January got off to a predictably slow start, at least in Europe and it was January 9th before Angela Merkel and Nicolas Sarkozy met for talks. Unsurprisingly, they were worried about the credit crunch and – no surprise here – Greek debt.

Other countries greeted 2012 less sluggishly and China and India reported a strong start to the year, with an increase in domestic demand helping to compensate for reduced orders from Europe.

Virtually all world stock markets turned in a positive performance in the first month of the year. The only fallers were Malaysia, Slovenia, Portugal and Spain, with several markets seeing rises approaching (or even slightly exceeding) 10%. Among the more established markets Hong Kong led the way, rising by 10.61%.


The news from the UK was almost unremittingly bad throughout January – and yet the FTSE 100 index managed a healthy rise of just under 4% to finish the month at 5,681.

Unemployment in the UK reached a 17-year high at 2.68 million, with youth unemployment continuing to be above one million. On January 24th the Guardian reported that the national debt had reached £1tn and in a more prosaic demonstration of the national malaise, Little Chef reported a round of job cutting, perhaps reflecting the fact that there are far fewer reps and delivery drivers on Britain’s roads.

Most worrying though was the reported slump in Tesco’s sales over the Christmas period. The company’s shares slumped 15% on the news as Tesco warned of ‘minimal growth’ – a sentiment echoed by other retail chains such as Argos, Mothercare and Halfords.

Then on the very last day of January came news that Britain’s manufacturers had enjoyed a “strong start” to the year, with output growing at the fastest rate for a year. The closely-watched Purchasing Managers Index survey for January was upbeat, and even had some economists suggesting that a ‘double-dip’ recession could be avoided. Another strong performance in February would be a very positive indicator for the UK.


As noted in the introduction, M. Sarkozy and Frau Merkel didn’t meet until well into the new year, but then it was business as usual with yet more talks aimed at solving the Greek debt crisis and the EU bailout fund being boosted further to $1tn. Several learned commentators are now actively discussing the means by which Greece could leave the euro but – for the moment – the talks go on.

More worrying in the short term was the fact that the ratings agencies continue to downgrade both European countries and European banks. France lost its AAA rating in the middle of the month, and by the end of the month Italy and Spain had also been downgraded. Among the smaller economies, Belgium, Slovenia and Cyprus were all told to sit on the naughty step.

Speaking at the Davos Economic Forum, legendary financier George Soros warned of a “lost decade” for Europe, similar to that which affected South America in the 1980s.

Like the UK, however, European stock markets shrugged off all the worries to post strong gains in January: Germany’s DAX index rising by 8.91% to finish the month at 6,617.

United States

It was easy to be confused in the US, in a month which saw headlines about SOPA and SOTU. The first was the Stop Online Privacy Act, eventually withdrawn in Congress after much protest from Google, Facebook and countless other online luminaries. SOTU was the annual State of the Union address, and it was widely seen as the start of Barack Obama’s campaign for re-election. It may be that in the run up to the election the President finds himself repeating Bill Clinton’s mantra – “It’s the economy, stupid” – as the economic indicators coming from the US seem to be giving increasingly good news.

Despite this, the Dow Jones index posted only a modest rise compared to some world markets – up 3.6% to 12,632. However, American investors do have several reasons to be cheerful, with the economy expanding by 2.8% in the fourth quarter of 2011. Figures for December showed that inflation and unemployment both fell in the month and the US Federal reserve stated that there would be “no interest rate rises before 2014.”

The Far East

All the major markets in the Far East – China, Japan and Hong Kong – saw gains in January, and as noted above, Hong Kong’s Hang Seng index rose by more than 10%.

Japan did post its first annual trade deficit for more than 30 years, but given the disruption caused by the tsunami of March 2011, that was hardly surprising.

China’s economy “only” expanded by 8.9% in the last quarter of 2011: export growth was lower as a result of the problems in Europe, but as noted elsewhere, there are signs that domestic and regional demand is beginning to compensate for this.

Emerging Economies

January was a tremendous month for those stock markets usually filed under ‘emerging markets’ with Brazil, Argentina and India all posting double-digit rises. The Russian stock market rose by just over 7% as the anti-Putin protests subsided (perhaps because of the Moscow temperature in January…), but there was a less impressive performance from 2011’s stellar performer, Venezuela, where the rise was only 4%.

