Stock Markets

Euro falls against dollar and pound PDF Print E-mail
Euro and dollar notes

The euro has hit a five-month low against the dollar as continuing concerns about the Greek economy weigh heavily on the currency.

The European single currency touched $1.4127 at one point on Wednesday, before recovering slightly to $1.4135.

Although Greece has passed measures to reduce its budget deficit dramatically, some analysts believe the country's financial woes will persist.

Against the pound, the euro also fell, with a euro worth as little as 86.85p.

This was also its weakest position against sterling since August.

"Greece's debt problems look to be deep-rooted and they cannot be resolved immediately," said Takeshi Makita at the Japan Research Institute.

Higher food costs lift US producer prices PDF Print E-mail
Christmas decorations
US consumers spent less than expected over the festive season

US producer prices rose 0.2% in December compared with November, led by an increase in the cost of food products, the Labor Department said.

The seasonally adjusted increase in the price of goods leaving US factories was a slowdown on November's 1.8% rise.

For 2008 as a whole, producer prices increased by 4.4% as the US economy started to recover from the middle of the year.

Separate data showed a 4% fall in US housing construction in December.

However, analysts said this decline was primarily caused by the cold weather.

Excluding food and energy products, which tend to be more volatile, core producer prices were unchanged in December, and were up 0.9% for 2009 as a whole. source

China economy shows strong growth in 2009 PDF Print E-mail
China v Japan GDP

China has said its economy expanded by 8.7% in 2009, exceeding even the government's own initial expectations.

The pace of change increased as the year went on, with growth in the final quarter of 2009 increasing by 10.7% from the same period a year earlier.

China is now on course to overtake Japan and become the world's second-biggest economy.

Japan announces its latest quarterly gross domestic product (GDP) figures next month.

The Japanese economy is likely to have contracted by about 6% in 2009.

'Right direction'

China's GDP announcement was made by Ma Jiantang, head of the National Bureau of Statistics.

Chris Hogg
Chris Hogg, BBC News, Shanghai

Officials say China's economic stimulus package - the largest in the world in proportion to the size of the economy - helped China to rebuild and recover.

A year ago the concern was that economic growth here would be too weak. Now the fear is that it could be becoming too strong.

Investors here are nervous because it's not clear yet what action the government will take to try to ensure this recovery is sustainable.

Interest rates could rise. The country's currency may be allowed to gain in value against the dollar. Lending controls are likely to be tightened.

He said China had faced "severe difficulties" in 2009, but its economy has now recovered and is moving in the right direction.

Annual growth was only slightly down on 2008.

These latest GDP figures have exceeded the target set by the Chinese government, the BBC's Chris Hogg in Shanghai says.

This is a turnaround because China, like other countries across the world, was hit by the economic crisis during late 2008 and early 2009. Factories closed and workers were laid off.

The economy recovered with the help of a massive government stimulus package but now there are signs it is expanding too quickly.

"There's very strong growth but there's real concern about the quality of the growth and what will happen when the stimulus is withdrawn," said Michael Pettis, professor of finance at Peking University.

Chinese workers in Shenzhen queue up to enter factory

"It seems pretty clear that any withdrawal of the investment stimulus is going to have a big impact on growth."

Inflation is also picking up, with consumer prices increasing by 1.9% in December from a year earlier.

Chinese authorities are expected to now take measures to prevent the economy from overheating.

Economists expect interest rates to rise, while banks have already been ordered to keep more money in reserve, and reports say some have even been told to stop lending for the rest of January.

US trade gap widens sharply as imports grow PDF Print E-mail
Shipping containers, Long Beach, California
US exports have picked up, helped by the weaker dollar

The US trade deficit widened sharply in November as the recovering economy boosted demand for imports to their highest level in almost a year.

The deficit grew to $36.4bn (£22.6bn), up 9.7% from an upwardly revised figure of $33.2bn in October. The increase was more than analysts had expected.

Imports totalled $174.6bn, up by 2.6% from the previous month, while exports totalled $138.2bn, up 0.9%.

The weak dollar helped to boost exports, particularly to China.

