Markets make calmer start to the week

• FTSE 100 rises in early trading • Italian public holiday helps steady nerves • Gold falls back from recent records • Japanese economy not as sickly as feared Calm returned to financial markets on Monday following last week’s turbulence, as traders awaited fresh developments in the European debt crisis. Most major stock markets posted early gains, and the only major swing on the foreign exchange was a sharp fall in the swiss franc. Gold lost ground, falling back from its recent highs. In London the FTSE 100 rose by 41 points in early trading, hitting 5361.89, as City workers enjoyed a more sedate session after recent volatility. “A calmer tone has settled over the markets after last week’s turmoil,” said Jane Foley, senior currency strategist at Rabobank. There was widespread encouragement that the Japanese economy shrank by 0.3% between April and June, a smaller contraction than feared. In Japan, the Nikkei index closed 1.37% higher, with other stock markets in the region also registering solid gains. Foley said the Japanese GDP data, and encouraging US retail sales data released last Friday, had prompted “a collective sigh of relief across the global investment community”. Franco-German summit in focus Traders said that a public holiday in Italy – the source of much of the fear that swept markets in recent days – had helped to steady investors’ nerves. However, the picture could change on Tuesday when Nicolas Sarkozy and Angela Merkel will hold crucial discussions on the future of the eurozone . The talks, taking place in Paris, will consider how the two biggest eurozone economies can prevent the region’s debt crisis escalating further. Failure to agree clear plans could prompt another sell-off in the financial markets, traders believe. “If nothing is agreed tomorrow then we could see another market wobble,” said Michael Hewson, analyst at CMC Markets. “I’m afraid we’ll see more delays and more prevarication … and the markets are losing patience.” One option to resolve the euro crisis would be for weaker countries to issue “eurobonds”, backed by the rest of the community. France and Germany, though, have indicated that eurobonds are not on the agenda this week. Hewson warned that the financial markets are currently “in the eye of the storm”, suggesting that Monday’s placid scenes may be short-lived. A week to forget Last week’s drama began with heavy losses as the European debt crisis threatened Italy and Spain, sending the FTSE 100 to its fourth triple-digit fall in a row – a record . The recovery then stumbled on Wednesday over fears about the French banking sector, which prompted another sell-off . The blue chip index ended with two days of triple-digit gains, clawing back 6% of its total value . “Many traders will doubtless welcome a quiet start to the week after the extreme volatility that has been seen of late,” said Cameron Peacock, analyst at IG Markets. Peacock pointed out that the markets could be moved by US manufacturing data due for release later on Monday. At 2.30pm BST, the European Central Bank will reveal how much it spent in the last week buying up the sovereign debt of Italy and Spain. Akif Ince, credit data analyst at Markit, reported that the cost of insuring corporate and government debt had declined on Monday – a sign of “positive sentiment” in the market. “While we seem to be retracing for the time being, there are many moving parts and an air of uncertainty is lingering in the market as ideas of eurobonds and naked sovereign CDS [credit default swap] bans re-emerge,” Ince added. The Swiss franc fell by 2% against other currencies, following reports that the Swiss Central Bank was planning to peg the currency against the euro. The Swiss franc has soared in recent months as investors sought a safe haven. Gold, the other classic refuge, dropped around 0.5% to $1,740 an ounce. Stock markets Market turmoil Global economy FTSE Dow Jones Currencies Graeme Wearden guardian.co.uk

Posted by on August 15, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.