Member Article

Federal Reserve extend “Operation Twist”

Markets were attacked by bad news from China in the morning. The reading for HSBC China manufacturing PMI (purchasing Manager’ Index) in June stood at 48.1, which was worse than the 48.4 in May and as any figure below 50 indicates contraction it indicated a possible slowdown in the economic powerhouse. Also announced was the eurozone’s composite PMI which was better than predicted at 46.0, but still indicating a decline in economic activity.

There was some good news in the UK where retail sales rebounded in May by 1.4% and recovered from the sharp fall in April. Compared with 12 months earlier retail sales grew by 2.4%, showing an even better result than analysts forecasted.

As previously reported expectations were high yesterday as markets waited on tenterhooks ahead of the US Federal Reserve meeting, with many predicting that the Fed would extend its bond buy-back programme (affectionately nick-named by analysts as “Operation Twist”). As news hit that the Fed had decided in favour of “Twisting” again markets appeared to stabilise long enough for stockbrokers to catch their breath before another explosive day in Wall Street. At the closing bell US stocks and commodities had fallen; the Dow Jones closing on 12,723.28 (-0.79%) and Oil closing at $79.40 (-2.52%).

Things also heated up for Angela Merkel as Germany’s economy began to feel the impact of the eurozone crisis with Markit announcing it was on course for a “marginal fall” in GDP. The doom and gloom also continued in Spain where midterm bond yields reached an all time high with 2017 government bond yields jumping above 6%. Stocks fell today, with the Stoxx Europe 600 Index (SXXP) down 0.7 percent at 8:59 a.m. in London. The euro, which jumped yesterday on speculation Merkel moved on the subject, fell for the first time in three days, trading at $1.2650.

On a more positive note, for those of you looking out of the office window yearning for brighter skies and sandy beaches you may soon be able to follow in the footsteps of the Oracle CEO Larry Ellison. It was reported today that Ellison bought 98% of Hawaii’s sixth largest island for an estimated $600m. Elsewhere, there were calls for the Greek Islands to be auctioned off in an attempt for the country to bail themselves out of their economic difficulties. Whilst the Greek government were not keen on this rescue plan it may be worth checking with your estate agent soon…

After the good start to this year the U.K.’s largest consumer electronics retailer, Dixons Retail Plc (DXNS), suffered a 17% drop in their underlying pre-tax profit from £85.3m to £70.8m. Similarly, UK company Invensys also saw a market slump, shares were down 16.3% at 215.1p by at 10.39am having closed up 27 % on Wednesday after announcing it had terminated takeover talks which had only been revealed the previous day. The FTSE 100 also closed 0.99% down at 5566.36.

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