Business News

A big night for markets

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by Peter Switzer

You never want to get too carried away with premature optimism on a Middle East resolution when a million people are in the streets of Cairo but it looks like Egypt has joined the good news stories of economics and earnings creating a triple digit gain for the Dow Jones index.

Good omens

In fact, the trifecta of good omens — Egypt, US company earnings and economic readings — have taken the S&P 500 through the important 1300-level and the Dow punched through the 12,000-level.

And for those wondering about Aussie stocks today, stop. We will be heading up.

By the way, this is the first gain for January in four years, which I think is a great omen for the year ahead.

Banks this year

Another surprising development is the number of analysts now tipping that banks in the US are in for a good year and on top of that the funding flows out of money markets into equities — risk assets — is becoming bigger and bigger.

Market views

Last night on my Sky Business program Kumar Palghat, a founder of bond fund business Kapstream Capital, who is a long-time bond lover — as this is his business — likes stocks this year over bonds! He had the opposite view last year.

He’s even more comfortable with the sovereign bond issues in Europe believing that the solutions offered this year are miles better than last year.

Against this optimism, hedge funds seem to be wavering. The TrimTabs/BarclayHedge's January survey found 37 per cent of 91 hedge fund managers are positive on the S&P 500. However this number was 46 per cent in December! And now 26 per cent are negative — that’s seven per cent higher since the December survey.

Behind the rise

Powering the stock market higher was the expectation Egypt’s Mubarak will announce he will step down, a very good ISM manufacturing sector report for the US economy and continued positive earnings from Pfizer and UPS.

All up it was a nice night’s work for anyone long on shares and let’s hope we get a lot more of these over 2011.

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Published on: Wednesday, February 02, 2011