Global Markets Update: Dow Jones Hits A New High
The Dow Jones has entered uncharted territory after hitting a new all-time high above 14,300, reinforcing our bullish view. And while most other major equity indices are still well below their all-time peaks, we retain our preference for equities over bonds. That said, the perception of sovereign risk in Spain and Italy has moderated in the two weeks since the Italian election threw up an uncertain result, and Spanish 10-year bond yields appear to have broken through massive resistance at 5.00%.
This suggests risk perceptions have improved significantly, to a point where we are actually bullish on the prospects of Spanish debt in the very near term. In turn, this points to continued risk appetite within the eurozone, and by extension, on a global basis.
However, we remain cautious towards eurozone periphery debt over a longer horizon. The macro fundamentals in these countries are dire, and the European Central Bank simply does not have the flexibility to intervene in the sovereign debt markets before a full-blown crisis has emerged. While the euro has stabilised around US$1.30/EUR area, and may head higher over the coming months, we continue to expect weakness in H2 2013, particularly as we expect renewed US economic strength as the year proceeds.
This Week’s Trivia Question
Last week’s theme was religious succession, which is currently focused on the identity of the next Pope. Our question was ‘which church elected its new head on March 1, 2013?’ The answer is the Ethiopian Orthodox Church, which chose Abune Mathias as its new patriarch.
This week’s question is as follows: next week marks the tenth anniversary of the last time a European prime minister was assassinated. Who was that individual? And who was the last European president to have met a similar fate? (Note: we exclude conspiracy theories here.)