Morning Call by Greg Secker

Yesterday, the FTSE 100 closed up by 3.89 points (or 0.1%) points to close at 4,689.67. Oil producers were amongst the highest risers as there was increased demand from the US causing firmer crude prices. However, the banks fell, after HSBC traded ex-dividend. Yesterday, the Dow Jones industrial average closed up 70.48 points at 9279.16. Yesterday, the Nasdaq Composite Index closed up at 1,969.24. The S and P 500 index was up 9.58 points to close up at 996.46. US stocks improved as investors reacted to firmer oil prices and investors started to shrug off overseas weakness. Healthcare stocks were among the better performers.



There has been concern among city economists about the weakness of the UK economy after it emerged that the Bank of England governor Mervyn King and two colleagues had pushed to extend quantitative easing (QE) by £75bn earlier this month, rather than the £50bn that was voted in. Detailed forecasts published by the BOE showed that gross domestic product (GDP) will rise by 0.2 per cent between July and September, marking the first economic expansion since the first three months of last year. These growth figures have been extrapolated by economists from data published by the Bank in the wake of last week’s Inflation Report. According the independent The Paris-based Organisation for Economic Co-operation and Development also said yesterday that the world’s 30 most advanced economies stopped contracting in the second quarter of the year, having endured the sharpest downturn since the Great Depression. According to research out yesterday by UBS, the devaluation of the Sterling has caused London to drop 19 places in a ranking of the world’s most expensive cities. London now ranks 21st for living costs and its international wage level comparison. Standard & Poor’s has reported that the number of companies defaulting on their debts has risen to record levels this year.



Investment returns for risky corporate debt has rocketed since January. S&P said the amount of debt that has defaulted this year, already exceeds that of all the defaults in 2008. Research shows, that the world’s big investment institutions are dumping cash and bonds and scooping up equities. According to a poll, investor optimism about the global economy has risen to a six-year high and stock market sentiment is at its most bullish for two years. According to the Merrill Lynch fund manager’s survey for August, 75% of respondents believe the world economy will strengthen in the coming 12 months – the highest reading since November 2003. Hurricane Bill is the first of the 2009 Atlantic hurricane season and has already hit Category 4 status. Due to this Insurers are concerned they will have another season of billion pound losses. The Obama administration said it will wind down its popular “cash for clunkers” incentive program so as soon as early September. Yesterday, the Transportation Secretary Ray LaHood reassured auto dealers that they would be reimbursed for discounts given under the program.



Cable is ticking higher in early European trade, supported by a generally healthy risk appetite. It is at 1.6575 at writing. Technical resistance now at 1.6590/00. EUR/USD trading is off to a far slower start this morning, the pairing presently sitting at 1.4238. Asian stocks did ok overnight, Chinese stocks rebounding, and looks to increase risk appetite. The USD/JPY is up at 94.35 from a North American close Wednesday around 94.05, while EUR/JPY is up at 134.30 from around 133.80.



This morning, Gold is at, 946.30 USD, Copper 278.60 USX and Brent Crude 74.64 USD Yesterday Crude oil prices surged after the government’s weekly inventory report revealed a surprise decline in stockpiles. Gold demand fell to its lowest level in six years in the second quarter, the World Gold Council said yesterday, as the global downturn hit jewellery consumption and electronics producers’ buying demand. Demand worldwide fell nine per cent to it’s the lowest level since the first quarter of 2003. Just as the price of the commodity slides to a seven-year low, a hedge fund has made a large bet that natural gas prices will triple by winter.



Due for release today there are the GBP retail sales and CHF ZEW Survey.