Equity bulls cheer despite Greek worries

It is an old cliché but an apt one nevertheless – equities around the world continue to climb the wall of worry, gradually setting to one side concerns about Europe, Greece and global growth. Instead they are choosing to focus on the positive growth surprises that are emerging, especially in the United States. Consider the news out of the US just in the past couple of days: initial jobless claims fell to a new four-year low, housing starts are up 35% since February of last year and manufacturing is showing more signs of strength. In Europe, Germany seems to be holding up quite well despite a number of economies within the eurozone falling into recession and UK consumers returned to the shopping malls last month. China meanwhile is still being propelled forward by strong household spending.

After appearing collectively to convince themselves late last year that financial Armageddon was imminent, both investors and traders have gradually been forced to cover their short positions in risk assets. This improvement in risk appetite has resulted in a very respectable run in global equity markets. The S&P 500 is up 17% over the past three months and reached a four-year high overnight; this index is now up 100% from the low reached in March 2009. Elsewhere, the DAX, Hang Seng and the Bovespa have jumped by one-third since early October.

In the currency world, it has been a similar tale, with the high-beta currencies impressing and the safe-haven currencies lagging. Since the end of September, both the Aussie and the BRL have risen by around 15% against the traditional safe-haven currencies (the dollar, Swiss franc and the Japanese yen).

Against this cheery background, and with the ECB set to undertake another helicopter drop later this month, right now it is difficult to pinpoint a trigger for a return of universal pessimism. It could be that markets are simply fed up with being concerned.