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Financial Focus

EU leaders meeting in Brussels focused on Portugal’s crisis following its debt downgrade by both S&P and Fitch yesterday. Yields on the country’s five-year debt surged to a high of 8.4% as it became clear that Lisbon is not willing to accept Jose José Sócrates.�

High inflation, stunted wage growth and an uncertain economic outlook are expected to slow consumer spending in the months ahead, threatening the UK’s economic recovery. Moody’s warned that Britain’s AAA debt rating could be at risk if slower growth makes it harder for the government to rein in its budget deficit.

THE US Labour Department reported a fall in initial claims for state unemployment benefits, and the underlying trend dropped to its lowest point since mid-July 2008. This contrasted with reports that orders for US durable goods had fallen in February. Analysts cautioned against placing too much weight on the weak manufacturing report, saying the data was in stark contrast to other upbeat surveys on factory activity.

MARKETS:

THE FTSE All-World index was up 0.9% on Thursday night, reflecting strong gains in the UK, European and US markets.

ASIAN shares gained for the fourth day this week, with renewed optimism about the global economic recovery and on speculation of strong corporate earnings in the second quarter following the US jobs report. Japan’s broad Topix index made its biggest weekly gain since July, and the Nikkei’s overnight gains moved the index in the right direction following its drop of 8% between March 11th and yesterday.

Financial bookmakers expect the main European benchmark indexes to rise on Friday, extending their recovery rally and tracking US and Asian gains.

CURRENCIES:

THE DOLLAR hovered near a 15-month low against a basket of currencies as a bounce in equities suggested that risk appetite was improving. THE EURO dipped briefly after S&P downgraded Portugal’s credit ratings by two notches to BBB and warned it could cut it again by one notch as early as next week.

ENERGY:

LOW orders for US durable goods overcame Middle-East supply worries, bringing prices to a two-day low in New York. However, prices have climbed 4.3% this week, and are up 31% from a year ago, and news that Libya’s crude exports may be limited for months following sanctions and damage to facilities, will not help prices fall in the short-term.

COMMODITIES:

SPOT gold held steady overnight, below record highs hit in the previous session, as worries about Eurozone debt and Middle East turmoil supported safe-haven investment. Silver, dubbed ‘the poor man’s gold’ has become increasingly popular among investors, who have pushed the commodity towards a 6.5% weekly rise.

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