[ForexNews]

Risky asset markets moved higher in the past week. With yields staying low and supportive, many global equity indices moved within touching distance of their 2009 highs. The SPX continued to flirt with the psychologically important 1100 level. Despite moving higher intraday a few times, it has failed so far to close above it. In Fx, risky currencies traded strongly and the AUD made new highs for the year mid-week, helped by the better domestic jobs numbers. A disappointing set of fundamental stats meant that crude ended the week poorly.

Earlier today Japanese GDP surprised on the upside, +4.8% qoq annualized (stronger than market forecasts of +2.8%). Asian markets are trading firmly, although the Japanese indices continue to lag performance elsewhere.

This week focus will be on the US, with retail sales, industrial production, and the Philly Fed survey on the calendar, as well as inflation prints from the US, Eurozone and UK too. US inflation numbers will be an important marker for bond view – headline CPI should be benign.

October US Retail sales out later today will be a key data point in terms of assessing the strength of final demand. Also on the docket today is October Eurozone CPI.

While historical comparisons are never exact, 2004 is a year which has several parallels with what 2010 might bring. As in 2004, markets are likely to have to digest a cyclical expansion that may be maturing and losing some momentum, a waning growth impulse from fiscal stimulus, and the prospect of exit from stimulative monetary conditions. Like 2004 as well, markets are coming off a sharp
nine month rally from March lows. But differently to then, the outlook is for a much weaker US recovery, but a somewhat stronger global one.