City Watch: Investors have been showing some optimism, says Mark Marshall

JUDGING by the recent performance of the world’s major stockmarkets, investors are becoming rather more positive about prospects for the global economy.

Easing eurozone tensions have taken some pressure off Spanish and Italian bond yields. A successful auction of 18bn euros of Italian bonds on Thursday has also led to the country’s bond yields falling to a seven month low. Some investors, perhaps anticipating more ECB intervention, were even feeling confident enough to desert German Bunds and US Treasuries in favour of government debt issues from Portugal, Spain and others in the more indebted euro countries. This too has led to strong gains in equities and commodities. In response the FTSE100 gained 1.77% on the week; the FTSE Eurofirst 1.69% and surprisingly Tokyo’s Nikkei 225 Average gained an impressive 5.49%.

Following these advances, equities will no doubt suffer a pull back in the short term, but the past week has provided more positive news for the global economy which is expected to pick up in the 4th quarter and into 2013, if last week’s data pointing to a recovery in US consumer spending and housing is any guide.

In the UK growth figures for the third quarter are due on Thursday. This might show growth in the region of 0.4% to 0.8% and could mark the start of a sustained recovery, as the economy’s firmer tone is reflected in strong employment growth, while the recent fall in inflation is lifting the squeeze on real incomes and should support stronger consumer spending.

The US election will be the major focus of investor attention over the next few weeks and the threat to the US economy posed by the impending “fiscal cliff”


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: : Mark Marshall is an investment manager with Charles Stanley & Co in Ipswich.

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