Tokyo's Nikkei index closed at a 26 year high in earlier trade this morning, building on record levels reached in New York and London yesterday evening. Meanwhile both France and Spain held successful bond auctions yesterday, following on from Ireland's success in the market earlier this week. All of this marks a positive start to the year for investors - and a continuation of the trend from 2017 - though it is still too early to say if this will continue well in to 2018.
Eugene Kiernan, head of investment strategy at Appian Asset Management, said that as it is very early in the year, stock markets volumes are quite low at this stage and so you tend to get dramatic movements without a huge amount going on. "There hasn't been a huge amount to move stock markets, but I think people are still focused on the health of the global economy, the health of company profits and both of those surprised on the upside last year. If they maintain that progress in 2018 that will be a positive backdrop as far as stock markets are concerned," the analyst said.
It has been a tough couple of years for pension pots and investment funds, given the low interest rate environment, but this positive momentum on the equity markets should offer a ray of light if it continues. "Equities still remain the core asset class for most pension funds, so any improvement there is a positive - but I think people need not extrapolate what we've seen over the past few days," Eugene Kiernan said, urging instead a focus on the fundamentals around national and company health.
Some political factors may serve to underpin equity value growth further in 2018, but Mr Kiernan also said that the cost of equities should be borne in mind by would-be investors. "Tax cuts are a positive because they improve underlying earnings but I think the issue is that when you look at stock markets in general, they're not really cheap," he said. "Stock markets are at fairly high levels in terms of valuation, that stops markets from getting too far ahead of us."
Higher interest rates would help some investors and savers but there is no prospect of that happening in Europe in the near future, though the European Central Bank has taken the first small step in that direction through the reduction in its monthly stimulus package. That means the ECB spending less each month on bonds, but that did not seem to negatively impact upon bond auctions held by Ireland, France and Spain during the week. Mr Kiernan said that was largely thanks to how reassured markets were by Mario Draghi's statement last month - where he made clear that quantitative easing would continue until September at the earliest, with the prospect of further purchasing programmes beyond that if deemed necessary.
In the US, meanwhile, a new chair is set to take the helm of the Federal Reserve following a decision by President Donald Trump to replace Janet Yellen. However Jerome Powell is not expected to take things in a dramatically new direction and is seen by markets as being very much in the mould of his predecessor. "I think the big attribute that he brings to this leadership role is continuity," Mr Kiernan said. "When you look at his views on the economy, his views on interest rates, they mirror that of the current leadership of the US central bank. Where he differs are on things like structural reform, regulation and financial stability - but in terms of the direction of rates, he's probably of a same view as Janet Yellen's Federal Reserve," he added.
MORNING BRIEFS - Irish skincare company Vita Liberata has been acquired by US-based Crown Laboratories. The deal sees private investment firm Broadlake sell the majority stake it acquired in the firm in 2012. No price has been disclosed but sources suggest the deal is worth around $30m.
*** Home builder Cairn has reported a significant rise in its revenues during 2017 as it sold four times more housing units than in 2016. In a trading update, the firm said it had taken in revenues of €149m from the sale of 418 homes last year. The company also said it had a net €134.3m worth of sales in the pipeline for the first half of 2018.