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Financial Focus

An unidentified bank was forced to seek an emergency $500m loan from the ECB yesterday in a sign that lenders may be struggling for liquidity again. The seven day loan was the first time the ECB’s dollar swap facility has been used since March, and the first large loan it has given since May 2010. In signs that the bank may have borrowed in desperation, the ECB priced the loan at an interest rate of 110 bps, far higher than the standard rate of 88bps.

JAPAN’S exports fell more than expected in July as a global slowdown and a strengthening currency weigh on the outlook for the nations sales overseas. Exports decreased 3.3% in July from a year earlier. The world’s third largest economy is counting on an export revival to aid its rebound from the earthquake in March.

PRESIDENT Barak Obama is seeking to revive a version of the so-called grand bargain with congressional republicans that would combine long-term U.S. deficit reduction, through entitlement benefit cuts and tax increases, with immediate steps to boost job growth. Obama plans to press Congress for billions of dollars in fresh spending to reduce unemployment as he also pursues a compromise on long-term deficit cuts.

MARKETS:

THE FTSE 100 index is seen dropping at the open of trading today extending falls made in the previous session in tandem with weakness in Asian equities after a sell-off in U.S. tech stocks. The FTSE closed down 26.03 points, or 0.5%, yesterday at 5,331.60, having at one stage dropped below the psychologically important 5,300 level, snapping a four session winning streak which saw the index jump around 7%. The Dow and S&P indices ended little changed in and up-and-down session where investors sold growth sectors in favour of defensive shares like telecoms and utilities. Asian stocks have fallen back today, with Taiwan’s tech heavy index down almost 2%, the biggest loser in the region’s major markets, tracking the fall in U.S. tech shares.

CURRENCIES:

THE DOLLAR and yen gained against major counterparts on prospects a report today will show that U.S inflation isn’t weak enough for the Federal Reserve to consider a third round of quantitative easing. The yen rose against the Australian and New Zealand dollars as Asian equities fell. The Swiss franc held yesterday’s gain against the Euro on speculation the Swiss National Bank can’t halt its advance amid slumping growth in Europe and the U.S.

ENERGY:

CRUDE oil dropped from a two day high in New York as investors bet that fuel demand will falter amid signs of weaker growth in the U.S. and Europe. Futures declined as much as 0.6% today before reports that may show U.S. jobless claims increased last week. Crude supplies rose 4.23 million barrels, and Energy Department report showed. They were forecast to drop 500,000 barrels.

COMMODITIES:

GOLD may advance for a fourth day as investors seek to protect their wealth with forecasts for a slower expansion in China adding to signs that major economies may be weakening. Immediate delivery bullion traded little changed at $1,792.15 an ounce at 11:42am in Singapore after paring a loss of 0.4%. December delivery gold traded almost unchanged at $1,794.90, also overturning a 0.4% decline.

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