UK chancellor George Osborne’s budget focused on reducing public sector borrowing while fueling private sector growth. In spite of rising inflation, lower short-term growth and higher medium-term borrowing, Osborne said his plan to cut the deficit was on track and revealed further plans to stimulate economic growth, including an additional cut in the main rate of corporation tax, an easing of planning rules, a promise of less regulation and a plan to simplify taxes.
THE UK’S Office for Budget Responsibility has reduced its growth forecast for the economy to 1.7% in 2011, blaming high inflation resulting from recent global commodity price shocks and the weather-affected final quarter of 2010. Higher-than-expected CPI inflation of between 4% and 5% is expected in 2011, but is expected to fall back to around its 2% target level in the medium term.
PORTUGUESE Prime Minister José Sócrates resigned yesterday after his latest austerity budget was thrown out by parliament. The defeat leaves Portugal without a credible plan to address its debt problems, and with weeks of uncertainty while an election is held. The yield on Portuguese government bonds shot to euro-lifetime highs of 8.18% before the vote, making an EU bailout almost inevitable.
THE GLOBAL benchmark FTSE All-World index was up fractionally yesterday, as markets fought off the news that US home sales fell to a record low in February, and with Eurozone debt worries resurfacing. THE EGYPTIAN stock market reopened yesterday after a seven-week closure, which helped ease some of the Middle-East tensions. As expected, it made heavy losses and closed down 8.9%.
ASIAN shares were generally higher through the night as resource stocks gained ground on expectations of new demand once rebuilding efforts are underway in Japan. Gains were limited as worries about the Middle East and Eurozone debt reduced investors’ risk appetite.
EUROPEAN shares are expected to open little changed today following yesterday’s gains. Investors are likely to be very cautious following the resignation of Portugal’s prime minister, and will be watching for comments from the EU leaders as they meet to discuss the Eurozone debt crisis.
THE EURO was sold in the US yesterday, as news that Portugal’s PM was forced to resign when his austerity plan was rejected. It held onto the losses overnight, as EU leaders meeting today and tomorrow are expected to struggle to agree on a solution to the region’s debt crisis.
Japan’s crude oil imports rose 5.6% in February, marking a second-straight year-on-year rise, government data showed earlier today. The report also showed that the country’s import of liquefied natural gas was up 3.8% from a year earlier, and that thermal coal imports rose by 8.4% in February.
THE LONDON Metal Exchange Index of prices for six industrial metals including copper and aluminum jumped 2.3% yesterday to a three-week high. Gold rose for the sixth straight session, nearing a record in New York.