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Weekly Analysis

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Shares set to rebound this week as good market news seen on the horizon

Tue, Oct 6 2009, 08:49 GMT
by Benny Menashe

Finotec Group Inc.

European shares are set to rebound this week from a four-week closing low, aided by steadier crude prices and as a survey showed British finance firms had their first spell of growth in two years in the last quarter. A survey from the Confederation of British Industry showed nearly a third of 89 UK firms reported a rise in business volumes in the three months to Sept. 2, against 24 percent reporting a decline, giving a balance of 7 percent. The Standard & Poor’s 500 Index increased 1.5 percent after Goldman Sachs raised its view on banks including Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp. to “attractive” from “neutral” and a report showed U.S. service industries expanded in September for the first time in a year.

Canada’s dollar strengthened for a second day against its U.S. counterpart amid gains in stocks and commodities as investors sought higher-yielding assets tied to global economic growth. Over the past several months, the loonie has tended to strengthen on positive U.S. economic data as investors left the safety of the greenback for commodity-linked currencies that traditionally benefit when global growth rebounds. The loonie earlier gained as Group of Seven finance officials refrained from calling for measures to stem the slide in the greenback after a meeting in Istanbul on Oct. 3 and reiterated that “excessive volatility and disorderly movements” in exchange rates threaten economic growth. The statement came at the end of a week in which global policy makers said a falling dollar risks impeding their recoveries from the recession.

The euro’s prospects are likely to be driven by any comments about its strength from European Central Bank President Jean-Claude Trichet following this week’s interest-rate meeting on Oct. 8, according to RBC Capital Markets. “No change in policy is expected at Thursday’s ECB announcement, but the key for foreign-exchange markets will be any mention of euro strength as a cause for concern in either the prepared statement or the question and answer session in Trichet’s press conference,” Adam Cole, head of global currency strategy in London, wrote today in a report.

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Published on  Tue, Oct 6 2009, 08:50 GMT