Global Economy 2011
As Equities ease a bit, hopes run high for Y 2011
Global equities were mainly on the defensive Thursday, while the Swiss franc hit record highs against the USD and Euro as light trading characterized he markets.
As the year comes to a end, optimism is high that Y 2011 will see further gains for risk assets.
Economic data reported Thursday confirmed the optimism with an overnight fall in US Treasury yields reversing after weekly jobless claims fell 34,000 to 388,000, lower than a forecast 415,000, the lowest level since July 2008.
In other US data, the Institute for Supply Management’s Chicago Business Barometer hit its highest level since Y 1988 as it rose to 68.6 in December from 62.5 in November.
We here at LTN believe that both fiscal and monetary policy will remain supportive to growth in the coming year, and will likely see the economic rebound shift from a stimulus-fueled to a self-sustaining recovery, driven by consumer spending.
In light year-end trading, US equities looked for traction and late in New York the FTSE All World index had trimmed its early rise of 0.3% and was finished a bit firmer. That put the benchmark index + 10.2% on the Year, and + about 24% off its low in July. The S&P 500 closed 0.2% lower on the day.
There was up and down trading in the currencies, and the Swiss franc hit record highs vs the EUR and USD Thursday on continuing concern about the EuroZone’s debt problems.
The “Greenback” fell 1.1% to a record low of SFr0.9351 vs the “Suisse”. The USD touched a 7 week low vs the Yen of Y81.29, and a 28-yr low of 1.1098 vs. the Au$, before trimming losses.
Late in New York US government bonds yields were higher, with the 10 yr T-Note yielding 3.37%, up 3 basis points. The benchmark yield is seen approaching 4% early next year by some players as new tax cuts fuel stronger growth and push the US deficit higher.
In spite of the sharp rise in Treasury yields since November, investors have booked a total return of 7.3% this year, thus reversing last year’s decline of 3.6%.
In Europe, Italy auctioned €3B of 3 and 10-yr debt Thursday at higher yields than in prior sales, a sign that weaker members of the EuroZone may face challenges in raising funds in 2011.
The yield on 10 yr German Bunds dropped 7bp to 2.93%
Trading in commodities was also defensive on the Day, but Copper hit record highs in New York and London. US Crude Oil prices settled below 89 bbl, down more than 1 on the session.—Paul A. Ebeling, Jnr. www.livetradingnews.com
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