Global stocks surge to 18-month high

Updated 12 December 2012
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Global stocks surge to 18-month high

NEW YORK: US stocks advanced and European shares rallied to an 18-month high yesterday after
German investor sentiment rose sharply in December and on expectations the Federal Reserve will keep pumping money into the US economy.
The euro gained versus the dollar, as investors steered clear of the US currency ahead of the Fed's meeting yesterday and today, while US government bond prices fell.
Morale among German analysts and investors improved sharply in December, jumping to 6.9 against expectations of -12.0, fanning hopes that Europe's largest economy will avoid recession this winter.
"We've been getting a lot of the beginning of our day from seeing what Europe has been doing and I think that's going to hold true today," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
The lack of progress in negotiations about the US "fiscal cliff" has kept investors from making aggressive bets in recent weeks, though most expect a deal will eventually be reached.
While the pace of talks in Washington to avert impending US tax hikes and spending cuts quickened, senior politicians on both sides cautioned that an agreement on all the outstanding issues remained uncertain.
The Dow Jones industrial average gained 61.56 points, or 0.47 percent, to 13,231.44. The Standard & Poor's 500 Index rose 7.13 points, or 0.50 percent, to 1,425.68. The Nasdaq Composite Index added 23.71 points, or 0.79 percent, to 3,010.67.
The FTSEurofirst 300 index rose 0.3 percent to 1,138.14 points, having hit its strongest since June 2011. The MSCI global stock index edged up 0.5 percent to 336.51 points.
The US central bank is expected to announce a new round of Treasury securities purchases at the end of its meeting today, according to a Reuters poll. The program would replace its "Operation Twist" stimulus, which expires at the end of the year.
Many economists believe the Fed will announce monthly bond purchases of $ 45 billion, although some think it could be more.
"We anticipate the Fed will announce Treasury purchases and as that depresses yields it will have a negative impact on the dollar and that supports the euro," said Jane Foley, senior currency strategist at Rabobank.
The euro rose 0.4 percent to $ 1.2989, while the dollar was little changed at 82.34 yen.
Markets had been rattled on Monday by Italian Prime Minister Mario Monti's announcement he would step down some weeks early.
But the upbeat ZEW data helped lift shares and the euro from their gloom.
Expectations of more easing drove the dollar index down 0.3 percent, and pushed the Canadian dollar to a two-month high, while the New Zealand dollar hit a nine-month high of $0.8369.
Benchmark 10-year Treasury notes were trading 9/32 lower in price to yield 1.65 percent, the highest in over a week and up from 1.63 percent late Monday. Investors were also
pushing for price concessions heading into $ 66 billion of US government debt auctions this week.
In the oil market, Brent crude rose 52 cents to $ 107.85 a barrel after OPEC said its production declined in November, while a weaker dollar and Middle East unrest also supported prices.
US crude gained 19 cents to $ 85.75.
Gold was steady near $ 1,710 an ounce, with more US stimulus expected to support gold's appeal as a hedge against inflation.


2 years on, Brexit vote has taken a toll on UK economy

Updated 23 June 2018
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2 years on, Brexit vote has taken a toll on UK economy

  • Big companies are sounding the alarm bell, with plane making giant Airbus this week threatening to pull out of the country, where it employs 14,000, if it gets no clarity on future trade deals
  • The governor of the Bank of England, Mark Carney, estimated recently that average household incomes are around 900 pounds lower than the bank was forecasting on the eve of the referendum

LONDON: While it’s still unclear what Brexit will look like when it happens next year, the decision to leave has already had a clear effect on the economy: households are poorer, companies are more cautious about investing, and the property market has cooled.
In the two years since the vote to leave the European Union, Britain has gone from being a pace-setter among the world’s big economies to falling into the slow lane. And the uncertainty over what relations with the EU will be when Brexit becomes official on March 29, 2019 could make matters worse.
Prime Minister Theresa May’s Conservative government remains split on what those relations should be. There are those who favor a “hard Brexit,” a clean break that takes Britain out of the bloc’s free trade union but also gives it more freedom to strike new trade deals around the world. Others want to keep Britain as close as possible to the EU, Britain’s biggest trading partner, which could mean it has to obey more of the bloc’s rules.
Big companies are sounding the alarm bell, with plane making giant Airbus this week threatening to pull out of the country, where it employs 14,000, if it gets no clarity on future trade deals.
“Thousands of skilled, well-paid jobs are now on the line because of the shambolic mess the government have created over the Brexit negotiations,” said Darren Jones, the lawmaker for the community where Airbus has its plant.
Before the referendum of June 2016, the British economy had been one of the fastest-growing industrial economies for years. Now, it’s barely growing. In the first quarter of this year it expanded by just 0.1 percent from the previous three-month period, its slowest rate in about five years.
For most people, the first and most noticeable impact was the drop in the pound. The currency slid 15 percent after the vote in June 2016 to a post-1985 low of $1.21. That boosted prices by making imports and energy more expensive for consumers and companies — the rate of inflation hit a high of 3 percent late last year.
The weaker pound helped some companies: exporters and multinationals that do not sell mainly in the UK But it hurt consumer spending and businesses that depend on their shopping. The retail industry was hit hard, with high-profile companies like Toys R Us and Maplin going bust, and supermarket chain Marks and Spencer planning deep cuts.
While prices rose, wages lagged, even though unemployment is at its lowest since 1975, at 4.2 percent.
“After Brexit, prices definitely went up,” said Nagesh Balusu, manager of the Salt Whisky Bar and Dining Room in London. “We struggled a bit earlier this year, so now we’ve increased the prices.” The bar is next to Hyde Park, a popular destination for foreign visitors. “The tourists have a good exchange rate. They know they can spend a little bit more than they usually do. But the locals are coming a little less. They are starting to think about how much they spend.”
The governor of the Bank of England, Mark Carney, estimated recently that average household incomes are around 900 pounds lower than the bank was forecasting on the eve of the referendum.
The real estate market, meanwhile, has cooled considerably, with the number of property sales in London near a historic low last year, according to estate agent Foxtons.
While some foreign prospective buyers were attracted by the drop in the pound, others seem to have been scared off by uncertainty over what Brexit might mean for their investment.
House prices are stagnating after years of gains, also due to expectations that the Bank of England will keep gradually increasing interest rates.
Nic Budden, Foxton’s CEO, predicts that the real estate market will remain challenging this year, while Samuel Tombs, analyst at Pantheon Economics, predicts that house prices will flatline for the next 6 months.
Against the backdrop of uncertainty, businesses have become more reluctant to invest in big projects. Because Brexit could lead to tariffs on EU imports of British goods, companies are hesitant to spend big on British plants and office space before they know what the new rules will be.
Benoit Rochet, the deputy chief of the port of Calais, the French town across the Channel from Britain, complained to a parliamentary committee this month that “we know there is Brexit but we don’t know exactly what Brexit means.”
“You are not alone,” responded the Conservative chair of the committee, Nicky Morgan.