City Watch: US jobs data has added to optimism, says Mark Marshall

Mark Marshall of Charles Stanley & Co

Mark Marshall of Charles Stanley & Co

ROBUST US economic data last week helped to propel equity markets to new comparative highs supported by a sense of optimism that the US economy might have turned the corner, if the latest non-farm payroll figures are any guide.

These showed that in February, 236,000 more jobs were created, well ahead of expectations. By itself, this will not necessarily lead to any tightening of US monetary policy. It seems, therefore, that the Federal Reserve will continue with its supportive asset purchase programme, currently running at US$85 billion per month.

It is also true that the US, thanks to new “fracking” techniques, is now virtually self-sufficient in gas supplies at a cost of one third of European levels, and this has transformed the competitive prospects for US manufacturing. Add in the housing recovery and it does not stretch the imagination to think that the US will once again become a driving force in the world economy.

The rise in equity markets this year has shown little sign of slowing, although some retrenchment from these overbought levels seems not only likely but healthy as well. It must be said that we are in this position thanks almost entirely due to central bank support, which has flooded the economies with cash here, in Europe, the United States and more recently, Japan. Much of this has been behind the recent rise in asset prices.

In the UK, the FTSE 100 has put on 10% this year. In theory the depreciation of sterling should be a boon to exporters and transform overseas earnings. Some of the best performing stocks this year have a high exposure to faster growing emerging markets and are not so exposed to the slower growing eurozone markets.

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

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