Archive for May 2010

CTFs Axed by Coalition Government

May 27, 2010

Child Trust Funds (CTFs) are to be scrapped under the Government’s plans for spending cuts.  Children will no longer receive a Government voucher to open a CTF which can receive up to 1,200 GBP each year in contributions from friends and family, until they reach the age of 18.

CTF providers have reacted angrily to the new coalition Government’s scrappage of the funds, which it is claimed have been successful thus far and have provided for the UK economy.

Existing funds are to contine until the 18th year of the holder but no new funds are to be issued.

CTFs were introduced by the last Government as a way to provide a savings and investment tax wrapper for all children in the UK.  The money within a CTF cannot be accessed by anyone but the child when it reaches maturity.


Euro Falls on Sudden German Ban

May 19, 2010

Wednesday morning and once again European markets followed the Asian trend and continued to sell the euro.

Today’s main reason for risk aversion away from the euro was an abrupt decision by the German authorities to introduce an immediate ban on “naked” short selling of some securities, principally euro government bonds.  The ban will take effect until March 2011.

The sudden decision to limit this rather risky practise, whereby an investor doesn’t even borrow a  falling security before selling it on, left investors wondering what was making the Germans so jumpy?

Pound Loses Footing on Higher Inflation

May 18, 2010

Sterling has slipped after having enjoyed early gains, as the truth on higher-than-expected inflation results kicked in.  Initially, investors bought into the pound on the news that April’s consumer prices rose by 3.7%; it had been expected that they would increase by a more modest 3.5% after 3.4% in March.

It is thought that higher taxes on alcohol and tobacco had an effect on the inflation boost.  Now, it is thought that interest rates might be forced upwards sooner than predicted in order to contain inflation – a fact that would bear down on the pound.

Meanwhile hedge funds are under attack again, as the EU parliament reached an agreement to forge ahead with tougher rules for the industry.  The news was met with joy from countries like Germany and France, which actively support an overhaul to the regulatory system of hedge funds and private equity firms.

In Britain, which is home the vast majority of Europe’s hedge funds, the news will be somewhat less welcome.  This is backed by the US Treasury which now worries that EU investors will be less interested in US funds.

Market Joy Fades on Renewed Doubt

May 11, 2010

That was short-lived.  After a start to the week that contained more ‘TGI Friday’ feeling than ‘Monday Blues’, with markets surging on the back of the large EU rescue plan, today the day started with muted tones.

Investors, it seems, aren’t so sure after all that the loan package put together by EU finance ministers and the ECB over the weekend is enough to have a lasting positive effect on the troubled euro zone region.  Sure, it is argued, there is now a security blanket on hand for suffering economies but a long term solution isn’t certain just yet.

The morning got going with many investors heading back to the US dollar and away from the euro, the pound and the Australian dollar.  Oil fell to nearly $76 a barrel while spot gold remained sky high as the ultimate safe haven.

Meanwhile in the UK, Gordon Brown has finally relented and plans to hand in his resignation as leader of the Labour party.  This comes despite the news that Lib Dem leader Nick Clegg is now seeking talks with Labour while continuing discussions with Conservatives.  ‘King Maker’ really does seem to be a fitting description for Nick Clegg at this time.

Euro Rises from the Depths

May 10, 2010

The euro has surged after EU ministers finally cobbled together a large emergency fund for all Eurozone nations to access if necessary.

The fund, estimated at around €500 billion, means that if a country is under threat of the debt crisis that is gripping the EU, it can call on emergency funds as a bailout measure.

International investors have welcomed the news of a ‘safety cushion’ for the troubled Eurozone, after Greece’s financial crisis threatened to take over other weak EU economies.  Last week the single currency plunged on investor fears.

Voters Head out on UK Election Day

May 6, 2010

Polling stations have been open at least 2 hours as people head out to cast their votes on election day.  Who will win?  So far, it is still expected that the Tories could win by a marginal lead but that the Labout party may still hold the majority of seats in parliament.

Sound confusing? It is…and the awkward situation has been brought about by an exciting twist this year: the Liberal Democrats have managed to gain new support mainly due to ‘dynamic’ leader Nick Clegg.

Despite the fact that this is great news for change, it does mean that a hung parliament (where there is no clear majority winner) looks ever more likely.  This in turn is bad news for the economic recovery as it means that bills and motions could take longer to be passed and approved.

Financial markets are awaiting the election results with much anticipation; the currency exchange market has had its fair share of nervousnous in recent days and weeks thanks to the threat of debt crisis, which it is now feared will spread from Greece to other EU economies.

Traders Fear Deficit Crisis will Spread

May 4, 2010

Will it ever end?

Greece continues to dominate headlines in the UK and other EU nations including Germany – the country which is to hand the largest proportion of aid to Greece as part of the new €110 billion bailout.

The new figure, agreed upon over the weekend, has failed to please traders on the markets; many still fear that the deficit ‘illness’ is going to spread to other troubled Eurozone economies (notably Portugal and Spain).

In order to receive the bailout, Greece first had to receive a ‘rule re-jig’ by the European Central Bank.  The Bank, which had repeatedly announced last year that it was to change its lending rules, has now made a U-turn to enable Greece to keep selling bonds.  In reality, the ECB does not lend to countries rated as ‘junk’ – Greece received this rating from Standard & Poor’s just last week.

While economists complain about the ECB’s lack of resolve and slow reactions, the people of Greece are once again taking to the streets with another 48-hour general strike in reaction to the austerity measures imposed upon them.

This morning the euro slid against the pound and the US dollar on the ECB’s decision.