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Slightly weak US data fails to dent optimism

European indices finished around 0.3% higher today, concluding what has been a generally positive week with the FTSE gaining on Monday and Tuesday before losing some ground Wednesday and yesterday. The FTSE 100’s weekly gain of 1.5% to close at 5965.6 comes in what appears to be a period of change in risk sentiment, with money seemingly coming out of the safe haven government debt of the UK, US and Germany and into equities. The move appears to be driven by a lack of frightening news out of Europe, better economic data from the US and elsewhere, and the huge wave of liquidity pumped into the financial system by central banks. Indices in Europe, as well as some in the US, were at multi-year highs, despite warning notes from many commentators that global growth, eurozone and political risks still remain.

Despite the improving sentiment, two pieces of US data (the Capacity Utilisation Rate and Michigan Consumer Sentiment) both disappointed slightly today, and with aspects of inflation data coming in slightly lower than forecast. The latter in particular helped quell increasing speculation that the Federal Reserve would tighten monetary policy (raise interest rates) in the near term, a scenario that would be bullish for the dollar. Consequently the dollar was weaker and after a strong run against the euro, found itself lower against the single currency by % at the time of writing.

There was little in the way of domestic data today, either corporate or economic, although a lot of attention was focused on Apple and the release of its new iPad. The queues outside its flagship stores across the world exemplified why this company has been in the spotlight recently and why its share price has performed so strongly in recent weeks (and years).

This was posted in Bdaily's Members' News section by James .