As 2012 draws to a close, of the key themes that hold centre stage, some can be expected to remain essentially relevant in 2013. Among these are the prospects for economic growth in the United States and China, respectively, the first and second largest economies in the world. It is to be hoped that the growth here and in other expanding economies will eventually work through to those economies striving to recover from recession or near-zero growth. Organisations such as the World Bank and the International Monetary Fund are looking for global GDP growth of between 3.0% and 3.7% in 2013, a slight improvement over the rate of growth expected for 2012.

Just as Shakespeare noted through the words uttered by Lysander in ‘A Midsummer Night’s Dream’, ‘the course of true love never did run smooth’, so the attempts by the U.S. Democrat and Republican parties to reach agreement over the current debt negotiations were never likely to click seamlessly. Not that, on occasions, there appears to be much love to be lost between these political giants despite everything in the history of this relatively young nation that actually binds them.

A second successive day with a rise in the Dow Jones Industrial Average Index of over a hundred points must mean that Christmas is getting close. Indeed, another 1.2% gain in the S&P 500 Index also suggested that the shares of Apple rallied after the recent bout of aggressive shorting and, in fact, this was the case with the price back up almost 3% to the $534 level after its recent flirtation with $500.

Any day that starts in Europe with an overnight gain in the Dow Jones Industrial Average of 100 points or more usually has a good feel to it. The emergence of US$ 1 trillion as a ballpark figure for new tax increases and, separately, spending cuts from the third meeting between President Obama and the Republican speaker of the House of Representatives, John Boehner, suggests that there may be progress in the debt negotiations. Until the next setback, that is being taken as good news by markets with the S&P 500 Index closing up almost 1.2%.

While the Shanghai market continues to rally on perceived stimulus prospects – closing up 0.45% this morning and threatening to close the year all square in Renmimbi terms if not in US$ terms – most other major markets seem to be ending the year with a whimper without a bang-inducing solution for the U.S. debt negotiations appearing over the hill with the U.S. cavalry. Other exceptions alongside the recent 10% rise in the Shanghai Composite Index since mid-November include the Brazil Bovespa Sao Paolo Stock Exchange Index(up almost 8%) and Japan’s Nikkei 225 Index, up 13% over a similar period, helped by yesterday’s landslide return to power by the Liberal Democratic Party.

To channel a past commercial theme of retail group Marks & Spencer, this is not just any old year-end rally, this is a Shanghai-style year-end rally. Last night’s 4.3% jump in the Shanghai Stock Exchange Composite Index on sharply higher volume is equivalent to an index value increase of £100 billion (or about 1% of the market capitalisation of the whole S&P Index) to £1.4 trillion (Renmimbi 14.4 trillion or US$ 2.3 trillion) which is quite big in anyone’s money. The index has gained 9.7% in value since bottoming on the 3rd December (that’s almost 2,100 % annualised) which compares with a net 4.9% rise since the 15th November for the S&P 500 Index and 5.8% in the FTSE 100 Index, also since mid-November.

If a little knowledge is a dangerous thing then access to so much ‘information’ through the internet carries the potential for big difficulties. Just as you think you know to whom to attribute a saying, it seems that it may not have been that person or even that phrase after all. Wall Street’s net neutral reaction yesterday to the announcement from the Federal Reserve’s Open Market Committee prompted recollection of the comment ‘you can please some of the people all of the time, you can please all of the people some of the time but you can’t please all of the people all of the time’, words, allegedly, uttered by President Abraham Lincoln. For those cynical of the Central Bank’s attempts to support the recovery, you can even substitute the word ‘fool’ for the word ‘please’ in which form the observation has been attributed variously, possibly incorrectly, to ‘circus co-founder’ P.T.Barnum or even the priceless and much-quoted Mark Twain.

While London shivers under a blanket of freezing fog this morning, perhaps it is not surprising that the FTSE 100 Index is only slightly higher so far today after closing yesterday’s session prone. Indeed, the opening tone in European equity markets so far is cautious ahead of today’s report from the Federal Open Market Committee on the U.S. economy and policy pointers. Apart from this, there is a paucity of ‘macro’ news due today except for Eurozone October industrial production numbers for October which, being so historic, may add little to the picture for prospects.

There are laundry bills and laundry bills but this one, at US$ 1.9 billion, is a tad lumpier than most. Just days after the news it was selling its stake in Chinese insurance group Ping An for US$ 9.4 billion, it has emerged that HSBC has agreed to pay a fine to the U.S. Department of Justice in settlement of investigations into alleged money-laundering activities in around 2007 and 2008.

Just as one might have thought that the last nail had gone into the coffin bearing his political career, the apparently immortally irrepressible Silvio Berlusconi has popped up again. European equity markets have gone into reverse this morning, with the Italian equity market more than 3% lower and the 10-year government bond yield back up to over 4.8%, on the news that Italy’s unelected technocrat Prime Minister Mario Monti is to step down following the withdrawal of support for his fragile coalition in parliament by Berlusconi’s People of Liberty party. Furthermore, Mr Berlusconi has indicated his intention to stand as Prime Minister for a psychedelia-inducing fifth time. Certainly, our Silvio seems to know how to party hard.

by Mike Franklin, Head of Investment Strategy, Beaufort International Associates Friday had been shaping up so well. The overnight news from the U.S. was that Initial Jobless Claims, at 370,000 for the week ending 1st December, came in slightly below estimates as the impact on the data from Superstorm Sandy began to fade. A firmer […]

The U.K. Chancellor’s Autumn Statement served to demonstrate how little room there is for manoeuvre for any Government, whether it’s Cameron’s Creaky Coalition or the apparently 360-degree 20-20 vision-enabled ‘two-Eds-are–better-than-one’ Opposition to make any significant changes to the U.K.’s feeble upward economic trajectory. One thing the Statement has done is to put back into sharp relief the question of whether the U.K. will lose its Triple-A credit rating given the Government’s inability to have much impact on the pace of recovery and the extension of austerity policies into 2018.

As London wakes up to the first snow of the season and the U.K. braces itself for an inevitably icy blast from the Chancellor’s Autumn Statement due later today, a warmer tendency has wafted in from the Orient this morning with the word ‘urbanisation’ and a near-3% rise in the Shanghai S.E. Composite Index. This is not, hopefully, the type of urbanisation that plagued the lives of so many expatriates in Spain in recent years as the indiscriminate siting of roads and sewerage works caused some residential property prices to slump.

This week looked as if it would be a rocky road and, so far, that is how it is turning out. Yesterday morning’s better news concerning Greece sustained respectable market gains for much of the European day but sentiment on Wall Street later succumbed to disappointment with the Institute for Supply Managers’ Manufacturing number for November which came in at 49.5 against an expected level of 51.4 and October’s 51.7. Of course, the elephant in the data room is the impact of the jumbo storm Sandy which makes interpretation slightly more difficult than usual.

Markets ran a gauntlet of starkly contrasting waves of sentiment last week as investors responded well to developments on the Greek debt restructuring and fretted over the mixed signals emerging from the Fiscal Cliff negotiations. In the event, they emerged on the plus side with major market indices up by between 0.5% (S&P 500 ) and 0.8% (FTSE 100), the Euro Stoxx 50 Index coming in at +0.7%.