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Global data points to a positive start for 2012
Investors exposed to the full impact of the financial markets in the second half of 2011 could have been forgiven for bracing themselves for an equally rocky ride as 2012 began. With the prospect of very little change in the global economy, and the eurozone still facing a number of significant headwinds, including heightened fears over the collapse of the Euro and the prospect of recession returning to the eurozone, all seemed to be pointing towards continuing uncertainty.
Yet 2012 has begun with a raft of positive statistics – even the disappointing fourth quarter 2011 UK gross domestic product (GDP) result has not dented investor sentiment, in fact sentiment is on the rise and with good reason. Corporate profitability continues on an upward trend, as the lessons learned and good habits formed following the 2008 banking crisis begin to pay dividends. Many companies are now much stronger and leaner - better prepared to ride out the peaks and troughs of the market cycle.
Greece has been supplied with its second financial lifeline in less than two years when the 17 country eurozone reached agreement to hand €130bn (£110bn) in extra bailout loans to save the country from a potentially disastrous and chaotic default.
Looking further afield, an undeniably robust employment report from the US saw non-farm payrolls increase by 243,000, a nine-month high, whilst the unemployment rate fell to a three-year low. In China there are indications that its economy, particularly the property market, is enduring a gradual slowdown rather than the hard landing that many commentators had intimated.
It is important to recognise that economies tend to encounter a gradual shift in the balance of good news over bad, and investor sentiment and markets often move ahead of a full economic recovery – certainly 2012 has begun very positively. The stock market rally which began in December has continued into the New Year, with shares around the world experiencing their strongest start in 18 years.
Find out more in the latest Economic Update.
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