Markets have come under severe pressure once again. Shares took a hammering overnight as flashing red lights up the screens and a more subtle glow lines the broadsheets. The only winner in all this, as we have stated in the past, is gold. The precious commodity soared to a new record high of almost $1,825 an ounce. It appears the cause will have been poor US data yesterday. The once global powerhouse continues to struggle and bring down world markets with it. The UK did not escape the pain with shares in Lloyds, RBS and Barclays all dropping by around the 10 percent mark.
Pound Sterling – UK Markets
Following yesterdays abysmal retail figures and the overnight losses in the stock markets the UK will be glad to see the end of the week. However, with weak data dominating the headlines worldwide, sterling looks to finish off relatively stable against the euro and US Dollar. We appear to be benefiting from the misfortunes of others and whilst our government is doing its damndest to ensure that sterling remains weak, the tourists among us are hoping for the opposite.
With sterling strength come detrimental effects on our export market. Bank of England Governor Mervyn King maintains his stance that a strong export market will do wonders for our growth prospects. Yet up until now the product of a weak pound has yet to yield any fruits.
US Dollar – US Markets
Debilitating negative data poured out of the US economy yesterday. US unemployment benefits rose, home sales fell, inflation picked up and an individual Philadelphia factory index stooped to worse than a two year low. The number of people joining the benefits queue rose by 9,000 to a season high of 408,000. The phrases suggest we are talking sports figures rather than those of an economic nature. However, the figures take the total number of Americans claiming unemployment to 7.34 million.
Existing home sales unexpectedly fell by 3.5 percent in July, compared to June. This was considerably worse than what was expected for the month and also figures released in June. Whilst the nation is in economic turmoil consumer prices rose 0.5 percent compared to the previous month. These figures are expected to lower the chances of further quantitative easing. In short then, the US really is in the dog house at the moment.
Euro – European Markets
Various nations who provided Greece with bailout funds have been banging on the door of the European Financial Stability Fund. Earlier this week Finland secured collateral on the loan they have provided. Following this news, Austria, the Netherlands and Slovakia have added their voices to the demand. However, various eurozone nations have been quick to criticize the move stating that allowing for collateral would undermine the bailout. The agreement made last month provides 109 billion euros in emergency funding through the EFSF.
Other Currencies – Highlights
The Swiss Franc continued to advance against the dollar, euro and yen as investors sought out safe havens for their assets as stock markets fell and concerns over the global economic recovery were raised.
The South African Rand has also fallen and is now set for its third weekly loss versus the dollar. This news comes amid concerns slowing global growth will hamper demands for South Africa’s exports as investors pull funds from riskier assets.
BoE less likely to increase interest rates in May
UK’s CPI figure in spotlight, as the Pound value drops
Sterling slumps after lower than expected CPI results