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Caution ahead of US GDP data

Published Friday, January 30th, 2015

Global equites put in a mixed performance yesterday as a slew of disappointing corporate results and ongoing anxiety surrounding Greece did battle with indications of a strengthening US labour market. The mood across the eurozone remained sour as political uncertainty showed no sign of abating with credit rating agency Fitch sounding the alarm bells should Greece fail to come to an agreement with its international lenders. Moreover, worrying figures revealed that bank deposits in the embattled periphery country fell by 2.4% in December as cautious savers began safeguarding themselves against the rising threat of a Grexit. A modest improvement in euro-area consumer morale during January was largely shrugged-off as traders digested soft inflation data from the bloc’s largest economy which confirmed that it has slipped into deflation. The reaction was immediate with benchmark Bund yields falling to a fresh historic low and many will see this as justifying last week’s decision by the ECB to belatedly announce a programme of sovereign-debt purchases.

Risk aversion was mirrored on Wall St in early trading but a late rally helped US indices gain 1%. Concerns over Fed policy tightening and underwhelming company earnings were countered by bullish labour market figures. Jobless claims posted their biggest weekly decline since 2012 on their way to their lowest level for 15 years and bolstered existing optimism regarding US economic growth prospects. Housing data wasn’t quite as encouraging as pending home sales fell by more than expected in December and was somewhat corroborated by figures showing that US house ownership slipped to a 20-year low in 4Q last year. However, the risk-on mood prevailed and investors will be counting on the release of solid US GDP figures later today to ensure that stocks end the week on a positive note.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.