Signs of an improving global economy?

China - China's service sector grew at its fastest pace in six months in May, helping allay fears of a sharp slowdown in its economy. The non-manufacturing Purchasing Managers' Index (PMI) rose to 55.5 in May from 54.8 in April. The PMI is a key indicator of the health of the sector and a reading above 50 indicates expansion. It comes just days after China reported that the manufacturing sector grew at its fastest pace this year in May. China's service sector, which includes construction and aviation, accounts for nearly 43% of its overall economy.

Spain - Spain is set to introduce a new stimulus package totalling €3.6bn ($4.9bn) in a bid to bolster the country’s nascent economic recovery. Spanish prime minister Mariano Rajoy has announced that the new measures will be brought in next week in an attempt to create jobs and encourage the competitiveness in the economy.“ Next Friday, the government will present a package of measures to increase competitiveness and productivity,” he said.

Middle East - Qatar’s shares fell for a third day on Wednesday and bonds dropped on concern that the Persian Gulf nation may lose the right to host the 2022 soccer World Cup, potentially jeopardizing some of its $200bn investment plans. Qatari stocks, among the world’s best performers this year, have lost 4.1% in the past three days after the U.K’s Sunday Times reported that payments were made to soccer officials in return for allowing the Arab country to host the tournament.

Japan - Japanese shares gained this week, with the Topix index rising for a tenth day on Wednesday, its longest winning streak since August 2009, as the yen weakened and steelmakers advanced.

“The future is looking brighter for Japanese shares,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc., citing factors such as a weaker yen and the relative cheapness of stock prices. “However, the danger of overheating is increasing.”

Spotlight on: More life left in the U.S.?

• Fidelity Worldwide Investment's Dominic Rossi says questions over the ability of the U.S. to keep leading global indices higher are misplaced, with the region in the middle of a bull market and capable of climbing another 25% from here.
• Equity markets have shrugged off uncertainty over the crisis in Ukraine and weak U.S. growth.
• In the US, the news is only going to get brighter. We are at an inflection point in the U.S. economy, the market is fully recognising how rapidly the economy is strengthening.
• The speed of the improvement in the budget deficit is remarkable. Since 2009, the fiscal deficit has shrunk to around $600bn from $1.5trn. It is not implausible President Obama will finish his term with a fiscal surplus.
• In this case, I think we are looking at a U.S. equity market that is similar to the late 1990s, one in which equities should be well supported by liquidity. Overall, the outlook for corporate earnings remains favourable.
• In this light, if we get a mid-cycle correction based on the expected onset of the interest rate tightening cycle in 2015, this would be a buying opportunity, and, the S&P 500 could move to 2,000-2,300 from its current level of 1,800.