Whilst the IMF cut its overall growth forecasts for 2012 – trimming its forecast of world economic growth from 4.1% to 3.3% – it inevitably sees the major contractions in Europe and the developed world. Emerging and developing economies in Asia, Latin America and Eastern Europe are still predicted to see growth of 5% or above.

And finally…

January was a quite outstanding month for the financial headline writers. Blacks Leisure found itself in trouble and was eventually bought by JD Sports for £20m. Last minute price reductions failed to save Blacks but did prompt the headline, “Now is the winter of our discount tents.” And Sir Fred Goodwin found himself back to plain old ‘Mister’ as his knighthood was removed for the RBS debacle. However, Mr Goodwin was to hang on to his massive and much-envied pension pot – prompting the English edition of the ‘Volga News’ to report, “Queen takes Knight but no cheque, mate.”


http://www.guardian.co.uk/business/2012/feb/01/uk-manufacturing-rebound-recession-averted, Worrying collapse in UK private pensions http://www.bbc.co.uk/news/business-16385381 3 Jan CFO’s fear for Euro and double-dip http://www.bbc.co.uk/news/business-16385525 6 Jan – Unemployment up in eurozone http://www.guardian.co.uk/business/2012/jan/06/eurozone-unemployment- hits-new-record but down in the USA http://www.guardian.co.uk/business/2012/jan/06/obama-boost-unemployment- falls-jobs 9 Jan – Merkle and Sarkozy meet for talks – worries about credit crunch; German trade surplus in November was Euro 15bn 10 Jan – Export growth in China slows http://www.bbc.co.uk/news/business-16481123 Blacks and La Senza – now is the winter of our discount tents http://www.bbc.co.uk/news/business-16464914 12 Jan Tesco sales slump over Xmas – also problems for http://www.guardian.co.uk/business/2012/jan/12/high-street-tesco-retail-slump Also Little Chef job cutting 12 Jan China skyscraper crash http://www.guardian.co.uk/business/2012/jan/11/skyscrapers-china-india- recession China to lead the world into crash into 2012 http://www.guardian.co.uk/business/2012/jan/11/china-economic-collapse- global-crisis 14 Jan Europe in crisis after ratings downgrade – Sarkozy threatened in elections Le downgrade est arrive http://www.guardian.co.uk/business/2012/jan/13/eurozone-crisis-france-credit- rating-aaa http://www.guardian.co.uk/business/2012/jan/13/credit-agencies-strike- against-eurozone Greek talks break down – threat of bankruptcy http://www.guardian.co.uk/business/2012/jan/13/greece-bankruptcy-debt- restructuring-talks-collapse EU boosts bailout fund to $1tn http://www.guardian.co.uk/business/2012/jan/18/eurozone-crisis-greek- bondholders UK unemployment hits 2.68m – 17 year high: youth unemployment 1.04m http://www.guardian.co.uk/business/2012/jan/18/unemployment-public-sector- strikes IMF demands $19bn from UK to boost bailout fund http://www.guardian.co.uk/business/2012/jan/18/uk-faces-request-for-19bn Equivalent to 200 Royal Yachts 23/1 Pressure on Greek creditors to accept large losses – deal on knife edge http://www.guardian.co.uk/business/2012/jan/23/eurozone-debt-crisis-live- greek-deal-knife-edge Chinese flaunting of wealth http://www.guardian.co.uk/world/2012/jan/22/china-beijing-iphones-jeremy- paxman 24/1 Britain’s national debt tops £1 trillion http://www.guardian.co.uk/business/2012/jan/24/britain-national-debt-tops- one-trillion Greek debt talks collapse http://www.guardian.co.uk/business/2012/jan/24/eurozone-debt-crisis-greece- bond-deal IMF slashes growth forecasts http://www.guardian.co.uk/business/2012/jan/24/imf-slashes-global-growth- forecasts Obama state of the union address http://www.guardian.co.uk/world/2012/jan/25/state-of-the-union-obama-fairer Japan post first annual trade deficit in more than 30 years http://www.bbc.co.uk/news/business-16712816 29 Jan – Davos : Who’s afraid of China http://www.bbc.co.uk/news/business-16745322 Fitch downgrades 5 European economies http://www.bbc.co.uk/news/business-16769449 Soros warns of lost decade for the EU http://www.bbc.co.uk/news/business-16766012 Web economy to double by 2016 http://www.bbc.co.uk/news/business-16753902