It’s public sector strike day.
Thousands of people will take to the streets of London to complain about the fantastic deal they’ve been offered on pension reform by the coalition. The union leaders have been gearing up for a fight for months now and despite claims from the coalition that discussions are ongoing the unions have insisted on spending the day disrupting millions of people’s daily routine. Of course you are going to get people upset about having to pay more, work longer, only to get less when they retire, but during the old days of unsustainable borrowing by the last administration in order to give public sector golden plated pensions, the strikers have to look back and realise that what they were promised then the country simply can’t afford today or tomorrow. Average public sector pay continues to remain way above that of the private sector and their existing pension deals are way out of line with what’s sustainable. With private sector workers having to do exactly what the coalition is asking the public sector to do i.e. align their pensions more with the private sector, when you see signs like “fair pensions for all” being branded around the picket lines you have wonder how they can’t see why the coalition is having to make these reforms. A full blown strike is also disingenuous at a time when the economy is on its knees and all they had to do to keep their mandate going was to do a strike for as long as a mere five minutes as opposed to a full day of stomping up and down the pavements!
Unfortunately, following on from the “independent” downgrade to UK growth forecasts yesterday indicating the GDP will be even less next year than it would have been in 2011 we are likely to see more of these strikes, protestations to government cuts and possibly even riots. It wasn’t a pretty picture painted by the Chancellor yesterday and if the eurozone crisis does get worse then even those gloomy forecasts may need to be downgraded further.
Downgrades to some of the world’s major banks by the S & P last night knocked Asian markets for six and that’s feeding through to European indices this morning. We’ve been calling the FTSE to open lower by some 35 points throughout most of the night and at the time of writing as the market opens up we are at 5285. For the FTSE support and resistance is seen at 5240/5195 and 5340/60, 5420 respectively over the near term with the recent rally now being called into question and over the slightly longer term things are still looking rather on the negative side with major support since at 5040/4960/4800 and resistance at 5600/5735.
European finance minsters have also fallen short of being able to come up with a plan to boost the EFSF bailout fund to as much as €1 trillion and are having to go cap in hand to the IMF, as well as explore other charitable donors who’ll almost certainly be China and other emerging economies.
As a result the euro is in a negative mood this morning with EUR/USD dipping to 1.3275. The rally in recent days has definitely been proved to be short lived following a brief return back above the 1.3400 level yesterday. For the single currency support and resistance is seen at 1.3240/10 and 1.3395/1.3440 respectively.
Gold has also taken a turn for the worse rejecting the 1720 level and it would seem that the precious metal is following in the footsteps of the euro and equity markets at the moment. This morning’s weakness is unexpected considering that you would usually expect to see the price of gold rally on news of credit rating downgrades, but not the case anymore so once again the longer term rally of the yellow brick is being called into question. This morning gold is trading at 1710.
The same can be said for black gold with Brent rejecting the triple Nelson level, falling back from 111.00 to 110.00 this morning. Near term support and resistance for Brent is seen at 109.50, 107.65, 106.85 and 111.95, 112.55, 113.20 respectively.
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