Jittery Investors Start Moving Their Money Into Bonds

Fighting and political tensions in the Middle East and Ukraine are making investors jittery, according to investment managers.

US fighter attacks in Iraq, ongoing strife between Israel and Hamas and Russia ratcheting up tension in  the Ukraine by imposing tit-for-tat sanctions against Europe and the US all contributed to concerns for investors, said Russ Koesterich, BlackRock’s Global Chief Investment Strategist.

On top of that poor economic figures out of the Eurozone suggesting the single currency is stagnating in recession, added to their woes.

The result on markets is government bonds picking up as stock markets stand still or slump as investors seek a safe haven for their cash.

Although some markets are struggling against the effects of geopolitical risk, frontier and emerging markets in Asia have reacted well, says Koesterich.

“Prices in Asia, especially India look reasonable,” he said. “In a world where other markets look expensive, perhaps reasonable is the new cheap and the way for investors to go.”

Eurozone stagnating

Eurozone GDP showed some disappointing second quarter results this week – with even big hitters like the German economy crumbling by 0.02%.

France has stood still, while Italy has slipped back into recession, said Azad Zangana, of Schroders.

Not all the results were disappointing, he explained – growth picked up in Spain and Portugal (Both up 0.6%) and the Netherlands (Up 0.5%).

“Seasonal factors may be in play here,” he said. “We should expect to see better results in the third quarter. The row with Russia with sanctions crossing between the European Union and Moscow is probably not helping a lot either.”

Buffett’s $200,000 shares

Shares in billionaire Warren Buffett’s Berkshire Hathaway corporation have hit $200,000 for the first time.

Is Abenomics working?

Abenomics may not be working as well as expected in Japan – the government has posted GDP figures for the first half that show a 6.8% drop in the second quarter following on to a revised growth of 6.1% in the first quarter – showing the economy is contracting.

“It’s likely the first quarter rise was sparked by introducing an increased consumption tax in April and that consumer spending and demand fell away in a bid to beat the tax,” said a spokesman. “Hopefully, we will see a balancing out over the next quarter.”

Named after Prime Minister Shinzo Abe, Abenomics calls for high monetary stimulus and financial reforms.

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