The US's closely-watched deficit with China narrowed to $20.2bn from $22.7bn in October.

The big jump in imports to the US reflected an increase in demand for industrial materials and consumer goods. This more than offset a fall in demand for foods and cars.

Economists were encouraged by the fact that both imports and exports increased.

"The big news is continued and sustained growth in trade volume, signalling recovery both in the US and among major US trading partners," said Christopher Cornell, at Moody's SOURCE

UK producer prices up in December PDF Print E-mail
Car production line
The manufacturing sector remains under pressure

The prices of goods leaving UK factories rose at a faster pace than expected in December, figures show.

Figures from the Office for National Statistics (ONS) showed UK producer prices rose by 0.5% last month.

It took the annual rate of output price inflation to 3.5%, which is the highest rate since January 2009.

Input prices, the cost of materials bought by producers, rose at an annual rate of 6.9%, the fastest pace since November 2008.

However, analysts said the increases were unlikely to signal wider inflationary problems.

"We remain dubious that manufacturers will be ably to significantly lift their prices over the coming months given substantial excess capacity and elevated competition amid still challenging conditions," said Howard Archer, chief UK and European economist at IHS Global Insight.

"While the manufacturing sector appears to be recovering to some extent after a largely dismal 2009, it is still hardly racing ahead." SOURCE

Oil price touches 15-month high on demand from China PDF Print E-mail
Oil pump

Oil prices have fallen back late on Monday after hitting a fresh 15-month high of nearly $84 a barrel.

US crude oil for February delivery was at $82.52 a barrel, after earlier touching $83.95 - the highest price since October 2008.

In London, Brent crude fell 40 cents to settle at $80.97 a barrel.

The gains had been mainly fuelled by positive economic news from China, which showed that demand for oil there had jumped by 25% in December.

China is the world's second-largest energy consumer.

The prolonged cold spell in the US and Europe also added to the upward pressure on oil prices.

Another factor was a fall in the value of the dollar, something that flatters the price of commodities priced in that currency.

For investors holding other, stronger, currencies, weakness in the dollar makes items with a dollar price tag cheaper.

The price of oil is still well below its record high of more than $147 a barrel, which it hit in the summer of 2008. SOURCE

UK 'close to leaving recession' PDF Print E-mail
£20 notes
The BCC says there needs to be easier access to capital

The British Chambers of Commerce (BCC) says there have been improvements in many areas of the British economy, most strikingly in manufacturing.

Its economic survey for the fourth quarter of 2009 says the UK economy appears to be "on the brink of leaving recession".

But it warned that, despite exports in the service sector strengthening, the industry was still struggling.

And it warns there needs to be easier access to capital for businesses.

The BCC says UK productivity could be hit if "sharp falls in business capital spending are not reversed".

It also says the 1% increase to employers' National Insurance Contributions planned for 2011 should be scrapped.

UK manufacturing activity 'accelerates' PDF Print E-mail
Car manufacturing
Car manufacturers have been more positive in recent weeks

UK manufacturing activity grew at its fastest pace in more than two years in December, a survey has indicated.

The Chartered Institute of Purchasing & Supply's purchasing managers' index rose to 54.1 from 51.8 in November. A score above 50 indicates growth.

The survey also found an increase in the new orders index to 57.4, the highest level since July 2007.

The pace of job cuts in the sector was the weakest since May 2008 and mainly centred on larger companies.

'Tumultuous year'

The pound jumped higher after the data was released and gained 0.2% on the US dollar to reach $1.62.

Some analysts think the increase in the purchasing managers' index (PMI) is a sign that 2010 could be a better year for the sector.

It's an encouraging number but an awful lot depends on global economic growth
Mark Miller, Lloyds TSB

"December data signal a positive end to a tumultuous year for UK manufacturers," said Rob Dobson, senior economist at Markit, which helps to compile the PMI data.

But worries over the general state of the UK economy mean others are more cautious.

Oil price rise nears $80 a barrel PDF Print E-mail
Traders work on the floor of the New York Mercantile Exchange
Oil is the world's most heavily traded commodity

Oil prices have climbed to more than $79 a barrel, reaching the highest levels for five weeks.

