As Worry of Recession in US Abates, Concerns Persist Over Economic Impact of Bank Liquidity Contagion Risks in Europe, says S&P Capital IQ Lookout Report

NEW YORK, Dec. 2, 2011 /PRNewswire/ -- In the most recent issue of the Lookout Report -- a biweekly research note from S&P Capital IQ's Global Market Intelligence unit that draws upon the firm's unique analytical assets, including Capital IQ, S&P Indices, S&P Leveraged Commentary and Data, and company and funds research-- analysts note that financial market participants today are generally less worried about near-term U.S. recession risks than they were in June when total U.S. nonfarm employment expanded by only 20,000 new jobs. However, anxiety over the economy persists as a consequence of bank liquidity contagion risks currently emanating out of Europe, and the lack of clarity over a workable solution to the crisis.

This information  is published in the Lookout Report for December 2, 2011.  The report, which also features market insights and commentary on corporate earnings, leveraged loan trends, commodity index activity and more is available here.

Following are additional highlights in this issue of the Lookout Report:

Economic And Market Outlook: More Weak Housing News From The S&P/Case-Shiller Home Price Indices
Home prices are back to the levels last seen in 2002 or 2003, and mortgage rates are as low as any time in recent memory. Despite inexpensive houses and historically low mortgage interest rates (cheap money), sales of both new and existing homes are soft, and inventories--measured as month sales on hand--are high.

S&P Index Commentary: Mark-To-Market Pension Accounting Picks Up Steam
Some S&P 500 companies are now using their actual pension portfolio returns instead of smoothing, which spreads the market's effect on plan assets over several years. The change will alter balance sheet and income postings, and will likely result in greater fluctuation in the fiscal year-end report, which is when the actual returns are posted.

Leveraged Commentary And Data: Loan-Fund Assets Grow In October Thanks To A Secondary Rally
Looking ahead, managers are reluctant to make predictions, especially given the volatility related to events in Europe as well as the fiscal and economic situation in the U.S. Our best guess is that fund assets under management (AUM) will be effectively flat during the final month of the year, and that strength in year-end retail and progress in Europe will largely determine the direction in January.

R2P Corporate Bond Monitor
The fixed-income market's risk-reward profiles--as measured by average Risk-to-Price (R2P) scores--deteriorated from Nov. 1 to Nov. 30, although scores began stabilizing across the board in the second half of the month. Corporate bonds' returns were positive on average, but market and credit risks increased significantly.

Market Derived Signal Commentary: Outlook Suggests Potential Improvement In CDS Spreads For The Transportation Industry
According to GMI's surveillance of S&P 500 third-quarter earnings reports, most transportation companies, excluding the airlines, were bullish about their future prospects, despite the slow economic recovery. We think there is positive momentum in the Baltic Dry Index, and that, along with positive corporate outlooks, could translate into tighter transportation spreads.

Capital Market Commentary: Historical IPO Data Suggest Equity Activity Could Increase
Using S&P Capital IQ data, we assessed dollar volume and the month-over-month change in the number of completed IPOs priced on major U.S. exchanges, including domestic and foreign issuers from all sectors. We found that changes in the number of issues matched changes in the S&P 500 Index for seven of 11 months. In addition, changes in the amount raised for IPOs matched S&P 500 equity price changes in five of the 11 months.

S&P Index Commodity Commentary: Energy Continues To Lead Index Gains
Prior to the global liquidity injection, commodity prices already showed strength in November on the back of strength in the energy sector.  Rapidly increasing energy prices, weakness in industrial metal prices, and strength in precious metals prices have done little to alleviate the already weak economic outlook derived from the performance of the S&P GSCI in 2011.

The Lookout Report provides cross-market and cross-asset class views of current data and forward-looking insights from leading S&P market specialists.  Key areas of focus include aggregated corporate earnings, market and credit risk evaluation, capital markets activity, index investing and proprietary data and analytics.  The report previews the issues most likely to drive market expectations or cause a market disturbance in the weeks ahead.   It can be accessed on S&P.com, the S&P Global Credit Portal and Capital IQ.

About S&P Capital IQ

S&P Capital IQ, a brand of the McGraw-Hill Companies (NYSE:MHP), is a leading provider of multi-asset class data, research and analytics to institutional investors, investment advisors and wealth managers around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Securities Evaluations, Global Data Solutions, and Compustat; and research offerings including Leveraged Commentary & Data, Global Market Intelligence, and company and funds research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need.

SOURCE S&P Capital IQ