The week is ending with stocks advancing modestly today, as the S&P 500 scaled a new intraday record, helped by investor optimism regarding Greece and Ukraine and upbeat German growth data.
By Paolo Palazzi-Xirinachs
Saturday, February 14, 2015
Germany grew 0.7% in the fourth quarter, more than double the expected 0.3%, pointing to a stronger 2015 for Europe's biggest economy. Equities have rallied this week after a ceasefire agreement between Ukraine and Russia, and apparent progress on a deal on Greek debt in the Eurozone. For the week, the Dow is up 1.1%, the S&P 500 is up 1.8% and the Nasdaq is up 2.5%.
The markets seem to have been very cautious – almost overly so in equities – over the past five weeks. That seems to be mostly attributable to overseas risks and the instability of the possible Grexit situation. Those risks seem to be coming off the table this week with EU debt renegotiations with Greece looking more promising and with the ceasefire declared between Russia and the Ukraine.
Germany reasserts itself economically
The Eurozone economy picked up momentum at the end of last year, with Germany showing itself as the driver of growth, offsetting weakness in Greece and Italy and the uncertainty of Greece and the other PIGS members. Gross domestic product rose 0.3% in Q4 after expanding 0.2% in the previous three months, according to the EU’s statistics office in Luxembourg. Analysts surveyed by Bloomberg News predicted growth of 0.2%.
While the currency bloc’s economy is overcoming its longest-ever slump, falling consumer prices and the rise to power of an anti-austerity party in Greece have increased the risks to growth. To avert deflation in a region where consumer spending is bolstering the recovery, ECB President Mario Draghi announced a 1.1 trillion-euro ($1.3 trillion) quantitative-easing package that has already helped push down bond yields and the single currency.
Oil tops $60 for first time in 2015
Oil hit its highest level for the year on today with Brent crude rising above $60 a barrel, as Eurozone economic growth exceeded expectations and market bulls priced in another drop in the US oil rig count.
The rise in prices was also fueled by bets that cuts in energy firms' exploration budgets will help mop up some of the excess oil in the world market. Many analysts and traders believe there is a global oversupply of nearly two million barrels per day in crude oil. They say little has changed fundamentally to explain the rally of the past two weeks.
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