Indices across Europe are set to open mixed ahead of the key German constitutional court ruling on the ESM’s legality for the new bond purchase program announced by ECB chief Mario Draghi last week. The German DAX closed higher yesterday by 1.68% while the CAC40 was down by a0.03%. The Dutch AEX closed 0.13% higher.
Markets were seen to be in a rally hitting 5 month highs as the bond purchase program alleviates the borrowing costs for struggling economies such as Spain and Italy. It is imperative for the new program to sign up to the rescue funds from the ESM.
The single currency was trading strong for the second consecutive day against the Japanese Yen, gaining 0.2% at 100.21 Yen, while the US dollar lost 0.1%, trading at $1.2873 to a Euro in the early hours of the morning.
The FTSE 100 is called down 8 points at 5,784, the German DAX up 14 points at 7,324 and the French CAC down 4 points at 3,533.
London FTSE Snapshot
On the economic news front, today will see the UK’s unemployment report coming out at 0830 GMT. While the past employment rends have been resilient depite the past three quarters showing a significant drop in output, this could potentially result in a decline of the long term productivity trends. Today will see the August unemployment report along with July’s average earnings data. It is expected that a decline of 34k in the jobs by the ILO is possible along with the earnings growth average to be steady at 1.6% albeit low. The unemployment rate is also expected to be steady at 8%.
Market News – Asia
Shares in Asia surged to three week highs, with confidence that Germany’s constitutional court would ratify the ESM fund. News from Chinese premier Wen Jiabao is that the Chinese government could engage in further stimulus, using $15.8 billion fiscal stability funds in order to stimulate growth.
Immediately upon the news, the Australian Dollar surged ahead by 0.03%, trading at $1.0467 marking a strong level.
The Nikkei index moved higher above its 14 day moving average at 1.73% higher. The Hang Seng Index also advanced with gains of 1.12% while the Topix climbed 1.1%. The ASX gained 0.8%
Market News – US
Stocks across the US closed at their best in Tuesday with the Dow Jones industrials closing at its highest in five years, gaining 69.07 points, closing 0.52% higher. The NASDAQ managed to make modest gains of 0.37% while the S&P500 gained 0.28%
Meanwhile, ratings agency Moodys has put the US on alert stating that it would likely strip the US of its coveted Triple A ratings in the event US lawmakers fail to provide a long term debt reduction plan. Moody’s has currently put the outlook to “negative” which could change to stable should there be any improvements in the debt reduction.
Small and medium businesses saw their confidence rise for the first time in August, according to a report by the National Federation of Independent Business Optimism Index conducted by the Bank of Ameria. Businesses expect to see an increase in sales and hiring, according to the report.
The US dollar was weak, moving to a four month low against the Euro, ahead of the FOMC meeting that starts today. Speculation is rife that the Federal Chairman, Ben Bernanke will announce the QE plans. The USD was weak against more than 11 currencies.