Sentiment is mixed as volatility continues
There was mixed sentiment in the markets on Friday as the House of Representatives voted 263-171 in favour of the $700 billion financial rescue package.
The bill, which had been rejected on Monday, was formally approved after $149 billion in tax breaks were added to the proposal. It means that the US Treasury now has the power to purchase toxic assets from banks, in an attempt to stabilise financial markets. Stock markets had rebounded early on Friday but then started to turn negative as the economy took centre stage.
US payrolls plunged in September, recording the biggest monthly decline in five years. Although the unemployment rate remained at 6.1%, the 159,000 job cuts added to the growing fears of weakening global activity. The Dow and S&P500 closed 157 and 15 points lower at 10,325 and 1,099 respectively. While the FTSE managed to hold on to some of its gains, posting a 110 point increase to finish at 4,980.
Weaker than expected data on the UK service sector has led to an increased number of economists predicting that the BoE's monetary policy committee will cut rates this week.
The PMI services headline index, which was released on Friday morning, dropped to 46 in September against an expected reading of 48 and lower than August's 49.2. It led to the number of economists expecting at least a 25 basis point cut increasing to 47 out of 61 compared to just 21 earlier in the week.
The rapid deterioration in data over recent weeks has provided further evidence of the gloomy outlook facing the world's major economies, causing some to call for the central banks to deliver coordinated rate cuts. Although this seems unlikely, there is an increased possibility that the MPC, FOMC and ECB will all reduce their respective target rates in quick succession.
Particularly after Trichet informed the markets, in his post announcement conference, last Thursday that the ECB's council members had considered cutting rates at its meeting.
Away from monetary policy, Europe's central banks have committed to further liquidity operations as they endeavour to kick start money markets. Overnight rates tumbled in the days that followed the third quarter end, while term rates remained elevated in a sign that stresses beyond the one day period now exist more than ever.
The Bank of England announced that it will offer £40 billion of three month funds to banks and except a wider range of collateral, staring today. At the same time the European Central Bank will increase the number of banks that have access to its fine-tuning overnight auction to 1,700, from the existing 130.
The euro slumped to its lowest level in over a year against the US dollar and sterling recorded its biggest decline since October 1992, after dropping 4 percent last week.
It would appear that markets now feel there is more bad news to price in for the UK and euro zone, which is likely to weigh on the respective currencies. However the Pound did manage to move to the highest level in seven months against the euro.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
The bill, which had been rejected on Monday, was formally approved after $149 billion in tax breaks were added to the proposal. It means that the US Treasury now has the power to purchase toxic assets from banks, in an attempt to stabilise financial markets. Stock markets had rebounded early on Friday but then started to turn negative as the economy took centre stage.
US payrolls plunged in September, recording the biggest monthly decline in five years. Although the unemployment rate remained at 6.1%, the 159,000 job cuts added to the growing fears of weakening global activity. The Dow and S&P500 closed 157 and 15 points lower at 10,325 and 1,099 respectively. While the FTSE managed to hold on to some of its gains, posting a 110 point increase to finish at 4,980.
Weaker than expected data on the UK service sector has led to an increased number of economists predicting that the BoE's monetary policy committee will cut rates this week.
The PMI services headline index, which was released on Friday morning, dropped to 46 in September against an expected reading of 48 and lower than August's 49.2. It led to the number of economists expecting at least a 25 basis point cut increasing to 47 out of 61 compared to just 21 earlier in the week.
The rapid deterioration in data over recent weeks has provided further evidence of the gloomy outlook facing the world's major economies, causing some to call for the central banks to deliver coordinated rate cuts. Although this seems unlikely, there is an increased possibility that the MPC, FOMC and ECB will all reduce their respective target rates in quick succession.
Particularly after Trichet informed the markets, in his post announcement conference, last Thursday that the ECB's council members had considered cutting rates at its meeting.
Away from monetary policy, Europe's central banks have committed to further liquidity operations as they endeavour to kick start money markets. Overnight rates tumbled in the days that followed the third quarter end, while term rates remained elevated in a sign that stresses beyond the one day period now exist more than ever.
The Bank of England announced that it will offer £40 billion of three month funds to banks and except a wider range of collateral, staring today. At the same time the European Central Bank will increase the number of banks that have access to its fine-tuning overnight auction to 1,700, from the existing 130.
The euro slumped to its lowest level in over a year against the US dollar and sterling recorded its biggest decline since October 1992, after dropping 4 percent last week.
It would appear that markets now feel there is more bad news to price in for the UK and euro zone, which is likely to weigh on the respective currencies. However the Pound did manage to move to the highest level in seven months against the euro.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: Bank of England, credit crunch, UK interest rates, unemployment, US recession
posted by Drs Search @ 8:52 AM
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