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Financial focus

  • European markets to start flat ahead of US data

  • China’s stocks fall most in seven weeks

  • Asian stocks fall, snapping 11-day rally

  • US market falls back following seven-day gain

  • BoE’s Carney says stimulus working

  • Draghi rate vow splits economists as Eurozone rebounds

  • US budget gap narrows as stronger growth boosts revenue

  • US jobless claims fall, but reading clouded by processing problems

  • Italian worries spook market

  • French government says deficit will be hit by sluggish economy

  • German cost of borrowing at a 23-month high

  • Banks raise forecasts for China growth above official targets

  • BRIC markets sink to worst place for investors in global poll

  • WTI Crude rises amid US-Russia talks on Syria

  • Sterling soars to 8-month high on jobs figures

  • Gold heads for worst weekly loss since June

  • UK buyers queuing for homes, says Barratt’s chief

European markets to start flat ahead of US data

European stocks are seen opening flat today after two weeks of solid

gains in anticipation of a tightening in the flow of cheap US money

when the Federal Reserve meets next week.

China’s stocks fall most in seven weeks

China’s stocks slid the most in seven weeks, led by shippers and

banks, after UBS AG downgraded China Shipping Development Co.

and investors speculated a recent rally on the Shanghai free-trade

zone’s prospects was overdone.

Asian stocks fall, snapping 11-day rally

Asian stocks fell overnight, with the regional benchmark index on

course to snap an 11-day rally, as the US and Russia hold talks on

Syria and investors await the outcome of a Federal Reserve meeting

next week.

US market falls back following seven-day gain

US stocks slipped yesterday, ending seven straight days of gains by

the S&P 500 index as a drop in precious metal prices dragged mining

shares lower. Spot gold fell 2.6% to $1,331 an ounce as tensions with

Syria eased and on worries the Federal Reserve will begin to scale

back its monetary stimulus when it meets on Tuesday and

Wednesday. Spot silver fell five per cent to $21.99 an ounce. The

S&P 500 had risen about 3.4% over the prior seven sessions, its

longest winning streak in two months, as concerns about a Western

military strike against Syria faded.

BoE’s Carney says stimulus working

Bank of England Governor Mark Carney defended his policy of

forward guidance to lawmakers on Thursday and said signs of

recovery in Britain’s economy could prove to be another “false dawn”.

Strong economic data in recent weeks has caused financial markets to

push up long-term borrowing costs and bring forward bets on when

the Bank will increase interest rates, raising doubts about Carney’s

new policy, which aims to stop expectations of higher rates choking off

recovery. British lawmakers challenged Carney on this at a session to

explain his guidance plan. The Canadian said it was succeeding in

lowering short-term borrowing costs relative to longer ones, easing credit conditions for households and small firms. “The

economy is picking up and the stimulus is working,” he said, adding that guidance made the BoE’s pre-existing policy

stance more effective, rather than loosening or tightening it. But Carney said it was early days for the recovery and the

bank stood by its forecast that it would take at least three years for unemployment to fall to 7% – the threshold for it to consider interest rate rises. Markets by contrast think a rate rise could come in little more than a year.

Draghi rate vow splits economists as Eurozone rebounds

Mario Draghi’s forward guidance on European Central Bank interest rates has split economists down the middle. Of 31

economists in a Bloomberg monthly survey, 16 said the ECB president’s commitment that official rates would remain at

“present or lower levels for an extended period of time” hasn’t been effective. The remainder said it has. Draghi made the

unprecedented vow in July, after the Federal Reserve’s signal that it may start withdrawing US stimulus pushed market

rates higher globally. While European borrowing costs initially fell, they have since returned to levels the ECB head called

“unwarranted.” That supports the view of some economists that the Frankfurt-based central bank can’t stop rates rising

as the 17-nation currency bloc rebounds from its longest-ever recession.

US budget gap narrows as stronger growth boosts revenue

The US budget deficit narrowed in August from a year earlier as a stronger job market boosted revenue, propelling the

world’s largest economy toward its smallest annual shortfall since 2008. Outlays exceeded receipts by $147.9 billion last

month, compared with a $190.5 billion gap in August 2012, the Treasury Department said today in Washington. In the 11

months through the fiscal year that ends Sept. 30, the deficit was $755.3 billion, the narrowest for that period in five

years.

US jobless claims fall, but reading clouded by processing problems

The number of Americans filing new claims for jobless benefits appeared to drop to a near 7½ year low last week but the

decline was driven by two states that had trouble processing filings, making it difficult to get a clear read on the health of

the labour market. Initial claims for state unemployment benefits dropped 31,000 to a seasonally adjusted 292,000, the

lowest level since April 2006, the Labour Department said on Thursday.

Italian worries spook market

The threat of a political crisis pushed Italy’s funding costs higher at an auction on Wednesday, as Prime Minister Enrico

Letta warned that costs would spiral if instability is allowed to spook markets. Italy’s treasury paid 1.34% to sell €8.5bn in

one-year bills, up from 1.05% at a similar sale a month ago. On Tuesday night Italian politicians delayed a showdown

over whether Silvio Berlusconi should be barred from the senate.

