Equities in UK and US hit 2009 high

Equities in UK and US hit 2009 high

Better than expected US corporate earnings and cautiously optimistic comments from Fed chairman Ben Bernanke helped uphold the recent move into risk. Sterling has moved higher against the USD this morning with risk appetite supporting this move even in the light of last week’s sharp contraction in GDP. The pound is currently being underpinned with the improved performance in equities- however any reversal in this trend may lead to a sharp sell off in the pound. The pound this morning has also had a helping hand from an article in the Financial Times stating that in the short term China has no choice but to embrace the USD. This week we have another flurry of corporate earnings with about a third of S&P 500 companies reporting results- it is expected that the positive trend will continue.

The main data this week will be US centered. We will kick off with new home sales for June and a small rise is expected. On Tuesday the conference board will release its July consumer confidence index on Tuesday. Wednesday we see durable goods orders which are forecast to show a decline for June and GDP on Friday. It will be interesting to see how the economic data stacks up against the corporate earnings- so far the positive earnings are overshadowing any weaker data and this is playing out in the markets, however this trend may not hold.

Data released has again been positive from Germany as Gfk consumer confidence came in better than expected at 3.5, up from 3.0 in July- this is the strongest reading since June 2008 and lifting the euro against the dollar to 1.4250.

report by Phil McHugh

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