Improved US Economy Infuses Confidence in Market


American consumer confidence bounced back in the month of September to the highest level seen since February, as per Conference Board, which saw its index rising from 61.3 points to 70.3 points in the month of August. Expectations of market were for more humble gain. One of the other reports suggested that prices of homes in US kept increasing in the month of July in twenty different cities that were being tracked. This happens to be the third month in a row where prices of homes in different cities increased.

After some early losses seen in Europe, Britain’s FTSE 100 went up 0.2% to 5,850.21 and Germany’s DAX increased 0.2% to 7,424.39. On the other hand France’s CAC-40 went up only 0.1% to 3,499.27. Wall Street was seen opening higher, with Dow going up 0.3% at 13,597.01 and S&P 500 increasing 0.3% to 1,460.89.

Earlier the markets traded lower due to the concerns that debt problems of European government will not stop posing a big risk to the investors and economy. Spain is likely to talk about few new structural reforms and cost-cutting measures in this week. These new steps could make way for increase in requirement for financial aids from different eurozone countries.

On the downside the hopes of Madrid applying for new aids were brought down by the fact that it decided to delay the move. The country has been more than reluctant to pose a question as these kinds of assistances often come with some kind of strings attached. Another big problem is whether the countries in eurozone will give Greece extra time to manage its targets of deficit reduction. The government also requires finalizing an austerity measure package but politicians are fighting hard to compromise as the popular anger continues to increase.

What has further made the situation of financial markets worse is the proof of worldwide economic slowdown. On one side we see Europe slowly sliding into recession and on other side we have two of the biggest economies in the world, China and US, struggling with their economic situations. Standard & Poor’s, the leading agency of credit ratings, decreased its forecast for entire eurozone. It predicts 0.8% contraction in this year and almost no growth whatsoever in 2013. It claimed that the biggest sources of concern were Italy and Spain.

Chief economist of S&P, Europe, Africa and the Middle East, Jean-Michel Six says that the current economic indicators give a picture of a bleak future for Europe.

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