So Goldman Sachs have just released a report stating the “Great Recession” we’re in could potentially turn into the “Great Stagnation”.
They think there’s around a 40 percent chance that the major parts of Western society will go through extended and dawdling growth. Good news for us Brits though, as they believe the countries with the highest chance of stagnation for eight years or more are Belgium, Italy, France, Austria, Japan and the US. There’s better news for the emerging market economies, such as Russia, China and India – Goldmans believe there is almost a zero percent chance of them hitting stagnation. You could say this report won’t exactly help the already nervous sentiment of the eurozone debt situation, nor the economic outlook as a whole.
Meanwhile, Greek PM Papandreou is to hold a series of talks with Euro leaders to convince them that Greece can meet the demands of a tough austerity programme. The Franco-German team will really have to push their ideas forward if any package is to be agreed in the near future. A big win for Chancellor Merkel to increase the bailout fund’s firepower will also come as a strong relief for the Greeks’ cause.
The FTSE is down around 30 points this morning to 5170, following on from yesterday’s 20 point downer. The fall could be down to the decrease in demand for copper and their respective miners. There are PMI figures coming out of China on Saturday, and traders could be nervous over these as the region is a big metals consumer. In contrast, our neighbours from over the pond had a successful day’s trading after better than expected initial jobless claims figures. The Dow rose 143 points to 11153, but the futures are already pointing downward this morning.
Today is awash with economic data. In the UK, earlier this morning, we had September consumer confidence which rose for the first time in four months. In the US, we have personal income and spending for August, which is expected to remain unchanged. Later in the day, the US will see September’s Chicago PMI figures and it’s expected to fall. At the same time as that release we have September Uni. Of Michigan confidence, which has been known to move the markets if the figure is drastic. Although this month it is expected to rise only marginally.
As nervousness was the theme for yesterday, risk wasn’t on the agenda for FX traders. Safe haven currencies were back in the picture and the yen and dollar took advantage of it. This has continued into this morning, and we can expect it to remain if the data later on today is weak.
As we said earlier, copper has seen a real slowdown in demand and the metal is taking its biggest beating since the start of the global recession. The story isn’t much better for gold as it faces its biggest monthly fall since 2008. It is currently trading at 1627 and is showing support at 1604 and resistance at 1653.
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