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Financial Focus Today

Positive sentiment came from US service sector data, which stood firm in September, suggesting the economy was not yet slipping into recession. The amount of people hired in the private sector also picked up, further adding to the theory that a recession will be avoided.

Bank of England officials may edge close to reactivating emergency bond purchases today as they gauge whether budget cuts and a European debt crisis warrant the first increase in stimulus in two years.

GROWTH in Britain’s dominant services sector unexpectedly picked up pace in September, though firms’ expectations for the next year are bleak, a survey of purchasing managers showed on Wednesday. The data follows the PMI survey on Monday that showed a return to growth by the manufacturing sector.

German Chancellor Angela Merkel said on Wednesday that Berlin was ready to recapitalise its banks if needed, adding some more reassurance following an agreement on Tuesday by European finance ministers to safeguard banks in the face of mounting concerns about a Greek default.

MARKETS:

Asian shares rose on Thursday, as optimism over Europe’s efforts to aid the Eurozone’s financial sector and US data suggesting the economy could avoid recession spurred short-covering (when investors realise gains by buying back borrowed stock they had sold in a bet on falling prices) and value hunting.

Rallies by hard-pressed banks, insurers and commodity stocks led a bounce back by Britain’s top shares yesterday as support for debt-laden Greece revived investor appetite for riskier assets. Financial issues were boosted after the International Monetary Fund said it would “definitely participate” in a second bailout package for Greece if the Washington-based lender was happy about the country’s determination to solve its debt problems.

European shares are set to edge up on Thursday, building on strong gains in the previous session on optimism that policymakers would do enough to shore up the struggling banking sector, but with caution prevailing ahead of Central Bank decisions on rates and policy.

CURRENCIES:

The dollar and yen advanced against most of their major peers as a decline in US stock futures supported demand for the haven currencies. The euro failed to rally versus its US and Japanese counterparts before a European Central Bank meeting today, where many economists predict policy makers will cut borrowing costs.

ENERGY:

OIL traded near a four-day high in New York as investors bet that shrinking crude stockpiles and signs of an economic recovery in the US indicate fuel demand may increase in the world’s biggest consumer of the commodity.

COMMODITIES:

Commodities rebounded from the lowest in 10 months after Federal Reserve Chairman Ben Bernanke said that the central bank might take further steps to sustain an economic recovery. The Standard & Poor’s GSCI index of raw materials rose almost 3%, the biggest gain since September 27th.

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