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Debt fears continue as attention turns to the US - Latest Market Analysis

Having sought relief from an uncharacteristically productive Brussels meeting late last week, Monday saw investors turn their attention towards the debt woes playing out on the other side of the Atlantic. The stalemate between the Obama administration and Congress over raising the nation’s debt ceiling, which must be agreed by August 2nd, is pushing the country towards a previously unthinkable default. Whilst there was no panic selling at the start of the week, markets were noticeably unnerved by the unproductive political discussions over the weekend.

European markets opened around 0.5% lower although the FTSE, CAC and DAX followed diverging courses throughout the day. Banking stocks were hit across the board, with the UK’s Lloyds and Barclays giving up some recent gains to finish the day down more than 4%. At the other end of the spectrum, Fresnillo gained 2.9% in response the price of gold, the safe heaven appeal of which saw the precious metal reach a new nominal high above $1620 per troy oz. The FTSE ended the day down 0.2% at 5925, with the DAX and CAC 40 finishing +0.3% and –0.8% respectively.

The dollar gained some ground against Sterling and the Euro, but the major story in foreign exchange was the Swiss franc, which gained more than 1.5% against the Dollar, Sterling and the Euro in a safe haven trade that epitomises market concern. Whilst Sterling is not the focus of immediate default fears, the currency was weighed down by concerns that tomorrow’s second quarter GDP results will show weak, if not negative, economic growth.

This was posted in Bdaily's Members' News section by John Dance .