During Monday's trading in London, US crude touched $79.12 a barrel before falling back later to $78.77.

Heating oil futures led the gains, while London Brent crude rose by more than a dollar to $77.32 a barrel.

Prices rose following forecasts of colder weather in the United States, and the expectation of increased consumption and falling reserves.

That would indicate that demand was rising and signal an improvement in the US economy.

The north-west of the US is also the world's largest heating oil market.

On Thursday last week, benchmark crude rose $1.38 to settle at $78.05. Oil markets were closed on Friday for Christmas.

Falling supplies?

Inventory figures detailing the amount of oil held in stock are expected later this week from the Energy Information Administration.

News of low stock levels could push oil prices above $80 a barrel by the end of the year, according to Clarence Chu, a trader with Hudson Capital Energy in Singapore.

Better employment figures in the US last week also helped to lift hopes of economic recovery and raised expectations of stronger consumer spending and oil consumption


Bank of England voted 9-0 for unchanged 0.5% rate PDF Print E-mail
Bank of England building
Policymakers felt little had changed regarding the outlook for inflation

All nine members of the Bank of England's Monetary Policy Committee (MPC) voted to hold interest rates at its December meeting.

Minutes from the meeting also showed that the MPC was unanimous in voting to maintain the £200bn quantitative easing (QE), or asset buying, programme.

The MPC agreed that the medium-term outlook for inflation had not changed since its November inflation report.

In November, the committee extended its existing £175bn QE programme by £25bn.

That decision, however, had been split.

Seven members voted for a £25bn expansion, while chief economist Spencer Dale favoured no expansion and David Miles wanted a £40bn increase.

The December minutes said that the two still thought "a slightly different scale of asset purchases could still be justified".

"But the lack of significant news on the month meant that the case for deviating from the programme of asset purchases announced in November was outweighed by the benefits of completing it as planned," the minutes said.

The British Chambers of Commerce agreed that there was "no immediate need" to increase the size of the programme.

But the group's chief economist David Kern added: "It is disappointing that the MPC has not considered new ways of addressing the persistent weakness in bank lending to business.

"A cut in the rate of interest paid on commercial bank deposits held with the Bank of England may be worth considering." SOURCE

US growth rate revised downwards PDF Print E-mail
House being built in the US
The US economy returned to growth in the third quarter

The US economy grew by less than originally estimated between July and September, official figures show.

The latest estimate said the economy grew at an annual pace of 2.2%, down from the previous estimate of 2.8%. The first reading had shown growth of 3.5%.

It is the first quarter in which the US economy returned to growth, after four quarters of decline.

Separately, a report showed new home sales rose 7.4% in November, spurred on by government incentives.

The National Association of Realtors said sales rose to an annual rate of 6.5 million - the highest level in more than two years.

"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead," said the National Association of Realtors' chief economist Lawrence Yun.

The original deadline for the US government's tax credits was 30 November. It was later extended.

US interest rates remain on hold PDF Print E-mail
Federal Reserve chairman Ben Bernanke
Low inflation gives the Fed the chance to keep rates low

The Federal Reserve has decided to keep US interest rates on hold at between 0% and 0.25%, as had been widely expected.

Despite continuing signs that the US economy is recovering, the central bank reiterated that rates would stay at the low level for an "extended period".

The Fed's hand was strengthened by official data showing earlier on Wednesday that US inflation remains under control.

Inflation rose by just 0.4% in November, as had also been predicted.

With inflation continuing to be low, the Fed is not under pressure to increase interest rates as a means to tackle any inflationary pressure.

Instead, it can keep the cost of borrowing low to help the US economy continue to rebound.

Separate official US figures on Wednesday indicated that the economic recovery remains on track.

The Commerce Department said the current account deficit rose 10.3% to $108bn (£66bn) between July and September, as demand for overseas goods among US consumers increased.

Meanwhile, new home construction for November grew by 8.9% to an annual rate of 574,000 units.

The most recent official figures showed that the US economy grew at an annual pace of 2.8% during the third quarter, down from an initial estimate of a 3.5% expansion.

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