A calm end for another busy week as investors continue to focus on the outlook for the recovery
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Thursday, September 16, 2010
, Posted by Usman Ali Minhas at 11:45 PM
The end of the week might be rather calm after a hectic and busy week of shaky and unstable sentiment. The market movement was still heavy and violent despite the absence of major fundamentals where the intervention by the BoJ and the downbeat rhetoric from the SNB all added to the playing scenario.
Investors are still caught between a rock and a hard place, with ongoing slowing recovery signals and unwinding fears over the debt crisis, yet still it’s a long lasting bet and the odds are on the double-dip. The debt crisis grip has eased and the market unwound some of the pessimism especially over the euro area. Yesterday Spain announced another successful bonds sale worth 2.72 billion euros with higher rates than those allocated in July.
Allocating the needed amounts but with higher borrowing costs for indebted nations is a clear testament for the shaky and unstable sentiment in the market. Investors are demanding more for holding those securities and protecting against default also continues to rise.
Governments had to introduce heavy austerity measures and spending cuts to control soaring public debt and huge budget shortfalls, yet still the spending cuts are further downside pressure on the outlook for growth.
The outbreak of the crisis did send the euro and sterling lower in the first half of the year, especially versus their American counterpart, yet the recovery was seen as Europe confirmed that the crisis is not as deep as presumed. Still the volatility is now persistent and evident as economies recovery slow confirming the effect of spending cuts which will continue into the coming year.
The European Commission this week raised their growth expectations for the area euro area despite their struggle with debt burdens, as seemingly the imbalance of growth and the weaker euro alongside a better than expected first half offset the downside pressures. The commission expects the economy to expand by 1.7% from 0.9% previously projected in May. The area expanded by 1.0% in the second quarter which was stronger than expectations, yet still the slower pace of recovery is likely to return in the third and fourth quarters with expected 0.5% and 0.3% growth respectively. This rhetoric is also mirrored by the ECB which sees growth ongoing but at a moderate and uneven pace.
In UK on the other hand, growth expectations continue to be trimmed despite the outstanding performance recorded in the first half of the year, beating all the odds. The BoE downgraded their growth projections for the year according to the latest inflation report to 3.0% from 3.6% despite the reported 1.2% expansion in the second quarter.
The focus is on the global economy and the pace of maintained recovery which will affect national performance for all nations including Europe. The US triggered the spark of fear with the stream of downbeat data which ignited a global wave of pessimism and fear over the pace of the recovery especially as the data coincided with Chinese downbeat figures after the moentary measures taken to rein in on excessive growth and bubble formations.
The imbalance prompted alternation in policies adopted by many nations where the RBA reserved its monetary stance, the BoJ extended the monetary stimulus and just two days again intervened in the market to weaken its currency and protect its economy. The BoE and the Feds said they stand ready to act and the ECB extended its measures into the coming year all acting preemptively to prevent the relapse into recession which can be driven by investors over pessimism to facts.
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