Liquidity to drive equity markets higher
Following the second Greek bail-out and the successful completion of the country’s debt restructuring, equities made further modest progress during March, before pausing as investors contemplated the risk of a hard landing in China and the effects of rising government bond yields.
Clearly, the European Central Bank’s Long-Term Refinancing Operation – which has resulted in a gross liquidity injection into the banking system of about €1 trillion – has significantly eased bank funding conditions in the Euro area.
In the US, the stock market’s recovery from the lows of October 2011 continues amid a steady improvement in the economy. Economic activity indicators have turned positive, business and consumer confidence readings are rebounding and the employment market has improved significantly, with the unemployment rate falling to a three-year low of 8.3 per cent in February. Even the housing sector, for so long a brake on consumer confidence and spending, is now showing signs of a sustainable upturn. (...)
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