Umm, why is the FTSE up this morning?

GDB2222

Umm, why is the FTSE up this morning? Opened down less than I expected, and now it's above Friday's close. Any explanations?

lisyloo

Annoucementby the ECB?

http://www.bbc.co.uk/news/business-14441453

MacMickster

Its not how it starts, its how it finishes the day that will be revealing. Does the smart money think that this is a solution to the problem, or the sound of a can being kicked along the road again?

GDB2222

lisyloo wrote: »

Annoucementby the ECB?

http://www.bbc.co.uk/news/business-14441453

Ah, thanks, hadn't spotted that. Is this just more King Canute stuff?

Generali

MacMickster wrote: »

Its not how it starts, its how it finishes the day that will be revealing. Does the smart money think that this is a solution to the problem, or the sound of a can being kicked along the road again?

To be fair, the ECB has given the can a pretty heafty thwack and it is coupled with some very strong language and action by the Italians: budget returns to balance in 2013 and a constitutional amendment to ban deficits apparently.

Generali

lisyloo wrote: »

Annoucementby the ECB?

http://www.bbc.co.uk/news/business-14441453

Also Moodys announced they would not downgrade the US.

Alysia

GDB2222 wrote: »

Umm, why is the FTSE up this morning? Opened down less than I expected, and now it's above Friday's close. Any explanations?

There is the ECB annoucement, but it's mainly due to human psychology. An index falls 10% in a week, which is outside the normal trading patterns for that index, so people then look for a value entry point back in as things look to stablise and this morning seems to be that time. Obviously that doesn't mean it won't fall further in due course and I don't think it'd be that surprising to see the FTSE 100 gap under 5,000 at some point during August. We've been due this type of fall for a while now anyway, although I didn't see it being as sharp as this.

MacMickster

Generali wrote: »

To be fair, the ECB has given the can a pretty heafty thwack and it is coupled with some very strong language and action by the Italians: budget returns to balance in 2013 and a constitutional amendment to ban deficits apparently.

From Robert Peston's blog on the BBC:

http://www.bbc.co.uk/news/business-14441484

Last night's statement from the European Central Bank implied that it would do what investors say they want it to do, which is to buy Italian and Spanish debt, to make up for inadequate demand from banks and commercial investors.
But the ECB made it clear it would be doing so with extreme reluctance. Also the ECB implied that it would buy Spanish and Italian bonds only until eurozone governments have ratified a rescue package for their currency union that was agreed on 21 July, which would allow their bailout fund - the European Financial Stability Facility - to buy the debt of eurozone members facing funding difficulties.
Although France and Germany insisted in a joint statement that their parliaments would ratify the rescue package by the end of September, ratification by all sovereign members can't be taken for granted (the perils of living in a democracy).
And there's another thing which spooks investors: eurozone governments have not done the one thing investors most want, which is to agree to massively increase the size of the EFSF.
Here is the relevant statistic. Over the next five years, Italy has to borrow more than 500 billion euros, simply to repay existing debt that is set to mature. On top of that, Italy will have to borrow more to finance its deficit, the gap between tax revenues and spending.
To put it another way, Italy's potential financing requirements on its own would exhaust the resource of the EFSF, based on its current size, if investors were to shun Italy altogether.
That is why investors see any purchases by the European Central Bank of Spanish and Italian debt as - at best - a sticking plaster. ECB purchases would not provide long-term sustainable demand for Spanish and Italian bonds.
The sticking plaster is only useful if it gives Italy and Spain sufficient time to persuade the markets that they have their deficits on a sustainable downward trend and their public finances are being properly fixed.
But if in the coming weeks Italy and Spain fail to do that, declining confidence in their ability to repay their debts will look even more like a potentially mortal wound for the eurozone.

Whilst it sounded like a hefty thwack, the can may have just gone up in the air rather than a long way down the road.

Generali

MacMickster wrote: »

Whilst it sounded like a hefty thwack, the can may have just gone up in the air rather than a long way down the road.

Good analogy!

If the Italians follow through with what they've said then they should be ok. Spain though? I think they're toast.

chucknorris

It's actually slipped back down at the moment (9.47 am down 0.2%). If nothing dramatic happens in the next 2-3 hours I shall be investing 12k in a tracker. I would invest more but all my cash is tied up in fixed rate bonds at the moment.

Mrs_Bones

If the stories in the papers at the weekend come true and the B of E does downgrade this countries growth forecasts again this week, will that effect things on the markets?