Pulling back from a recent test of the psychologically important 2.0000 level, the pound was seen easing across the board as cooling investor risk appetite weighed on British currency.
Amid a tightening central bank and subprime concerns, banks are forced to alter their earnings estimates as profits are speculated to decline.
- [I]“Interest rate fears jolt FTSE”[/I]
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[I]-Source: Financial Times[/I]
The “under-valued” Japanese yen is gaining steam as investor?s succumb to a bout of risk aversion unwinding of some yen-fund carry trades. Brittan is currently boasting the highest borrowing rate in the G7 and is a prime recipient currency of yen-funded carry trades making it vulnerable to unwinding positions. Traders are taking capital off the table and repositioning it in long government bond until they gain some sense of market directionality.
-[I] “Yen rallies for 3rd day on waning risk appetite”[/I]
[I]-Source: Reuters UK[/I]
Planning to act under the interest of ordinary voters, newly placed British Prime Minister Gordon Brown intends to work with both sides of the political line. It is his expectation that this will help him change the face of politics in the U.K.
``This need for change cannot be met by the old politics,’’ -Brown
- [I]“Brown Plans Change in U.K. to Meet Ordinary Concerns”
[/I]Bloomberg - Are you a robot?
[B][U]UK Market Activity:[/U][/B]
[I][U]Currency Markets:[/U][/I] [B]GBP/USD[/B]
Pulling back from a recent test of the psychologically important 2.0000 level, the pound was seen easing across the board as cooling investor risk appetite weighed on the British currency. The Sterling digressed to 1.9961 as remarks from the BoJ and RBNZ injected some uncertainty in the markets laying the foundation for some investors to scale-back their exposure to risky carry trades. Retreating 0.6 percent against the resurgent Japanese yen, cable/yen traded at a 9-day low as scant UK data forced traders to turn to US economic news for direction. Attention will be primarily focused on the U.S. FOMC meeting as market participants look for any comments regarding the housing market or inflation before defining a strategy.
[U][I]Equity Markets:[/I][/U] [B]FTSE 100[/B]
UK equities declined London?s benchmark FTSE 100 dropped 0.42 percent to 6,531.70 as each of the 17 western European equity markets sold-off. Falling victim to a tightening BoE monetary regime, British banks are revising their earnings guidance downwards, dragging their stock values with them. Stating earnings estimates below analysts? expectations for 17 cents per share, Northern Rock (NRK.L) tumbled 0.9 percent suffering their worst daily draw-down in 10 years closed at 861.5. FTSE banking components continue to emerge as index laggards pointing to market dynamics like the US subpirme debacle and an escalating bout of risk aversion as possible culprits.
[I][U]Fixed-Income Markets:[/U][/I] [B]10-year Long Gilt[/B]
Reflecting the classic inverse correlation between equity and debt prices, 10-year gilt yields retreated to two-week lows as investors booked profits in stocks and reallocated funds to the “safe-haven” of government debt issues. Yields on the UK long bond fell 6bp to 5.403 percent as bond prices were buoyed by the notion that after a widely anticipated rate hike next week, the BoE might keep monetary policy in place.