Chancellor George Osborne defended his austerity programme in parliament yesterday, ahead of a crunch meeting with finance ministers from other G7 countries. “The way this country and other countries are going to get growth is not by taking yet another fix of the debt-fuelled spending bubble that got us into the mess we are in at the moment,” he said.
GREECE will default in December, according to analysts at RBS, as yields on the market interest rates on its two-year debt reached a record 53.2% yesterday. Eurozone finance ministers from Holland, Finland and Germany met in Brussels yesterday to agree the collateral for Greece’s second bailout, but appear to have failed to agree on a position.
ITALY made yet more changes to its proposed austerity package yesterday, hiking VAT by 1% and adding a 3% tax burden for high earners, as hundreds of thousands of citizens went on strike to protest against the measures. Berlusconi’s government is planning further amendments in an effort to balance its budget by 2013.
THE FTSE 100 index is predicted to rise as much as 1.5% today, tracking gains in Asia after US stocks ended off lows helped by data showing the pace of expansion in the US services sector accelerated in August. Miners are expected to lead the advance, lifted by stronger metal prices.
Asian stocks rebounded from a three-day drop that left valuations at the cheapest level since 2008, with cheap oil and banking stocks being supported by short-covering. Turnover was thin, however, as investors remain anxious about the Eurozone crisis.
S&P 500 futures expiring in September indicate that US stocks may rebound from its three-day, 4.4% slump. The index fell as much as 2.9% yesterday before closing 0.7% lower.
The Swiss National Bank yesterday said “it will no longer tolerate a euro-franc exchange rate below the minimum rate of 1.20 francs” and that it’s “aiming for a substantial and sustained weakening of the franc.” The franc slid a record 9.9% against the euro after the announcement. The DOLLAR fell against the euro overnight, snapping a six-day advance, as gains in Asian stocks damped demand for the refuge of the world’s primary reserve currency.
Crude gained 0.4% to $86.40 a barrel in New York, rebounding from the lowest level in more than a week, on speculation a storm building in the Gulf of Mexico poses a threat to supply in the US amid shrinking crude stockpiles in the world’s biggest consumer.
Gold is predicted to rebound after it fell the most in a week yesterday. The safe haven metal remains up 32% for the year year, and is poised for an 11th year of gains, the longest rally since at least 1920. Copper for three-month delivery rose 0.8% o the LME, following a four-day, 3.7%drop. Nickel climbed 2%, also gaining for the first time in five days. Corn, soybean and wheat futures rallied on speculation that dry weather in the US, the world’s largest exporter of the grains, may damage crops.