Equities still miss the Christmas spirit

I read this morning that Bill Gross, CEO of PIMCO, one of the largest active global fixed income investment managers in the world, is quoted as saying that governments are forcing investors into risk assets. Of course governments are forcing investors into risk assets. They need to re-inflate economies, and the only way that happens is you must get companies and individuals to invest and make it unattractive to save. What it also means is that governments are going to support those who are prepared to invest for as long as they need to. According to a report from BCA research, despite the loose monetary policies that governments continue to pursue, inflation does not remain a threat. Eighty percent of mature economies have inflation rates below 2pct. It would appear that the threat of global inflation remains limited; this can only bode well for governments to continue to maintain existing monetary policies for the foreseeable future.

The euro zone announced that the economy grew in the last quarter at 0.1%. Expectations were for a pick up to 0.2%. Either way growth in the euro zone is anaemic at best. As well as weak GDP data Markit's November Euro zone Composite Purchasing Managers' Index (PMI), which monitors activity at thousands of firms across both the services and manufacturing slipped to 51.7 from 51.9 in October. The service sector data is a better lead indicator than the manufacturing data, simply because companies tend to hire people first as a prelude to increasing production.

Today we have the last ECB meeting of the year, I imagine it's now a question of when and not if the ECB will put in more proactive measures to weaken the currency and stimulate the economy. If not one will see the euro-zone crisis rear its ugly head again.

Yesterday Automated data processing (ADP) announced that more jobs had been created in the US than expected, this report has continued to increase speculation the Fed will taper in the near future. Apart from the ECB meeting George Osborne will deliver his autumn statement; the expectations are for an upbeat message.

At present equities seem to be moving lower on good news, as traders speculate what central banks will do next. Today we get US third quarter GDP initial estimates. Estimates are for annualised growth to come in around 2%. It will be interesting to see how the market reacts to this number. If the number is weaker than expected will investors become less worried the Fed will taper or will markets fret that despite the Fed's best efforts the US economy is continuing to struggle.

Posted on December 5, 2013 .