EMERGENCY talks got underway in Italy yesterday as the country’s embattled Prime Minister belatedly decided to get to grips with the nation’s weak financial position. Nicolas Sarkozy and Angela Merkel have told Italy that urgent action is needed to improve its finances ahead of a euro-saving summit tomorrow. Reforms to Italy’s generous state pensions system are top of the agenda.
ELEVEN of the City’s main financial groups have urged Chancellor George Osbourne to fight any proposed financial transactions tax, in a letter to the Treasury yesterday. The British Bankers Association and Investment Management Association argued that a tax would hammer the economy and affect all of the public, not just financial services.
GROWTH is weak and the UK’s economy may be contracting in this quarter, the monetary policy committee’s Martin Weale said yesterday. “The underlying rate of growth is weak, I wouldn’t be terribly surprised if we saw growth contract in the fourth quarter,” Weale said. “The risk of recession is higher than it was a few months ago.”
MARKETS:
EUROPEAN shares are expected to open down today, after sharp gains in the previous session, on uncertainty about an outcome of a summit tomorrow, with policymakers in disagreement over the size of losses private holders of Greek debt will take.
JAPAN’S Nikkei share average reversed early gain this morning as hopes for progress in Europe’s debt crisis gave into caution ahead of corporate earnings reports and the yen stayed near a record high versus the dollar. Selling from European investors when the Nikkei moves above 8,800 is also hampering any test of last week’s six week peak around 8,910, market players said.
CURRENCIES:
THE EURO weakened against the majority of its counterparts before reports, economists say, will show deteriorating consumer confidence in Germany and France. The 17 nation currency snapped a five day advance versus the dollar before European leaders hold a summit tomorrow to discuss measures to resolve the region’s debt crisis.
ENERGY:
OIL rose a third day, trading at the highest in 12 weeks, on signs of improving U.S. demand and speculation Europe’s leaders will agree on a fund to contain the crisis threatening the region’s economic growth. Futures climbed as much as 0.9% after surging 4.4% yesterday, entering a so-called bull market.
COMMODITIES:
THE BIGGEST rout in commodities since the global recession may be a sign that the fastest U.S. inflation in three years is peaking. The S&P GSCI Index of 24 commodities entered a bear market last month after sliding more than 20% from a two year high in April, concern that slower growth will cut demand. A slump in the gauge from a 2008 record preceded a drop in inflation, while a 2009 rebound caused the Consumer Price Index to climb.
