US data surprises and Angela Merkel’s victory.

29th September 2011

Ian Copelin, Investment Director, my wealth comments, “Equities have advanced today after economic data showed the US economy grew faster than earlier estimated at a 1.3% in the second quarter, whilst applications for jobless claims declined by 37,000 to 391,000 versus expectations of a drop of just 8,000 to 420,000.

Markets were also boosted by news that Germany’s lower house, the Bundestag, approved an expansion of Europe’s temporary rescue fund, the EFSF, with 523 votes in favour and 85 against.  Crucially, Angela Merkel won the vote without relying on the opposition (it had been feared that dissenters within her party would be high).  Consequently, the yield on the Greek 10-year bond fell for the third day, declining 17 basis points – which reduced yield spread to benchmark German bunds down by 13 basis points to 2,090 basis points.

At 3.15pm, the S&P 500 index is currently up 1.54% or 17.72 points, while the FTSE 100 is currently unchanged on the day, having earlier been down 0.82% or 42.7 points.

This suggests that global equity markets are already pricing in something catastrophic and any good news will have a positive impact on the market.”