The G10 financial markets beat new records this week

The G10 financial markets beat new records this week. Thus, the Dow returned Thursday, October 5 at its highest historical closing since 2000, to 11.866,69 points. The Paris Stock Exchange also displays significant performance, with a CAC 40 close 5.300 points and an increase of more than 12 percent since January 1.

These results come deny decline forecast that voiced the main analysts before the summer. They now expect to the maintenance of the course at a high level at least until the end of the year by putting forward many positive signs.

First, all emphasize the positive effects, for the margins of the companies, the decline marked and unexpected, the price of a barrel of oil, which was trading at around 58 dollars Friday, or a drop of approximately 25 in three months. Some will even, a little hastily without doubt, to characterize the drop in oil minicontre-shock.

The second positive element is the confirmation of a scenario of slow soft US economy, whose growth rate could stabilize between 2 and 3 in 2007; Thus away the spectre of an entry in a recession, feared before the summer. The Federal Reserve has, it seems, took the party to accompany this movement and to suspend the process of tightening of interest rates started in April last in order to avoid a hard landing of the real estate and stock markets.

Geopolitical risks

Third positive factor, the dynamism of the eurozone which growth has reached in the first half of 2006 an annual rate of 3.4. Bank credit to the private sector has made progress on an annual rate of 11. The decision, expected by the European Central Bank (ECB) on 5 October, to increase its rate of 3 to 3.25, is not likely to undermine these prospects for growth, long rates now at historically low levels because of the abundance of liquidity in global markets.

These factors of optimism should not hide, however, the mortgages that today weigh on global economic conditions. The dramatic decline in the price of oil is at the mercy of a new international crisis, potential triggers are not lacking: hardening of the Iranian position in his arms of iron with the international community, the domestic situation in Iraq... Not to mention the intentions displayed by OPEC to keep courts derive too low.

If the risk of a recession in the United States today seem to fade, they are not fully minimized as long, as evidenced by the poor (see page 7) published Friday employment figures.

The major unknown is the behaviour of the real estate market. Finally, the strength of the recovery in the euro area remains to be confirmed in the long term. If the household consumption is sustained, certain strategic sectors, including automotive, observe a marked slowdown.

The indicators expected in the coming days should see more clearly. In the United States, this week will mark the launch of the publication of quarterly results from major US companies, with Alcoa Tuesday, followed PepsiCo Thursday and General Electric Friday. Results rose by more than 10, especially in the manufacturing sector, as announced it some analysts, would be as evidence of the good of the American economy. Moreover, the results of the trade balance for the month of August will be known Thursday.

In the euro area, finally, expected with particular attention the publication of estimates of growth for the last two quarters of 2006 and first quarter 2007, which might exceed the target of 2.5 in annual rate displayed by the European Commission in its September forecast.

If these various indicators are oriented favorably, the scenario of the continuation of the stock market recovery initiated since the summer and a recovery in the global economy in the second half of 2007, already favoured by some analysts, such as Antoine Brunet and Sophie Casanova for HSBC, be strengthened.