The UK benchmark was outperformed by other European bourses yesterday, and is today remedying this anomaly - even testing the important 6200 level in early trade.
European finance leaders appear to have finally grasped the concept of capitalism, in agreeing a deal on new rules which will force investors and wealthy savers to share the cost of future bank failures. The socialisation of any capital shortfalls will now only fall to the tax-payer as a last resort. The ‘template’ put to work in Cyprus appears to be now the new norm, and whether this will embolden confidence in the banking sector and avoid any bank runs remains to be seen.
German unemployment remains steady at 6.8%, although the figures did show that 12,000 jobs were lost against the 8000 gain that was forecast. The news has succeeded in keeping the euro trading above the 1.30 level against the dollar, but only barely. Spanish retail sales coming in at -4.5% on the year tend to show that the peripheral-core divide is very much apparent. Seeing as most are tending to clutch at straws to paint a better picture of the dire situation in Europe, one could say that EU composite retail sales falling at their slowest rate in over a year is good news.
The UK GDP revision was yet another casualty in the global growth story, with the Q1 number revised down to 0.3% from the initial 0.6%. This may well stoke and support Mervyn King’s recent comments that loose monetary policy will remain in place, and has thus sent sterling spiralling through the 1.53 level against the US dollar for the first time since early June.
Later this afternoon, US pending home sales are expected to show an increase of 1.1% in May. With April’s poor show of a mere 0.3% gain being attributed to a shortage of houses, a failure to meet expectations is likely to give equity markets a push northwards.
The Dow is expected to open up four points from yesterday’s close at 14,914.