Monday 5th March 2012
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Apple this week is going to offer a distraction for investors when it hosts a meeting at which it is widely expected to unveil the latest version of its iPad tablet.
Exceeding expectations will also be a focus at the end of this week when the US releases its February payrolls report which is expected to show that the world's biggest economy added 210,000 jobs, somewhat less than January's 243,000. Both events may be enough to help equities continue to advance in a modest, albeit certain fashion.
“There is a much more encouraging labour-market backdrop for the consumer in early 2012,” Conrad DeQuadros, senior economist at RDQ Economics in New York, told Bloomberg News. “But economic growth is moderate, which leaves the unemployment rate fairly elevated by year-end, and that’s the Fed’s main focus.”
The Standard & Poor's 500 Index gained 0.3 percent last week and posted its best February since 1998, according to Bloomberg. The Dow Jones Industrial Average dipped 0.1 percent in the past five days, closing at 12,977.57 on Friday.
"The rally will continue as long as better economic information continues. The question is, 'Are we seeing some sustainable improvement in the economy?' I think the answer is 'yes,' so I think there is going to be some continuation in the rally," Bryant Evans, investment advisor and portfolio manager at Cozad Asset Management, in Champaign, Illinois, told Reuters.
In the US, there will also be data on the services sector, factory orders, productivity, jobless claims and both international and wholesale trade.
The US international trade deficit is expected to have risen to US$49 billion in January from December's US$48.8 billion, according to economists polled by Reuters.Stocks may remain appealing to investors as long as the data keep underpinning a belief that the US economic recovery stays on track.
The recent gains in oil have put investors, analysts and consumers alike on edge for the risk that this will cut into the recovery. Many breathed a sigh of relief that oil pulled back in the past week.
On Friday, oil for April delivery shed 2 percent to settle at US$106.70 a barrel on the New York Mercantile Exchange. Prices fell 2.8 percent in the last five days, the first weekly loss since February 3, according to Bloomberg.
"The economy has a pretty good head of steam, and a few data points here or there aren’t going to derail that. But if you have some exogenous shock from oil, all bets are off. Things can and do change in the short run," Doug Foreman, director of equities at Kayne Anderson Rudnick in Los Angeles, told Reuters.
Last week, euro-zone markets benefitted from the cheap cash provided by the European Central Bank to the region's banks in another longer-term refinancing operation and the signing of a new fiscal treaty by the vast majority of the EU's members.
The Stoxx 600 Index rose 0.9 percent in the past five days.
However, Moody's Investors Service served a reminder on Friday that the region's debt crisis is far from over as it slashed Greece's sovereign debt rating to the lowest possible level.
"The announced debt exchange proposal implies that private creditors that participate will incur substantial economic losses on their holdings of the Greek government debt," Moody's said in a statement.
Analysts including Richard Batty, global investment strategist at Standard Life Investments, remain cautious on the outlook for European stocks.
"We've had a liquidity boost in Europe and the risk premium on many assets like the euro and European equities has come in," Batty told Reuters. "Now the question going forward is, where are you going to get the strongest profits. We think globally you'll get 5 to 6 percent profits growth this year but in Europe it will probably be negative."
Investors will eye this week's policy meetings from central banks in Europe, Canada and the UK for any clues about the direction of interest rates.
On Monday, China's National People's Congress convenes to hear the government's plans for 2012 including new targets for growth, inflation and fiscal policy. Beijing is likely to lower the growth target to 7.5 percent and unveil measures to stimulate consumption, Societe Generale analyst Wei Yao told Reuters.
In Russia, exit polls show that Vladimir Putin has won a resounding victory in presidential elections. In contract, the latest polls show that Nicolas Sarkozy is falling further behind his Socialist rival ahead of French elections later this year.
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