French government says deficit will be hit by sluggish economy

The French government cut its forecast for growth next year to just 0.9%this week and said its public deficit would fall

more slowly than previously expected as a result. In April it had predicted growth of 1.2% for next year. Presenting

headline figures for the 2014 budget on Wednesday, finance minister Pierre Moscovici said the government now targets

a deficit of 4.1% of national output this year, up from an earlier forecast of 3.7%; and 3.6% next year, up from 2.9%. The

growth forecast for 2013 remains a feeble 0.1% as the Eurozone’s second-largest economy recovers from six months of

recession that began last year.

German cost of borrowing at a 23-month high

The German government’s cost of borrowing jumped to a near two-year high at a bond auction on Wednesday, reflecting

appetite among investors for riskier assets. The sale of 10-year debt saw the average yield rise to 2.06%, the highest

level since October 2011. Germany sold €4.076bn of its new 10-years, attracting the same demand as at a similar sale in

August despite the higher yield on offer.

Banks raise forecasts for China growth above official targets

Prospects for Chinese growth this year appear to be firming, as banks raise their growth forecasts and the government

commits to reforms. In contrast to some other emerging markets, institutions are becoming more optimistic about China’s

economic prospects for the rest of the year. Predictions of economic growth in 2013 have been hiked to 7.6% by UBS

and Nomura, above the government’s 7.5% target. Deutsche Bank has raised its forecast for the second time in a month,

to 7.9% growth in the third quarter and 8% in the fourth.

BRIC markets sink to worst place for investors in global poll

For the first time, the largest developing nations have the worst market opportunities as optimism for stronger growth

shifts to the US and Europe – according to a Bloomberg global poll. India fared the poorest, followed by Brazil, Russia

and China, a worldwide poll of investors, analysts and traders who are Bloomberg subscribers showed this week. The

number of respondents who see the European Union as one of the two best opportunities rose to 34%, its best showing

in the poll dating to 2009, with the US at 51%.

WTI Crude rises amid US-Russia talks on Syria

West Texas Intermediate crude climbed a second day on Thursday ahead of talks between the US and Russia to resolve

the crisis in Syria, a conflict that’s bolstered concern that Middle Eastern oil supplies may be disrupted.

Sterling soars to 8-month high on jobs figures

Sterling jumped to its highest level in eight months on Wednesday as the UK posted another set of impressive labour

market numbers. The pound was printing above $1.58 Wednesday evening, having climbed from $1.49 since early in

July. The rise has been steady across the last eight weeks, yet was boosted yesterday by a 0.1% fall in the UK’s

unemployment rate to 7.7%. A seven and a half month high was also reached against the euro, as sterling beat €1.19 in

the day’s trading. The currency also struck a four-year high against the yen, while the trade-weighted sterling index rose

to an eight-month high of 82.6, Bank of England data showed.

Gold heads for worst weekly loss since June

Gold advanced from the biggest decline since June, trimming its worst week in more than two months, before the US

Federal Reserve meets to consider tapering its monthly asset purchases and as investors weighed signs that the threat

of a US attack on Syria is easing. The metal fell 3.2% yesterday and is set to slump 4.7% this week, the most since the

period to June 28th

.

UK buyers queuing for homes, says Barratt’s chief

Housebuilder Barratt Developments yesterday said queues were forming for its housing schemes for the first time since

the financial crisis, as the market recovery spreads beyond southeast England. Britain’s largest housebuilder by volume,

said yesterday that buyer appetite for its homes was so strong that for some sites it was making five to 10 sales on the

day of a scheme’s launch. “We are seeing some very, very strong interest on new sites that we’re launching around the

country, even to the point where we’re starting to see queues … which is not something we have seen for many, many

years.” chief executive Mark Clare said. Britain’s housing market, which declined following the financial crisis, has revived

in recent months thanks to government efforts to ease mortgage lending, as well as a general increase in confidence in

the health of the economy.

Football Finance Focus

Barcelona looks outside of Spain for new sponsor

FC Barcelona has agreed a three-year partnership with the UAE’s United Arab Bank in a deal that represents the

Primera Division champion’s first partnership in the financial sector outside of Spain and Andorra. The deal, which runs

through to July 2016, positions United Arad Bank as Barcelona’s official partner in the UAE and places the bank as the

first and exclusive financial partner of the club in the UAE. As an official partner of Barcelona, the bank will create a range

of customised products and offers for the club’s fans across the UAE. United Arab Bank joins Barcelona’s regional

partner tier alongside Chang Beer, Big Cola, Castle Lager, Nokia, Rexona, Avea, Head & Shoulders and Indesat.

French clubs welcome talks of backtrack on ‘super tax’ plan

France’s Ligue 1’s leading clubs could be handed some welcome news after French media reported that the country’s

government is considering scaling back its controversial 75% rate of tax on high-earning individuals. The government of

President Francois Hollande has sought to introduce a 75% upper income tax rate that would have applied to anyone

earning in excess of Eur1 million per year. The new tax was seen as a means to aid the ailing French economy, but the

French Football League (LFP) and clubs have repeatedly expressed their concern that its effect on a host of Ligue 1’s top

stars could have led to a talent drain from France’s top flight.

 

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