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Financial Focus

THE IMF cut its forecast for global growth and predicted “severe” repercussions if Europe fails to contain its debt crisis or US policy makers deadlock over a fiscal plan. The world economy will expand 4% this year and next, the IMF said today, compared with June forecasts of 4.3% in 2011 and of 4.5% in 2012. The US growth projection for 2011 was lowered to 1.5% from 2.5% in June.

GREEK Finance Minister Evangelos Venizelos made “good progress” in a second round of talks with the European Union and IMF aimed at staving off default, according to an EU statement. The EU comments suggest that next month’s payment for Greece is likely to be released as Prime Minister George Papandreou counters investor doubts that he can avoid default.

THE FEDERAL Reserve looks set to launch a fresh effort to invigorate the faltering US recovery. Faced with a 9.1% unemployment rate, consumer and business confidence sapped by a US credit downgrade, and an escalating sovereign debt crisis in Europe, Fed officials have signalled they would seek to prevent already sluggish US growth from weakening further. It is unknown whether the Fed will opt to actively sell short-term assets and replace them with longer-dated securities, or whether it will simply replace maturing securities. A decision is expected later today.

MARKETS:

European benchmark share indexes are expected to fall on Wednesday, as investors book some of the previous session’s sharp gains before the conclusion of the US Federal Reserve’s monetary policy meeting.

US STOCK stocks ended little changed on Tuesday after giving up earlier gains of about 1%, as investors waited to see if the Fed would announce further measures to try and revive the economy.

ASIAN stocks rose overnight, reversing earlier losses, after a gauge of economic indicators signalled that growth in China is withstanding Europe’s debt crisis and a faltering US economy.

CURRENCIES:

The EURO strengthened against the Swiss franc after yesterday’s talks between Greece, the European Union and IMF curbed concern the nation will default. THE YEN held its advance toward a post-war record against the dollar amid concern global growth is slowing. The euro has depreciated 1.9% in the past month, the second-worst performer among the 10 developed-nation currencies. The dollar has risen 3.6% and the yen advanced 3.9%.

ENERGY:

OIL fell in New York as investors speculated that demand would falter amid increasing US crude stockpiles in the world’s biggest consumer of the commodity. The price of Brent oil, the benchmark for more than half of the world’s oil, will drop in the fourth quarter as global demand slows and production increases in Libya and the North Sea, Bank of America said in a note yesterday. It will average $102 a barrel in the three months ended December 31st, said New York-based commodity strategist Francisco Blanch.

COMMODITIES:

RICE prices may drop as India restarts non-basmati exports after a ban was lifted, boosting global supplies. Rice has surged 42% in the past 12 months, beating rallies in corn and soybeans, while wheat has dropped.

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