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German Business Confidence May Rise to Highest Since July 2008

German business confidence probably increased to the highest since July 2008 in December, a sign the economic recovery is on track.

The Ifo institute in Munich will say its business climate index, based on a survey of 7,000 executives, rose to 94.5 from 93.9 in November, according to the median of 33 forecasts in a Bloomberg News survey. That would be the highest reading since July 2008. The index reached a 26-year low of 82.2 in March. Ifo releases the report at 10 a.m. today.

Recent reports have painted a mixed picture about Germany’s recovery. While the ZEW institute said four days ago economists are tempering optimism about the outlook, the Bundesbank this month raised its forecast for 2010 growth and Volkswagen AG on Dec. 11 posted the strongest sales gains this year.

“There’s probably further good news to come from Ifo, even if the improvement isn’t as rapid as before,” said Laurent Bilke, a former European Central Bank economist now at Nomura International Plc in London. “Exports are the place where you’ll see the recovery coming from in Germany, even if the very strong euro means they may not benefit as much as they would have done normally.”

Ifo’s gauge of the current situation probably increased to 90 from 89.1 while an index of executives’ expectations may have risen to 99 from 98.9, according to the survey of economists. The institute conducted the survey between Dec. 1 and Dec. 17.

Exporters are helping to fuel Germany’s recovery, overcoming a 14 percent appreciation in the euro since February. Sales at Volkswagen, Europe’s largest carmaker, rose 19 percent in November from a year earlier. Deutsche Bank AG, Germany’s biggest bank, says business in Asia will help push pretax profit to a record 10 billion euros ($14.3 billion) in 2011.

Recovery Doubts

While factory orders and industrial production fell in October, exports rose more than economists forecast.

The end of government stimulus measures and market turmoil stemming from concerns over Greece’s budget health are nevertheless casting doubt on the pace of recovery.

The Bundesbank says German economic growth will slow in the current quarter from the 0.7 percent rate recorded in the third, when expansion was boosted by stimulus spending.

The central bank then expects the economy to grow 1.6 percent in 2010 after a contraction of 4.9 percent in 2009. It previously forecast the economy would stagnate in 2010.

“Exports are still strong, last month’s factory orders and industrial production were disappointing, but it was a temporary blip,” said Aline Schuiling, an economist at Fortis Bank in Amsterdam. “The underlying trend remains well set for exports and the industrial sector.”

Dec

19

2009

The Russell 3000 Index

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A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of the entire U.S. stock market. More specifically, this index encompasses the 3,000 largest U.S.-traded stocks, in which the underlying companies are all incorporated in the U.S.

Stocks within the Russell 3000 index are reconstituted once a year (typically around May or June). At this time, the underlying companies are reranked based on their market capitalizations for that year. Furthermore, if a member is somehow rendered ineligible for continued membership during the year (such as by going private, being acquired or going bankrupt), no replacement is named until the next scheduled reconstitution.

Of the 3,000 stocks in the index, there are two very popular sub indexes that are followed to track the progress of the market. The largest 1,000 stocks become the Russell 1000 index (large cap index) and the subsequent 2,000 are known as the Russell 2000 index (small-cap index).

Oct

23

2009

The Russell 2500 Index

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A broad index featuring 2,500 stocks that cover the small and mid cap market capitalizations. The Russell 2500 is a market cap weighted index that includes the smallest 2,500 companies covered in the Russell 3000 universe of United States-based listed equities.

The index is designed to be broad and unbiased in its inclusion criteria, and is recompiled annually to account for the inevitable changes that occur as stocks rise and fall in value.

The space covered by the blending of small and mid cap stocks is sometimes referred to as “smid” cap, and can describe any company up to the $10 billion market cap range. These companies are generally considered to be more growth oriented than large cap stocks, and may experience more volatility than the latter over long-term periods.

Oct

23

2009

The Russell 1000 Index

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The Russell 1000 is a much broader index than the often quoted Dow Jones Industrial Average (DJIA) and Standard & Poor’s 500 Index (S&P 500), although all three are considered large cap stock benchmarks. Many institutional managers prefer the Russell 1000 as a barometer for large cap investments as a whole; the average market cap of a Russell 1000 company is over $80 billion, and all of the index members are considered highly liquid stocks.

An ETF representing the Russell 1000 can be purchased for a minimal expense ratio; the ETF is called the iShares Russell 1000 Index and trades on the New York Stock Exchange (NYSE) under the ticker IWB.

Oct

23

2009

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