Optimism rises

US companies appear to be getting more optimistic. Bloomberg reports:

More U.S. companies said they plan to boost hiring through the middle of 2007 even as labor shortages force up wages, a quarterly survey by the National Association for Business Economics showed.

The poll found that a third of executives would boost payrolls in the next six months, up from 29 percent last quarter. Thirty-five percent, the most since April, reported that wages and salaries increased in the last three months...

Twenty-two percent of the executives surveyed said they were more "optimistic" last quarter about the economic outlook than in the previous three months, up from 13 percent in the October survey and 10 percent in July. Some 11 percent said demand declined in the fourth quarter, the fewest since the first three months of 2006...

The NABE survey of 124 companies, taken from Dec. 14 to Jan 10, showed that two-thirds of the respondents predicted the economy will expand at an annual pace of 2 percent to 3 percent in the first half of this year. Just over a quarter forecast growth of 2 percent or less, up from 17 percent in October.

Meanwhile, house buyers in the UK remain as optimistic as ever. Reuters reports:

Asking prices for homes in Britain rose an annual 13.5 percent this month, a survey showed on Monday, picking up from a 13 percent increase in December and suggesting higher interest rates have not dampened demand. Property Web site Rightmove said the average asking price rose to a record 222,859 pounds ($439,700) between Dec. 3 and Jan. 13, when the survey was conducted.

Slower producer price inflation could also boost optimism in Germany. From Bloomberg:

German producer-price inflation, an early indicator for price pressures in an economy, slowed in December as energy costs declined.

Prices for goods from newsprint to plastics rose 4.4 percent from a year earlier in Europe's largest economy, down from 4.7 percent in November, the Federal Statistics Office in Wiesbaden said today. Economists expected a gain of 4.6 percent, according to the median of 30 forecasts in a Bloomberg News survey. Prices were unchanged from a month earlier.

Morgan Stanley's Stephen Roach has more on the optimistic consensus on the macro climate.

MacroVision -- our annual deep dive into the burning issues in the markets and the global economy -- offered nothing but optimism for 2007. Risks were banished to the distant tails of the probability spectrum, with the all-powerful liquidity cycle expected to cushion all but the most wrenching of shocks. Sure, markets will correct from time to time, but the MacroVision crowd felt any such downdrafts should be ignored. Dips were thought to be buying opportunities -- whether for commodities, equities, credit, or emerging markets. The endgame was nowhere in the realm of possibility. Out-of-consensus views were presented with low conviction.

But with optimism comes risk. From Bloomberg:

Lawrence Summers has a message for investors heading to the Swiss mountain resort of Davos this week to toast a year of booming returns and record bonuses.

"It's worth remembering that markets were very upbeat in the early summer of 1914," the former U.S. Treasury secretary observes...

"It's too good to be true," says Vittorio Corbo, head of Chile's central bank, who will speak at a seminar in Davos about the dangers of derivatives. "Tomorrow the mood could change. We have to be prepared."...

"Current risks are ludicrously underpriced," says [Willem] Buiter, a former member of the Bank of England's Monetary Policy Committee. "At some point, someone is going to get an extremely nasty surprise."