US markets finished the week on a high note with a rise in US consumer confidence to its highest level in six months and a much bigger-than-expected fall in the country’s trade deficit, lifting investor confidence in the strength of the recovery.
A 17% boost in its quarterly dividend to 14c a share by General Electric also helped Wall Street confidence Friday.
But US bond yields jumped, with the 10 year Treasury security seeing its rate close at 3.33%, up 0.33% in the week, a very strong surge.
It was the highest close for six months and the biggest weekly rise in Treasury yields since the middle of last year.
Investors are worried about future inflation, but those fears are misplaced, as data this week for consumer inflation and industrial production and capacity figures will once again underline.
Those figures will be out around the time of the post-meeting statement from the US Federal Reserve’s last rate meeting for the year.
Such is the tide of positive sentiment and momentum that any negative figures this week will be ignored by investors.
The rise in exports looks set to lift economic growth this quarter.
And last week’s data fits into a pattern of an economy that is gaining traction after a slowdown in the summer and is likely to intensify the debate over whether the Federal Reserve needs to keep stimulating the economy through asset purchases.
The increasingly positive tone saw the US dollar have the best week since early September, turning in gains against most major currencies.
The dollar rose 1.4% to $US1.3226 against the euro and 1.7% against the yen, finishing at 83.95 yen, from 82.53 the Friday before.
But the greenback is still down around 1% against an index of 10 major currencies.
US shares ended the week with reasonable gains after scraping higher Friday after the stronger US dollar clipped gains and sent oil and gold and other commodities lower on the day.
The Standard & Poor’s 500 index rose 1.3% for the week to close at its highest level since the week that Lehman Brothers collapsed in September 2008.
The Nasdaq Composite closed at nearly a three-year high.
The Dow added 22 points, or 0.2%, to 1,1406 on Friday, the S&P 500 added 7 points to end at 1,239 — the highest point since September 2008.
Nasdaq rose 21 points, or 0.8%, to 2,637 — the highest level since December 2007.
For the week, the Dow locked in a gain of 0.4%. The S&P 500 added 1.3%, and the Nasdaq rose 1.5% over the last five days.
The decision by China’s central bank to raise lenders’ required reserves by 0.50% didn’t worry markets as much as previous moves have, perhaps that will change after the inflation data for last month is assessed.
European shares edged up to a fresh 26-month closing level and Asian shares were solid.
The fall in the size of the US trade deficit in October was the most important bit of data on Friday.
The deficit was reported at $US38.7 billion, down from a revised estimate of $US44.6 billion for September.
Imports fell, but exports rose, especially to China, Japan, Europe and Mexico.
While the dividend boost from GE helped confidence, it should also be seen as a warning that this giant company’s board of directors and management are not expecting a lot of upward movement in the share price for the next few months.
It confirms the still strong idea that dividend yield (i.e. income) is still more desired by investors than capital gains, especially in times of low inflation.
It’s an admission that GE doesn’t see an inflationary surge around the corner in 2011.
In Europe the Stoxx Europe 600 Index added 0.1% on Friday to 276.2 at the close in London, the highest level since September 2008.
The Index added 1.9% last week.
The strength wasn’t spread across all markets.
Bloomberg reported that "National benchmark indexes advanced in half of the 18 western European markets. Germany’s DAX Index climbed 0.6 per cent.
"The U.K.’s FTSE 100 Index rose 0.1 per cent, while France’s CAC 40 Index slid less than 0.1 per cent."
In Asia, the MSCI Asia Pacific Index fell 0.3% last week.
That was after the 3.5% rise the week before.
Japan’s Nikkei rose 0.3%, after the news that third quarter economic growth was stronger than previous forecast at an annual 4.5% rate from the 3.9% first reported last month.
South Korea’s Kospi index rose 1.5%, the Taiwanese market was up by around 1.1% and the ASX 200 added 0.9%.
Shanghai was down less than 0.1%, but Hong Kong lost 0.7%.
In Australia, the ASX200 index was up 4.6 points, or 0.1%, at 4745.9 on Friday, while the broader All Ordinaries index inched up 2.5 points, or 0.1%, to 4830.
Both will open flat today after the move by China to tighten bank lending and the sharp jump in inflation in November.
