In February, political events moved to the fore again. An indecisive Italian election outcome unnerved European bond and equity markets, while in the US politicians failed to reach a compromise to avert or delay the so-called “sequester”, $85 billion in automatic spending cuts over the next seven months. US markets, however, shrugged off Washington’s latest deadlock and continued to post gains as Chairman Ben Bernanke reiterated the Federal Reserve’s commitment to quantitative easing, suggesting that investors are currently more concerned with monetary than fiscal policy. Meanwhile the US economy continues to shows signs of progress with the Institute of Supply Management (ISM) survey for February indicating above average production growth, with improvement coming from both current production and the more forward looking new orders survey.
