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Upwards equity march not halted by Dubai crisis, says Skandia

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Despite the turmoil in Dubai at the end of the month equity markets have continued to rise, according to Skandia Investment Group’s latest monthly asset allocation report.

SIG chief investment officer James Millard (pictured) says equities rose again in November, boosted by comments from the G7 Central Banks that suggested that interest rates would stay very low for some time to come.

Japanese equities underperformed other equity markets as the strength of the economic recovery remained uncertain and the yen rose to its highest level against the US dollar for 15 years.

At the end of the month, equities and credit markets were hurt by Dubai’s request for a debt standstill at Dubai World, but Millard says it appears unlikely that this will turn into a major credit event such as the collapse of Lehman’s.

“As a business, we remain overweight equities and think that they will rally into year-end supported by very low interest rates, which should boost both the economy and financial markets. Within equity markets, we continue to prefer emerging over developed markets, remain overweight credit and expect credit spreads to narrow further. Although credit spreads have narrowed significantly over the past year, they remain wide by historic standards,” says Millard.
 
“One of the regions where the economic recovery has been stronger than expected is the Eurozone. This strength has occurred despite the ongoing strength in the euro versus other currencies, such as the UK pound and the US dollar.”

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