The Japanese yen has reached five-year lows against the US
dollar and the euro. Photo by Reuters.
The looming prospect of Wall Street ending the year on a
15-year high is giving investors and traders plenty of optimism
next year will continue the environment where stock values
continue to rise.
The first few days of January will be quiet on the markets
but economic growth is expected to accelerate in the US,
boosting employment and consumer buying power. But with the
markets repeatedly notching all-time highs, both in the US
and in New Zealand, there is a notion of caution being
exercised by some.
Chief market strategist for National Securities in New York,
Donald Selkin, said there was a pervasive feeling the economy
was getting better, and the Federal Reserve would play its
part by keeping interest rates low.
''While new money will still be flowing into stocks next
year, probably we'll see less money come in. There's little
chance of another 30% gain or so next year,'' he said.
The Standard & Poor's 500 has risen 29% so far in 2013,
its best annual performance since 1997. The Dow Jones
Industrial Average is up 26% while the Nasdaq is up nearly
The gains have been widespread and all 10 S&P 500 sectors
were higher on the year. Telecommunications, the weakest
group, rose 6.5% while consumer discretionary led the year
with a gain of 40%.
The latest Reuters poll showed analysts expected the S&P
to rise to 1925 points by the end of next year, representing
a rise of 4.5% from current levels.
Britain's top share index rose on Friday, taking its cue from
the highs hit on Wall Street, to notch up its sixth straight
day of gains - its longest winning streak for two months.
Reuters reported the FTSE 100 was up nearly 1% on Friday's
close, after both the Dow Jones and S&P reached their new
highs on Thursday, when the British market was shut for the
Boxing Day holiday.
The rise made it the British benchmark's longest winning
streak since October, fuelled by optimism the US economy was
strong enough to withstand the gradual withdrawal of monetary
The Fed's stimulus programme, under which it bought $US85
billion ($NZ104 billion) of bonds and mortgages a month, will
be less of a factor after the central bank announced a
slowing of the programme earlier this month.
The programme will be reduced by $US10 billion a month and
Fed chairman Ben Bernanke, who will retire on January 31,
suggested the US central bank could continue to slowly reduce
the stimulus throughout 2014.
In Britain, commodity-related stocks were among the biggest
risers, as well as the most heavily traded stocks.
TJM Partners head of trading Manoj Ladwa said the performance
of the US market was helping the UK market and he was
maintaining a target on the FTSE of 7000 for the end of the
year. It closed at 6750 on Friday.
The news is not so encouraging in other parts of the world.
The Japanese yen fell to five-year lows against the US dollar
and the euro late last week.
Although the euro zone's economic recovery is seen as
sluggish, the currency has been underpinned by European
banks' repatriation of assets, as well as buying by
exporters, as the region's current account surplus has
The European Central Bank will take a snapshot of the capital
positions of the region's banks at the end of this week,
which it will use in conducting an asset quality review in
2014 to work out which will need fresh funds.
This had led to some demand for euros from banks to help
shore up their balance sheets, traders said.