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2000.02, an equity odyssey

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  • All is for the best in this best of all possible worlds, as the US S&P equity index breaches 2,000 for the first time. True, the breach is only by 0.02, which might suggest equity markets care more about round numbers than economic fundamentals.
  • US economic fundamentals have been surprising positively recently - yesterday's consumer confidence data showed further positive sentiment regarding the labour market. However global fundamentals (which matter to large companies) are lagging the US performance.
  • Assorted sentiment data is due from the Euro area today - consumer confidence in Germany and Italy, and business confidence in France. It is the Italian and French data that is probably most pertinent to expectations about the ECB's future policy path.
  • Geopolitical tensions may be lessening, with positive noise from Russo- Ukrainian talks (although fighting continues in Eastern Ukraine) and a long term cease fire in Gaza. However, market reaction to these risks was limited, so reaction to the abatement of risks should also be muted.

Listen to the  audio version of this briefing.