Weekly Trading Update
13.07.12 Friday Morning
As China’s growth slows, so does a risk approach in the market as we head into earnings season in the US. China’s GDP growth expectations have dropped to their lowest level in 3 years. However, whilst most substantial economies struggle with contraction and recession a continued growth above 7.5% must be considered a positive. Growth fears continue to hold markets back with a further two countries, Brazil and South Korea cutting their interest rates. Cuts were in abundance with UK GDP growth revised from 0.2% to 0.0% and Goldman Sachs reducing their 2nd quarter figure by 0.1% to 1.4%. The only expansion taking place was the asset purchase facility in Japan which was increased to 45 trillion yen as they continue to struggle with the strength of their currency.
The Federal Reserve’s June minutes did little to wet traders’ appetites with the consensus being that things need to get worse before action is taken. There were hopes that more stimuli would be applied to the economy but instead the Fed have decided to extend Operation Twist by swapping $267 billion of shorter-term securities with the same amount of longer-term debt. The program is intended to reduce long-term interest rates. However, the Fed met prior to employment figures last week that showed fewer jobs were added than economists forecast, whilst the jobless rate was unchanged at 8.2%, the 41st consecutive month above 8%. Bernanke said after the meeting that policy makers were prepared to take additional steps to boost the economy, but QE3 still remains a way off.
The fallout from the EU summit was of falling bond yields in risky assets as Spain revealed that a political understanding had been reached but that there was no figure for a full bailout. They have also been given a deadline to come up with tax increases to aid government spending so more austerity measures are not necessary. Italy’s yield dropped to below 6% after a successful bond auction even after they were cut to two levels above junk by Moody’s. France has also been told that it must respect it's deficit reduction commitments after releasing pitiful industrial production figures.
Open (Monday)
5566
Close (Thursday)
5628
Change
1.11%
High
5688
Low
5586
Open (Monday)
12757
Close (Thursday)
12567
Change
-1.49%
High
12827
Low
12489
Open (Monday)
1.5483
Close (Thursday)
1.5424
Change
-0.38%
High
1.5579
Low
1.5394
Open (Monday)
1583.1
Close (Thursday)
1572
Change
-0.70%
High
1601.2
Low
1554.6
Premier Oil announced Thursday that it had agreed to buy a 60% operating stake of the license interests of Rockhopper Exploration for around $1 billion, covering some of the company's past and future costs. Initially this was seen as a positive for Rockhopper but over the course of trading the price fell as it was agreed that Premier had paid a low price for their acquisition. Afren is also the subject of bid talks with ENI and ExxonMobile looking at them.
Next week we have earnings reports from IG Group and SThree with management statements from Severn Trent and Britvic. In America, Citigroup, Lincare Holdings, Goldman Sachs, Yahoo! Johnson & Johnson, Bank of New York and Morgan Stanley release earnings reports.
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