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Natural resource stocks were in demand after last week’s positive trade and industrial production figures from China suggested that the economy is stronger than originally thought. Over the past week there has been increased speculation that Beijing will announce a stimulus package to boost economic activity. A number of state-owned banks agreed to lend money to Shanghai recently, and this has been construed as an unofficial stimulus package. Dealers bought mining stocks as they don’t now foresee China’s demand for metal waning.
Banking stocks are performing well, after UK Business secretary Vince Cable stated that Royal Bank of Scotland is unlikely to be privatised within the next five years. Traders welcomed the news as the majority stake held by the government provides stability, and the share price closed up over 1%.
In the US, the Dow is also flat on the day at 15,425. Traders on the far side of the pond have had little to get excited about. Later on, the US will announce the Federal budget balance, and analysts are expecting a deficit of $95.3 billion. If the report beats this forecast, we could see US equities trade higher.