A research note by Merrill Lynch (via US Global Investors) directed the attention to the ECRI Weekly Leading Index that has rebounded sharply from the lows and has improved for 10 consecutive weeks. “This index is a timely leading indicator for future GDP growth and while it is not out of recession territory yet it appears to be well on its way, as indicated in the chart,” said the report.



Given the “less bad” economic reports, investors in interest-rate futures are now betting the Fed will hike rates by year-end, according to MarketWatch. The December Fed funds futures contract on Friday priced in a Fed funds rate of approximately 0.5% compared with 0.3% a week ago.

Summarizing the economic outlook for the US, Asha Banglore (Northern Trust) said:

“The Fed is in a watch-and-wait mode. Credit market spreads have narrowed significantly from their highs in the early part of the year. Positive economic reports by way of the ISM Manufacturing Survey, stability of home sales, glimmers of improvement in the May employment data, a decline in continuing jobless claims, and the downward trend of initial jobless claims are factors that are encouraging. The coast is not clear and more is necessary to declare the recession has ended.”

The last words come from David Rosenberg, chief economist & strategist of Gluskin Sheff & Associates:

“Recession pressures may well be subsiding next to the sharp contraction earlier this year; however, deflation risks are not only lingering but in fact are intensifying. We still believe the V-shape recovery hopes that have underpinned the equity market while undermining the bond market in recent months will inevitably prove to be under water.”

Week’s Economic Reports

Click here for the week’s economy in pictures, courtesy of Jake of EconomPic Data. Click here for a summary of this week’s economic calendar from Yahoo.

In addition to the release of the Fed’s Beige Book (June 10) and the meeting in Rome of the G8 finance ministers (June 11 and 12), the US economic highlights for the week include the following:



Markets

The performance chart obtained from the Wall Street Journal Online shows how different global financial markets performed during the past week.

James W. Frick said: “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” (Hat tip: Charles Kirk.)

Let’s hope the news items and quotes from market commentators included in the Words from the Wise review will help Investment Postcards readers to prioritize properly and spend their investment dollars judiciously.

(For short comments -- maximum 140 characters -- on topical economic and market issues, web links and graphs, you can also follow me on Twitter by clicking here.)

That’s the way it looks from a wintry Cape Town.