US S&P (cash)

1876.4

-3.2

-0.17%

UK FTSE (cash)

6729

-62

-0.91%

German DAX (cash)

9385

-155

-1.62%

Japan 225 (cash)

15255

-9

-0.06%

Rio Tinto Plc (London)

32.31

-0.80

-2.41%

BHP Billiton Plc (London)

18.65

-0.23

-1.22%

BHP Billiton Ltd. ADR (US) (AUD)

36.83

-0.89

-2.35%

US Light Crude Oil (April)

102.53

0.63

0.61%

Gold (spot)

1340.80

-10.4

-0.77%

Iron Ore

114.2

-2.7

-2.31%