Stock investors stay confident

Economics

This week we expect growth in US headline durable goods orders for May to slow while those at the core level (excluding transport goods) should have picked up. Existing and new home sales are likely to have dipped slightly in May.

In Europe we expect the German ZEW and French INSEE business confidence indicators to see some improvement in June. French consumer spending should have given back some ground in May. In Japan we expect the all industry economic activity index to have improved in April.

Foreign Exchange

Euro/dollar: The daily indicators however, are showing positive divergence by now, suggesting an upward correction to be seen.

Dollar/yen: Up to a test of channel resistance at 110.60. Should hold above 108.70 to keep this bullish outlook valid and to avoid a deeper decline with 108.00 as next support.

Fixed Income

The postponement of any budget decision for the period 2007-2013 is more bad news for the European Union. The bond and currency markets reaction was rather subdued, but it does not bode well for the Eurozone growth prospects.

The low level of yields is fuelling market spreads (credit, EMD, carry currencies) back to the previous highs. We made a few changes to the bond focus list, which we describe in the corporate bond section.

Equities

Encouraging figures regarding inflation, industrial production and growth helped the equity markets to hold the gains of the previous weeks. Even the rise of the oil price could not disturb them. Apparently stock investors' confidence has improved.