21.06.13 Friday Morning

Global indices have taken a turn for the worse this week after Ben Bernanke made clear that the Federal Reserve will be scaling back its unprecedented bond purchases later this year. Equities are back to levels last seen in Mid-April with the FTSE 100 opening at 6132.5 Friday morning.

The FTSE 100 has recovered some of the losses seen in yesterday’s session as optimistic investors look for bargains amongst safer stocks. Considering we saw losses of 189 points in its worst session since almost a year and a half ago, the morning has been fairly calm.

Essentially, we are in a very similar position at the end of this week as we were at the beginning. Investors were always aware that tapering was inevitable; however, the questions were regarding the timing and savagery of the cuts. It is clear now, as it was yesterday, that curbs to bond-buying hinge on gains in the labour market along with the speed of growth and inflation.

Global indices tumbled at the prospect of a wind-down, however, most officials don’t expect to begin raising the benchmark lending rate out of its lowest-ever range of zero to 0.25 percent until 2015. Additionally, whilst inflation remains behind the Fed’s 2 percent target, some policymakers will want to refrain from gung-ho cuts.

Interestingly, in the Bank of England Governor Mervyn King’s last speech, he has called once again for further stimulus measure to aid what he sees as a struggling economy. Whilst he agrees that a moderate recovery is underway, King feels that growth is not yet strong enough and more needs to be done to ensure the country's banks no longer pose a threat to taxpayers.

Major concerns regarding Chinese growth and economic data have been overshadowed by the Fed’s withdrawal of QE. Despite many analysts focusing on comments from the Fed, the mounting discontent in China is definitely contributing to the uncertainty in global indices.

Chinese officials are continuing to increase the pressure on banks to rein in excessive informal lending and speculative trading, as interest rates spiked again to extraordinary levels. Some calm returned on Friday after rumours of some major banks needing emergency funding were quelled.

It will be interesting to see if markets can recover next week, taking the Fed’s stimulus withdrawal in its stride. Technical traders are of the belief that positive chart signals could lure participants back into the market.

Royal Bank of Scotland Group:   324.65 high - 289.45 low – 290 current

George Osborne has signalled that he is prepared to break up the Royal Bank of Scotland (RBS) in a bid to recoup the £45 billion of taxpayers’ money used to bail the once all-conquering Scottish institution out in 2008. The Chancellor announced last night that the Treasury would “urgently review” the recommendation from the Westminster’s banking commission that RBS should be split into a “good bank” and a “bad bank”.

Next Week’s Notable UK Earnings:

Monday – 
•	Devro Pre-Close Trading Update

Wednesday – 
•	Standard Chartered Pre-Close Trading Update June 2013

Thursday – 
•	Betfair Preliminary 2013 Earnings Release
•	Debenhams Interim Management Statement

Next Week’s Notable Economic Data:

Monday – 
•	EUR – German Ifo Business Climate

Tuesday – 
•	USD – Core Durable Goods Orders
•	USD – CB Consumer Confidence
•	USD – New Home Sales

Wednesday – 
•	GBP – Inflation Report Hearings
•	NZD – Trade Balance

Thursday – 
•	GBP – Current Account
•	USD – Unemployment Claims
•	USD – Pending Homes Sales

Friday – 
•	CAD - GDP