Growing Optimism in the Eurozone - Analyst Blog
05 Dicembre 2011 - 10:07AM
Zacks
Growing hopes of positive momentum on the Euro-zone front will
likely help stocks build on last week’s strong gains as European
leaders meet on Friday for a decisive summit meeting. The
expectation is that this week’s summit meeting will help provide
the framework for greater fiscal integration in the union, which
will pave the way for the European Central Bank (ECB) to play a
decisive role in propping up individual member country bonds.
On the U.S. front, we have a relatively quite economic calendar
this week, though we have the non-manufacturing ISM and Factory
Orders reports on deck for release a little later. The rest of this
week brings in International Trade and Consumer Sentiment readings,
both on Friday.
Notwithstanding the paucity of U.S. economic data this week, the
domestic outlook appears to be in very good shape. The holiday
shopping season has gotten off to a solid start, the labor market
is steadily improving, and the manufacturing sector appears to have
rebounded nicely from the summer slump. All high-frequency
indicators are pointing towards fourth-quarter GDP growth in the
2.5% to 3% range.
The only source of uncertainty for the market at present is Europe,
with the recent uptrend in the Italian government bond yields --
the third largest bond market in the world -- raising doubts about
the union’s long-term survival. It is in this context and the
significance of Friday’s summit meeting that a number of market
watchers are calling this a ‘make-or-break week’ for Europe.
We will see if those lofty expectations come to fruition. But in
the run up to the Friday summit, the technocratic government of
Italian prime minster Mario Monti unveiled today austerity measures
aimed at bringing down the country’s budget deficit. These spending
cuts and other pension changes, which are equivalent to roughly
1.9% of Italy’s GDP, will be presented to the Italian parliament
for approval late today. The bond market appears to be giving these
measures a vote of confidence as evident from the drop in Italian
government bond yields today. We will have to wait and see if this
trend can be sustained in the coming days.
In corporate news, we have a solid earnings and revenue beat from
discount retailer Dollar General (DG). In another
sign of continued move towards cloud computing, business software
giant SAP (SAP) is acquiring
SuccessFactors (SFSF) for $3.4 billion.
DOLLAR GENERAL (DG): Free Stock Analysis Report
SAP AG ADR (SAP): Free Stock Analysis Report
SUCCESSFACTORS (SFSF): Free Stock Analysis Report
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