World Week Ahead: Investors grow more upbeat about economic recovery

Monday 28th December 2009

There’s no sign yet that investors are going to hit the pause button, and no reason why they should.

And so stocks in Europe and on Wall Street are poised to extend their gains through the end of the year amid continuing signs that the global economy, and in particular, the U.S. economy is healing itself.

For weeks, investors have been digesting report after report on the state of the world’s biggest economy and while not every piece of data suggests all cylinders are firing, the consensus suggests that most signs are at least pointing in the right direction.

The Standard & Poor’s 500 Index is up 66.5% from the 12-year closing low it hit on March 9. Its trading levels imply a forward price/earnings ratio of 15.5, according to Thomson Reuters data. All three key U.S. benchmarks rose on in a holiday-shortened session on Thursday.

On the economic front, last week ended with positive reports on durable goods and jobless claims. In the week ahead, investors will get an early read on how confident U.S. consumers were in the holiday shopping season.

Of particular note will be the Conference Board’s index of consumer confidence for December. It’s set to be released on Tuesday, the same day as the ICSC-Goldman reading on store sales and the Redbook measure of sales at chain stores, discounters and department stores.

Historically, the 10 days before Christmas have made up as much as 40% of total holiday sales for November and December, Joseph Feldman, a managing director at Telsey Advisory Group in New York told Bloomberg News.

As for Treasuries, the focus will be on the planned sale of US$44 billion in two-year notes on Monday, US$42 billion in five-year debt the next day and US$32 billion in seven-year securities the day after that. Yields on U.S. government bonds were poised to rise next year, Michael Pond, an interest-rate strategist at Barclays Plc told Bloomberg Television on Christmas Eve.

The yield on the benchmark 10-year Treasury note will climb to 4.5% as a strengthening economy prompts the central bank to unwind programs put in place to revive growth, Pond said.

Ten-year note yields were little changed at 3.76% last Thursday.

Businesswire.co.nz

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