Business news tells two tales

Janus
Like Janus the market news looks both backwards and forwards

At a glance the business headlines today tell us two different tales of the economy – looking forwards some positive signs, but tempered by reflections of the troubles we have seen.

Financial Markets

Activity on the financial markets has been very positive with US bonds offering higher yields and selling well.  This indicates that banks are now more confident with their balance sheets and looking to take advantage of prices that might look cheap later in the year. 

Similarly stock prices are recovering well across the board – indicating a growing confidence.  This has been reinforced by the FTSE 100 recovering to its highest level since 2008 (BBC).  This has been reflected in the way that the US Fear Index has rebounded and reached a five and a half year low. (More..)

Companies

Of course the FTSE is driven by the performance of the companies – in particular the retailers with Tesco leading the charge on it’s announcement of a better performance over the Christmas period  (See Sky News), but even so the general trend on the high street according to the British Retail Consortium was  one of ‘could have been worse.’ (See MT4U)

Looking Back

However there are still some reminders of last years woes, Jessops the specialist photographic retailer has gone into receivership threatening 2,000 jobs. (See the Guardian report).  In Eurozone there are still concerns that Greece, Italy and Spain will need more support that Germany is prepared to accept – for the time being this has gone quite but the reality will have to be faced later in the year.

In the UK government measures to cut down debt have still to bite.  There are job losses in the public sector still in the pipeline which might add to the debt in the short term until jobs can be created in the private sector.  Similarly it is hard to tell what the impact of changes to the welfare payments, particularly those payments made to families who are in work but rely on Work Tax Credits to meet their weekly bills.

If current estimates of university enrolments remain true the UK economy will need to find jobs for school leavers, which with record levels of youth unemployed in the UK will inevitably increase demands on government spending.

Comment

I still find it difficult to move from my position that we are likely to see little signs of recovery until the the third quarter of 2013 – but I am more confident that this will be the case as banks and markets return to business as usual.

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