Europe
European markets saw a late setback on Thursday when the IMF cast a long shadow over Greek bailout negotiations, saying it will not participate because of the unsustainability of Greece’s debt load.
European stocks had already been a little directionless with upbeat earnings getting offset by worries over another drop in Chinese markets and a slight rise in German unemployment.
A leaked summary of an IMF board meeting held on Wednesday indicated that the current high debt levels and poor record of implementing reforms disqualifies Greece from a receiving another bailout. The IMF will participate in negotiations but will not reach a decision on joining the programme for months.
Germany has said it requires the IMF to be part of any agreement so with a decision pending from the IMF for months; the chance of a bailout programme being agreed before a €3.2bn payment is due to be paid by Greece to the ECB on August 20is next-to-none.
Germany reported a slight increase in unemployment by 9K leaving the unemployment rate unchanged at 6.4% while business and consumer confidence picked up across the Eurozone.
The bottom dropped out of Chinese markets again in the last few minutes of trading, raising concerns tomorrow could see a renewal of Monday’s crash.
A flurry of UK corporate earnings releases kept the FTSE 100 somewhat insulated from international concerns with earnings growth and job cuts both leading to optimism amongst shareholders.
Royal Dutch Shell (LONDON:RDSa) announced a huge 6,500 planned job cuts to cut costs to match the slump in the price of oil sending shares higher on the day by over 4%.
Royal Bank of Scotland (LONDON:RBS) shares rose as much as 3.5% after the bank reported a surprise 27% rise in profits over the last quarter before slumping back into the red by the afternoon.
Rolls Royce (LONDON:RR) shares gained over 2% simply by keeping guidance and avoiding another profit warning.
A rise in revenues at BAE Systems PLC (LONDON:BAES) have helped shares of the defence and aerospace contractor gain as much as1.5%.
Shares of Thomas Cook Group Plc (LONDON:TCG) warned bookings have been negatively impacted by economic uncertainties in Greece and the terrorist attacks in Tunisia sending shares down by as much as 2%
Centrica (LONDON:CNA) shares dropped 2% on news British Gas has lost 45,000 more customers in the first half of the year. British Gas revenues did rise 44% but the company is still planning to cut 6,000 jobs.
A fall in revenue at Babcock International Group PLC (LONDON:BAB)have sent the outsourcer's shares down by 3%
US
US markets opened lower on Thursday after an acceleration in US growth in the second quarter came right on the heels of the latest monetary policy statement from the Federal Reserve that said the central bank is looking for more signs of strength in the US economy before it decides to hike interest rates.
The first estimate for second quarter growth came in at 2.3%, below analyst estimates but well above Q1 which was revised higher from -0.2% to 0.6%. Personal consumption also rose to 2.9%. More troubling was that seasonal adjustments means GDP for 2012 through 2014 was revised lower, indicating an even slower recovery since the financial crises than previously thought.
Shares of Procter & Gamble Company (NYSE:PG) fell around 3% on the open after the company beat profit estimates but missed on revenues, in part due to strength of the US dollar hurting foreign earnings.
FX
Following the higher revision to first quarter GDP and acceleration in growth in the second quarter, the US dollar was stronger than all major currencies on Thursday.
The euro saw some of the steepest losses as concerns began to grow again surrounding Greece’s bailout and after German unemployment slightly underwhelmed. Having been at 1.11 on Monday, EUR/USD dropped back towards 1.09 on Thursday.
A surprise drop in building permits helped push the New Zealand dollar over the edge, sending NZD/USD over 90 pips lower and beneath 0.66.
Commodities
Strength in the US dollar and signs of weakness in Chinese stocks sent commodities generally lower with only crude oil seeing small gains following supportive comments from OPEC Secretary Abdullah El-Badri and a surprise drop in US oil inventories.
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