World Week Ahead: Eyes on US consumer, Greece

Monday 29th December 2014

The mood remained buoyant as Wall Street begins the week at record highs again, with investors continuing to see room to move higher as the US economy performs while central banks remains supportive.

On Wall Street last week — shortened by the Christmas holiday, the Dow Jones Industrial Average gained 1.4 percent, while the Standard & Poor’s 500 Index rose 0.9 percent, as did the Nasdaq Composite Index. Both the Dow and the S&P 500 closed the week at record highs. On Friday, the Nasdaq rose to the highest level in almost 15 years and closed at 4,806.86. That compares with its record high of 5,132.52 set in March 2000.

"I think Nasdaq will test and probably achieve higher highs than we did in 2000 because I think we're in a secular bull market that has another eight to 10 years left to run," Jeffrey Saut, managing director at Raymond James & Associates, told Reuters.

With 2014 almost done, the Dow has advanced 11.5 percent, while the S&P 500 has added 15.3 percent, and the Nasdaq has gained 16.5 percent this calendar year.

Meanwhile, US Treasuries are on track for their best performance since 2011, according to Bloomberg.

“Treasuries really present an awful lot of value, in light of the fact that the US dollar is improving, which should also help restrain inflation,” Christopher Sullivan, chief investment officer at United Nations Federal Credit Union in New York, told Bloomberg News. “The trajectory of recent economic growth in the US suggests the Fed can begin tightening monetary policy next year.”

The US dollar has also had a great year, as the American economy seems to power ahead in its recovery while others — notably the euro-zone — struggle.

The greenback has strengthened 14 percent this year to 120.31 yen, a third straight annual increase, while it gained 13 percent to US$1.2183 against the euro, the biggest gain since 2005, according to Bloomberg News.

The latest US economic data in this holiday-shortened week will arrive in form of the Dallas Fed manufacturing survey, due today; the S&P Case-Shiller home price index and consumer confidence, due Tuesday; weekly jobless claims, Chicago PMI, and the Pending Home Sales index, due Wednesday; and the PMI manufacturing and ISM indices, as well as construction spending, due Friday.

US and European markets are closed for the New Year’s holiday on Jan. 1.

Oil fell on Friday, and the outlook remains depressed.

"There’s still significant weakness in confidence, and that means that we’re going to have occasional retests to the downside,” Richard Hastings of Global Hunter Securities told Reuters.

In Europe, eyes are on the third and final round of Greek presidential elections today. Greek Prime Minister Antonis Samaras must secure enough support in parliament for his candidate to avoid early general elections and a potential victory of the anti-bailout Syriza party.

"The Greek people do not want early elections," Samaras told state television in an interview over the weekend, Reuters reported. "I have done and I am doing everything to ensure a president is elected and snap elections are averted.”

Among the very few euro-zone economic data released this week are the PMI and ISM manufacturing indices due Friday.

China's trade will grow 3.5 percent in 2014, implying the country will fall short of a current 7.5 percent official growth target, Reuters reported on Saturday, citing a report on the Ministry of Commerce's website that was subsequently revised to remove the numbers.

The weak Chinese data has spurred speculation that the central bank will implement more measures in a bid to keep the economy from continuing to slow.

BusinessDesk.co.nz

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