MARKETS continued to spiral downwards even as the U.S’s debt deal was signed into law yesterday, with Barak Obama warning that the economy was suffering “a Washington inflicted wound on America”. Fears remain over the U.S. losing its triple-A credit rating as negotiations over further spending cuts progress. Fitch and Moody’s affirmed the USA’s triple-A status yesterday, though the latter cut its outlook to “negative”, warning that a small risk of default lies within the new “untested” fiscal plan.
GOVERNOR Zhou Xiaochuan said that China’s central bank will monitor U.S. efforts to tackle its debt as the official Chinese news agency criticized what it call the “madcap” brinkmanship of American lawmakers.
FIVE YEAR Japanese bond yields are trading at almost a nine month low as the yen approaches a post World War II record high, fueling speculation that the Bank of Japan will expand stimulus this week to support the economy.
EUROPEAN stocks are seen to open lower today, sliding in tandem with big falls overnight on Wall Street and in Asia after further weak macro data sparked fresh fears over the health of the global economy. The UK blue chip index closed down 1.0% yesterday, a five week closing low, with miners bearing the brunt of the sell-off as investor confidence was undermined by the uncertain global economic outlook.
U.S. BLUE CHIPS dropped a massive 2.2% yesterday, while the S&P 500 index turned negative for the year as wrangling over the U.S. debt ceiling faded. U.S. consumer spending fell in June for the first time in nearly two years and income barely rose, signs that the economy lacked momentum as the second quarter drew to a close.
THE DOLLAR index was 0.3% from a two week high as Asian stocks slumped amid concern the global economy is slowing, boosting demand for haven currencies. Australia’s dollar slid for a fifth day after data showed retail sales unexpectedly declined. The yen slid against the greenback and euro on speculation the Bank of Japan will add monetary easing to help halt the yen’s advance. The Swiss franc dropped against most peers as a technical indicator signaled its recent gains were too rapid.
OIL declined for a fourth day in New York, its longest losing streak since May. Futures slipped as much as 0.7% after U.S. consumer spending fell in June for the first time in almost two years. Crude for September delivery dropped as much as 69 cents in trading on the New York Mercantile Exchange.
GOLD declined after a rally to an all time high prompted some investors to reduce their holdings even amid persistent concern that the global recovery may be losing momentum. Immediate delivery gold, which reached a record $1,661.95 an ounce yesterday, lost as much as 0.6% as of 11.32 am in Singapore.