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Financial Focus

The Obama administration fought back against Standard & Poor’s decision to lower the US credit rating outlook, arguing that there is not danger of a downgrade and that the deficit reduction deal in Congress is within reach. A new round of talks in Congress will begin next month, with the aim of reaching an agreement by the end of June.

GREEK authorities managed to sell 1.625bn of 13 week treasury bills yesterday. The sale was considered a success, allaying fears that restructuring of Greek debt is inevitable. Spain will issue 10 and 13-year bills today in an auction widely seen as a test of whether it can avoid contagion. Any sign of the escalating funding costs that have knocked Greece, Ireland and Portugal into accepting financial aid are likely to spook financial markets.

GROWTH in the Eurozone’s economy has accelerated this month despite fears over sovereign debt in several member states. An initial index reading of business output in the purchasing managers index came in at 57.8 for April, up from 57.6 in March and the second highest since June 2007. All scores over 50 indicate economic expansion. The positive figures were largely driven by France, where activity spiked from 59.1 to 62.4, and by Germany with a reading of 59.9.

MARKETS:

ENCOURAGING results from health care and materials companies lifted US stocks yesterday, but weak earnings from Goldman Sachs limited gains in a market sceptical of the growth outlook. EUROPEAN markets all posted gains, recovering some of the ground lost to unnecessary panic selling as S&P threatened to downgrade US debt.

ASIAN stocks rose overnight as strong results from Intel prompted a rally in tech shares, while renewed strength in metals prices boosted materials companies. HONG KONG shares rebounded as investors, boosted by encouraging corporate earnings in the US, chased bargain stocks. Chinese investors pushed the Shanghai Composite Index through the 3,000 level, following a 2% drop the session before.

FINANCIAL bookmakers expect to see the leading European benchmark indexes rally today as a raft of strong results from bellwethers such as Intel fuelled optimism for Europe’s corporate earnings season.

CURRENCIES:

THE EURO bounced off two-week low, as business activity data from France and Germany supported expectations that the ECB will continue lifting interest rates, boosting the single currency’s yield advantage over the dollar.

ENERGY:

OIL rose for second day in New York as signs of an improving economy in the US, the world’s biggest consumer of crude, stoked speculation demand for fuel may increase. LIBYAN crude output, which averaged 1.6m barrels a day last year, shrank to 390,000 barrels a day in March, according to a Bloomberg News survey.

COMMODITIES:

SPOT GOLD rose to a record high of $1,500.16 an ounce overnight, and silver reached a new 31-year high. Analysts feel that Middle East political tensions, lofty oil prices and Eurozone debt worries will continue to support investors’ confidence in precious metals for the foreseeable future.

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