Equity prices in the US rose during October, with those increases broadly in line with that of the MSCI World index. The S&P 500 index rose by 3.7% and the Dow Jones Industrial Average index by 3.1% while the technology-heavy Nasdaq index posted an increase of 5.9%.
Investors were distracted by the approaching mid-term elections, while sentiment was unsettled by mounting– and ultimately well-founded – speculation the US Federal Reserve would opt to boost the US’s flagging economic recovery by introducing another round of quantitative easing. Demand for US equity funds has picked up, and the IMA’s North America sector experienced strong net retail sales compared with many other IMA equity sectors.
According to Standard & Poor’s, during the first nine months of 2010, 117 US companies cut their dividend payments, compared with 730 companies during the same period in 2009. Meanwhile, 1,033 companies opted to increase their payout during the first nine months of 2010 – 46% higher than the same period last year.
Microsoft reported a 51% rise in first-quarter earnings that were boosted by stronger corporate purchases of PCs. Meanwhile, Intel reported better-than-expected profits for its third quarter and “continues to see healthy worldwide demand for computing products”.
Elsewhere, the banking sector garnered attention with some strong results. JP Morgan reported a 23% increase in profits for the third quarter, although revenues at its investment banking division fell. For its part, Citigroup reported better-than-expected profits amid a decline in losses from bad loans.
The US economy posted annualised growth of 2% during the third quarter, stoking speculation the Fed would expand its programme of monetary stimulus. Calls for additional quantitative easing received additional fuel from the news inflation had risen more slowly than expected during September.
According to the Treasury Department, the US registered its second consecutive annual budget deficit above the $1 trillion (£620bn) level. Tax receipts were held back by the continued high rate of unemployment, which is running at 9.6%.
Speculation over the probability of further quantitative easing helped the US dollar to fall to a 15-year low against the yen. Meanwhile, the US remained preoccupied by China’s currency policy – it believes the yuan remains significantly undervalued, providing China with an unfair advantage in its global trade activities. According to figures released during October, the US trade deficit widened during August compared with July – China’s exports to the US rose to $35.3bn, while US imports fell to $7.3bn.
Sterling financial services
No comments:
Post a Comment