Optimism.

6th October 2011

Ian Copelin, Investment Director, my wealth comments, “Global stock markets have rallied strongly over the last couple of days (the FTSE-100 has risen 7%), as economic data topped estimates, investors speculated Europe will act to contain the region’s debt crisis and the Bank of England raised the ceiling for quantitative easing to £275 billion from £200 billion.

Yesterday (5 October 2011), reports showed US private employment expanded, while the Institute for Supply Management’s non-manufacturing index fell to 53 (compared to forecasts of a drop to 52.8).  Today, we had US Labor Department figures which showed claims for unemployment benefits rose less than forecast last week to a level that shows the pace of dismissals may be slowing.

In Europe, policymakers have started using words such as ring-fencing, containing and firewalls, over the last couple of days – a sign that they are finally understanding that they can no longer continue simply kicking the can down the road, but have to take action to prevent the debt crisis spreading to Italy and Spain.

Although I run the risk of sounding like a broken record, it is important to emphasise that the recent stock market weakness has been caused by indiscriminate selling caused by the market becoming overly focused on the daily news flow on Greece.  It should not be forgotten that economic data has come in ahead of expectations – economic data currently indicates that the global economy is not going into a recession, but is simply growing slowly.”