The world’s markets are still in a quandary over the direction of the US FED. Signals from over the pond had indicated a winding up of its financial stimulus of quantitive easing and keeping interest rates at record low levels. However they have “delayed” this decision which has had an impact on markets across the world as they guess where things go from here. The FED, like the Bank of England, is committed to keeping interest rates low while unemployment remains high, but this uncertainty on policy is bound to harm investment going forward.
According to Purchasing Managers’ Index (PMI), China’s manufacturing sector has produced encouraging figures, which are an indication on the health of the world’s other economies as more exports are ordered.
Likewise the UK’s PMI remains high at 56.3 indicating a continued growth which has led to a boost in the labour market.
In a recent US treasury report, or a fit of jealousy, claims that Germany’s “export driven” economy is hurting not only the Eurozone but the wider economy. This is countered, quite rightly, by Germany as them just being competitive and a global demand for “quality goods.” The US is worried that the German’s trade surplus is risking deflation in the Eurozone, which with inflation hovering just above 0% at 0.7% is maybe not that far fetched.
Raghuram Rajan, the new governor of the Reserve Bank of India has denied that the country is in crisis. In an interview with the BBC he stated that the country has reserves of £175bn and that external debt was only at 22% of GDP (a figure some governments only dream.) Full interview: http://www.bbc.co.uk/news/business-24740842
