Market Watch: Europe trails as US recovery continues
FURTHER evidence that the United States is in recovery mode came last week.
In each of the last four years the US has grown more quickly than Europe – and 2013 looks like being no different.
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Last week showed the American economy adding jobs and building momentum while the Eurozone is in recession.
The US economy added another 236,000 jobs in February against an expectation of 165,000, and the jobless rate fell to a five-year low of 7.7 per cent.
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The ironic thing about this is the Federal Reserve, the equivalent of the Bank of England, has publicly stated that once unemployment reaches 6.5 per cent it will stop printing money – and this is just what the stock market does not want.
So although markets took the news well, there was no surprise that they didn't roar off into the distance on the news. In addition to this, the $85bn of spending cuts is still hurting and will drag on the economy, but it does appear that the US is heading in the right direction.
Manufacturing in the US has been improving and businesses are as confident as they have been for a while. Last week a survey showed confidence in the service industries is at its highest level in 12 months.
Firms reported rising new orders and price increases and employment growing strongly. Unfortunately, we don't see this news this side of the pond.
In Europe it is not going quite as well. The final quarter of 2012 showed a 0.6 per cent dip in economic activity, driven by falls in consumer spending and investment.
Portugal fell by a massive 1.8 per cent, but the problem is all across Europe, with 14 of the 17 member states contracting.
A cut in interest rates from the European Central Bank would help but there appears to be no movement here. France issued a combined report on manufacturing and services which was worse than both Spain and Italy for the second month in a row. The number of unemployed rose in the last quarter by the most in three years. Let's hope Germany can take the strain.
For the time being, stick with your US holdings which are being helped by the slide in sterling but, like a true cub scout, be prepared to sell the US and buy Europe. Now may not be the time, but it will come.
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