11/07/11: In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on four items impacting markets this coming week:
- Companies are increasing their capital spending. In a move that might signal the avoidance of a double-dip recession, major U.S. corporations have increased their capital investment this year. Spending at 140 non-financial companies in the S&P 500 reached $149 billion in the first nine months of 2011, the highest since 2008. According to investment strategist Michael Gayed, “It’s indicative of some kind of an expectation of a rebound of sorts going on in the next one to two years.” Of the companies surveyed, some well-known technology players more than doubled their expenditures in Q3 2011 from a year earlier.
- Berlusconi is considering resigning as bond yields are hitting new highs. We are watching Italy carefully as the next “European chapter” that could possibly impact markets. According to the Wall Street Journal, Prime Minister Silvio Berlusconi is meeting with family members to discuss whether or not he should resign. His political support is quickly waning as Italian 10-year bond yields hit another new euro-era record of over 6.6% today, rising very close to the 7% level where other European nations sought a bailout. A Reuters survey has found that market players believe Italy’s debt prices would recover if the government were to fall, prompting “conspiracy theories” that the ECB is letting the yields rise to put pressure on Berlusconi to go.
- And speaking of Europe, a Greek unity government is set to form following the Prime Minister’s resignation. Greece is moving towards a resolution of its own political problems. Outgoing Prime Minister George Papandreou is due to meet opposition leader Antonis Samaras today to discuss who will lead a new interim unity government, which was agreed to last night after Papandreou said he would step down. The accord increases the likelihood that Parliament will pass the latest bailout-austerity bill, and comes as Eurozone finance ministers meet to speed up their work on strengthening the bailout fund in order to enhance its market credibility.
- A number of economic and policy data points are on tap this week. Today, Eurozone finance ministers meet in Brussels, while in the United States, the Federal Reserve reports on consumer credit for September. Tuesday brings the release of OPEC’s annual world oil outlook report, while Wednesday has China posting inflation data for October and Fed Chairman Bernanke addresses a conference on small business. The end of the week brings U.S. reports on the September trade gap and the government’s October budget deficit along with The University of Michigan’s initial reading on consumer sentiment for November.
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Senior Vice President
Note: The opinions voiced in this material are for general information and are not intended to be specific advice. Any indices such as the S & P 500 can’t be invested into directly. Past performance is no assurance of a future result.
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