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New Week, But Turmoil Continues For Financial Markets ? Latest Market Analysis

Following the turmoil in financial markets of late, the start of a new week provided little in the way of respite for beleaguered investors. Although European officials came close to delivering the measures required to shore up troubled government bond markets, the slightly muddled responses meant that the downgrading over the weekend of US debt by S&P was having a bigger effect.

Bizarrely though, despite losing its treasured AAA credit rating, the debt of the US government actually rose in value, and the return demanded for holding it fell significantly. Stock markets in Europe opened lower, mirroring falls overnight in Asia, although an early morning rally in to positive territory provided some short lived hope.

Continued mixed messages from Europe’s leaders soon sapped that hope though. Over the weekend both the Italian and Spanish governments agreed to speed up their respective fiscal reform measures in exchange for ECB and EU commitments to buy their bonds and provide some support to their finances. Yields on both nations’ 10 year bonds fell to nearer 5.25%, having been as high has 6.5% last week. Equity markets were less convinced though and started their latest decent as German premier Angela Merkel stated the size of the European Financial Stability Fund would not be increased, despite expectations and hope that it would be.

In the UK, the FTSE 100 swung from a 1% gain before the statement to 1.5% loss after it. European equities continued to decline, accelerating their losses as the US reopened. The UK’s blue chip index closed 178 points, almost 3.4%, lower at 5069.

There was some good news though, as fears of a global recession or slowdown increase, the price of Brent Crude Oil fell a further 1.75% to $106. As Oil now stands almost 15% below its April high, the fall in value provides the global economy with the equivalent of a tax break that most major governments could only dream of offering.

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