John Dance

Member Article

Euro leaders continue to disappoint-Latest Market Analysis

It was evident from yesterday’s negative American close that Europe was unlikely to enjoy a positive open this morning. Wild swings on Wall Street were induced by news from the much anticipated meeting of Merkel and Sarkozy, in which the general tone was one of “step-by step” integration and closer fiscal governance, and not the decisive action that many had hoped for. In particular, their insistence that the European Financial Stability Fund (EFSF) was of sufficient size to handle sovereign debt issues did not sit well with investors. The suggestion of a financial transaction tax wasn’t particularly well received, many questioning the troubles surrounding its logistics and implementation. It caused shares in financial services companies to weaken, particularly those more heavily exposed to investment banking. In the UK, Barclays was 4.2% lower down 7.65p at 174p, RBS was down by 3.8% at 24.8p and ICAP lost 16.5p (3.7%) to end the day 428p.

Minutes for the Bank of England’s August meeting showed the group voted 9-0 in favour of holding rates at 0.5% earlier in the month. The Monetary Policy Committee, which usually experiences at least some divide between the hawks and doves, was united given growing concerns over the global economy and a recent downward revision of UK GDP. The Office for National Statistics also reported unemployment data showing that the jobless rate has risen to 7.9%, its highest level since February 2010, and claimants of Jobseeker’s Allowance rose by 37,100, its biggest rise since May 2009. Sterling initially fell on the news (around 0.5% against the EUR and USD), although rallied throughout the afternoon to actually finish up around 0.6% and 0.3% against the dollar and Euro respectively.

The FTSE finished the day lower by 0.5%, losing 26 points to 5332, gold put on 0.5% and Brent crude is back up to $111/bbl despite touching the $100 mark last Tuesday.

This was posted in Bdaily's Members' News section by John Dance .

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