FTSE LIVE: Eurozone bond buying plan floated at G20; hopes rise of more US stimulus
07:47 GMT, 20 June 2012
The FTSE 100 has opened down 9.6 points at 5,576.7 as investors
anticipate fresh measures by eurozone policymakers to tackle the
region's debt crisis and further stimulus action by the U.S. Federal
Reports suggest that Germany's Angela Merkel could bow to pressure and
agree a rescue effort for Spain and Italy that would see the eurozone's
permanent bailout fund used to buy their government bonds.
French president Francois Hollande said the suggestion of bond buying
was worth exploring and would be discussed at a meeting in Rome on
Friday between him, Merkel, Spain's Mariano Rajoy and Italy's Mario
Mexico getaway: Eurozone crisis was a major concern of G20 leaders meeting at the Los Cabos summit
At the G20 meeting in Los Cabos, Mexico, European leaders said they intend to work on concrete steps to integrate the region's banking sector, seen as a major step to break the cycle of debt-troubled countries bailing out their ailing banks which only pushes governments ever deeper into debt.
Earlier this week, the yield on Spanish 10-year bonds broke above 7 per cent, a key threshold above which borrowing costs become too expensive for a country to afford over the long term. Such levels have previously led to bailouts in Greece, Ireland and Portugal.
'When Spanish yields hit 7 per cent, we're getting into the “intervention” zone. It's either policymakers taking action, or the country takes the road to insolvency,' said Franck Dixmier of Allianz Global Investors.
In the U.S., the latest Federal Reserve Open Market Committee meeting wraps up today with a statement that could unveil further help for the fragile economy after the London markets close.
News yesterday that the UK's benchmark inflation rate had fallen to 2.8 per cent has also prompted speculation that the Bank of England may announce more stimulus for the economy.
Minutes from June's Bank of England monetary policy committee meeting will be released later, with investors keen to see whether there has been any change in the number of members voting for further quantitative easing.
Forecasters see one less MPC member voting to maintain the central bank's QE programme at current levels, with a vote count of 7-2 predicted versus 8-1 in May.
London copper futures slipped on worries over Spain's debt problems and as some investors cashed in on gains made the previous day. But the price was supported by talk of further stimulus by the U.S. Fed which could lift demand for industrial metals.
Brent crude was steady at under $96 a barrel but prices stayed close to 17-month lows hit the previous session.
British unemployment figures will be released later, with May's claimant count seen falling by 3,000 after a 13,700 drop in April. The ILO unemployment rate for April is expected to remain unchanged at 8.2 per cent.
The FTSE 100 closed up 95.22 points or 1.7 percent at 5,586.31 yesterday.
Ex-dividend factors will knock 2.27 points off the index today, with Experian, Land Securities, Severn Trent and United Utilities all trading without their payout attractions, which includes a special dividend for Severn Trent.
Stocks to watch today include:
Rio Rinto: The miner will spend $3.7billion to increase iron ore output in Australia by a further 25 per cent to 353 million tonnes a year by 2015, shrugging off forecasts of waning demand and a looming global supply glut.
Man Group: The group has named Tim Peach as managing director and head of its operations in Asia Pacific, a spokeswoman for the $59billion hedge fund firm told Reuters on Wednesday.
Kesa Electrical: Full-year results.
Independent Resources: First-half results.
- FTSE LIVE: ECB quashes hopes of more bond-buying
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- FTSE LIVE: Markets eye Greece debt talks and Portugal bond auction
- FTSE LIVE: Investors eye key Italy bond auction
- FTSE LIVE: Spain bond auction and ECB meeting eyed by investors