The euro was the main loser in the markets yesterday, falling across the board as the markets swung back to risk aversion as Italy’s borrowing costs stay above 6% in the bond markets; Greece stunned its euro zone partners by announcing a referendum to decide the acceptance or otherwise of the latest bailout package whilst slowing manufacturing growth in China prompted the Royal Bank of Australia (RBA) to cut its key interest rate by 0.25% to 4.5%, the first cut since April 2009.
Today see’s the publication of UK GDP data for the third quarter of 2011 with analysts predicting the UK has a good chance of entering a technical recession and government ministers fearing a steep rise in the unemployment rate.
Yesterday, property analytics firm Hometrack reported that UK house prices fell by 0.2% in October. In each of the preceding five months, the index had shown a fall of 0.1%, so the October decline represents a setback for sellers.
Barely four days after the last euro zone summit, markets again seem to be jittery. Nervousness abounds ahead of a barrage of important events this week including the Federal Reserve and European Central Bank rate meetings; US employment report on Friday and the G20 summit.
The US dollar benefited from an increase in demand for its ‘safe haven’ status and rallied across the board. The Japanese central bank intervened in the markets to deliberately weaken the Yen which has recently reached all time record highs, thus hurting Japanese exporters.
Meanwhile the euro plunged across the board on fresh nerves about the euro zone sovereign debt crisis. Last week, European leaders announced numerous measures to resolve the euro zone debt crisis including increasing the bailout fund’s firepower. However, markets are concerned about the lack of detail in the plans and how exactly they are going to be implemented.
The Chinese manufacturing sector may have slowed its rate of expansion even further in the month of October, according to data released last night by the China Federation of Logistics and Purchasing (CFLP) prompting action from the RBA.
