"The markets remained positive despite the World Bank cutting its global growth forecast by the most in three years. It forecasted that global growth would slow to 2.5% in 2012, down from an estimate of 3.6% in June. The Bank said that the global slowdown would pose a serious threat to emerging economies such as India and Mexico. It predicted that the euro area may contract by as much as 0.3%. Germany has also cut its 2012 economic growth forecasts. However, the EUR surged on the back of an announcement by the IMF that proposes an increase in its lending resources of as much as $500 billion after identifying a need for up to $1 trillion in financing over the next few years. The EUR surged to as high as 1.2865 this morning on the IMF news.
In less much less positive news, the unemployment rate in the UK rose to the highest levels in 16 years at 8.4%, up from 8.1% from the previous quarter. The number of job claimants rose for the 10th month to 1.6 million, the most since January 2010. The sobering data raises concerns that the UK is headed for another recession. If not for the IMF announcement, there would have been heavy selling of the GBP overnight. GBPUSD opens the Asian morning at 1.5431. The Australian has held steady and opens the morning at 1.0415.
Equity markets were buoyed by the IMF news and continued strength in US economic indicators. Confidence levels of US homebuilders rose to the highest levels more than 4 years in the month of January. Furthermore, reports that the Greek government would finalise an agreement with private creditors by the end of the week also supported markets. The S&P 500 has closed the session higher by 1.11% to 1,308. More than 40 companies on the index are due to report quarterly results this week. Earlier in Europe, the DAX rose 0.34% to 6,355 while the FTSE gained a modest 0.15% to 5,702.
Commodity prices were flat after a couple of days of gains and the CRB index closes the day 0.32 points lower at 310.51. WTI Crude is 0.4% higher at $101.10 as issues surrounding Iran continue to support the price above $100.00. Precious metals continue to consolidate in tight ranges with gold steady at $1,658 while silver gained 1.1% to $30.45. Soft commodities had a mixed session with wheat falling almost 3% while copper gained 0.7%. Today, we have the release of Australian inflation expectations and employment data. In Europe and the US, there is the European current account, US building permits, CPI, unemployment claims and a number of other indicators. "
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