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Prospects Daily: Global equities bounce back from 3-month lows

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Important developments today:

Global equities bounce back from 3-month lows

German retail sales increased in December

Brazil’s industrial production posts record year-over-year growth in December


Global equities bounce back from 3-month lows. World stock markets rebounded on Tuesday after reaching their weakest level since November the day before, but investors mostly remained cautious ahead of key economic data and events to be released this week that could provide market direction. The main focus this week is the release of the U.S. employment report for January on Friday, with investors looking for evidence of a labor market recovery. The MSCI world equity index rose 0.6% by mid-day from three-month lows in the previous day as investors reacted positively towards better-than-expected global manufacturing data released on Monday.

European shares climbed for a third day, led by mining companies, as the benchmark Dow Jones Stoxx-600 Index rose 0.6% today. Meanwhile, the MSCI Asia-Pacific Index advanced 0.9%, the biggest gain since Jan.14. The gauge slumped 3% in January, the most since February last year, as China moved to curb lending and cool economic growth. And U.S. equities opened with little change following earnings reports from several major companies, with S&P and Dow Jones adding 0.22% and 0.2% in early trading session, respectively.

U.S. pending sales of existing homes increase. The index of purchase agreements, or contracts entered to purchase existing homes reported by the National Association of Realtors increased by 1% (m/m) in December, after a record 16% drop in November. The volatility in pending home sales in the last quarter was due to homebuyers’ expectations of an end to the federal tax credit program (set to expire on November 30), which was extended through June 2010 days before expiration. The subsequent renewal of the federal program may continue to underpin home sales and moderate the impact on prices from mounting foreclosures.


Source: Deutsche Bundesbank


German retail sales increased in December… Sales at retail outlets in Germany rose 0.8% (m/m) in December, as holiday shopping lifted retail spending up from November, when sales fell 1.7% (m/m). Consumer spending in Germany has remained uneven at best, with the momentum in retail sales (3 month moving average, saar) still to emerge into positive growth territory after 13 months of negative figures. The government has recently extended subsidies to private companies in an attempt to limit any increases in unemployment, and this coupled with a more optimistic outlook for growth in 2010 (which the government revised to 1.4% for the year from 1.2%) is expected to provide positive momentum to private spending in the coming months.

Among emerging markets:

In Latin America and Caribbean, Brazil’s industrial production rose a record 18.9 percent in December year-on-year, after contracting 14.7 percent a year earlier, according to the national statistics agency. On a monthly basis output was down 0.3 percent from November. The Finance Ministry expects the economy to expand between 5 percent and 5.5 percent this year. Meanwhile the central bank governor said retail lending and wages are growing above long-term trend.

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