I have decided to include more of the world stock market indices this week, as my blog is starting to get read more and more across the world by people from the UK, Europe, America, Australasia and the Far East.

Notably this week is the fall in the value of the Yen against Sterling and the US Dollar, falling by over 4% against UK Sterling and by 2.5% against the Dollar. However, the US Dollar has suffered too this week and slid against Sterling by 1.6% ending close to $1.50 to the Pound for the first time in a while.

The reason for the weakening Dollar is due to the US economy contracting by more than expected at 6.1% in Q1 2009. Investors are focusing on a rise in private consumption for the first time since Q2 of 2008 combined with a sharp decline in private inventories.

In the short-run falling inventories hurt an economy and at a point where inventories have reached their optimal levels, companies will need to increase production to meet demand, as economies pick up again.

Due to the falling pace in contraction in the US economy The Federal Reserve is refraining from new stimulus announcements.

UK Sterling rose this week on comments by UK Chancellor Alistair Darling that he expects a UK economy to recover by the end of the year.
End of the week saw:
Stock exchanges:
FTSE 100: 4,243.22 GBX
FTSE 250: 7,571.33 GBP
UK All Share: 20,647.03 ZAX
US DOW: 8,212.41 USD
US S&P: 877.52 USD
US NASDAQ: 1,719.20 USD
Japan Nikkei: 8,977.37 JPY
China H Seng: 15,520.99
Australian ASX 200: 3,769.60 AUD
German DAX: 4,769.45 EUR
French CAC 40: 3159.85 EUR
Spanish Ibex 35: 9,038 EUR

Currencies
UK Sterling £ to US Dollar $ 1.49089
UK Sterling £ to Euro € 1.12313
UK Sterling £ to Japanese Yen 147.906
UK Sterling £ to Aus $ 2.03507
US Dollar $ to Euro € 0.753325
US Dollar $ to Japanese Yen 99.2063
US Dollar $ to Aus $ 1.36500

Commodities
Nymex Crude oil – $52.65
Gold – $887.90

This week saw the Asian markets gain the most with the Nikkei gaining 5% over the end of last weeks close. Whereas the UK’s FTSE 100 gained just 2% and the New York Dow Jones 1% – what is positive though is that this is the second week the indexes have gained.

Sterling gained ground this week over the US Dollar by 4%, but this was not due to Sterling strengthening, but more to do with the US Dollar weakening. The US Dollar weakened against the Euro and the Australian Dollar by 5% this week, whereas Sterling lost 2% against the Euro and 1% against the Australian Dollar.

The price of oil jumped this week by a massive 15% ending the week at a recent high of $52.82 per barrel. Also, investors again seek safety in gold with the price per ounce rising by 3% on the week.

End of the week saw:
Stock exchanges:
FTSE 100: 3,843
DOW: 7,278
S&P: 768.54
Nikkei: 7,946

Currencies
UK Sterling £ to US Dollar $ 1.44776
UK Sterling £ to Euro € 1.06158
UK Sterling £ to Japanese Yen 138.620
UK Sterling £ to Aus $ 2.09244
US Dollar $ to Euro € 0.733372
US Dollar $ to Japanese Yen 95.7632
US Dollar $ to Aus $ 1.44600

Commodities
Nymex Crude oil – $52.82
Gold – $954.20

This has been a good week for World Stock markets with the UK’s FTSE 100 rising by 13.4% this week and the US Dow Jones climbed by 9.7%.

In the same week Sterling has strengthened slightly against the US Dollar and Euro and the price of a barrel of oil rose by around $5 representing a 10% gain on the week. Although in a meeting in Egypt this Week Opec President Chakib Khelil left oil production unchanged, leaving any decision for a reduction to be made at their next meeting in December.

Bad news on the high street

One of Britain’s iconic high street chains has gone into liquidation, but there is some light at the end of the tunnel for Woolworths with a rescue bid by Dragons Den entrepreneur Theo Paphitis, who is known for taking over troubled chains and turning them around. Mr Paphitis has turned Rymans and La Senza’s fortunes around in the past so it is no surprise that he is in talks with receivers on this one. The government has also announced this week that is preparing to draw up a list of industries that it is prepared to help through this financial down turn.

Short-term tax reductions with higher taxes in the future

Next week the UK will see a lower VAT rate of 15%, with some shops bringing in the reduction early to entice shoppers to spend more. However, the country will have to pay for these tax reductions and extra spending in the future and in particular the higher rate income earners will be targeted with the introduction of a 45% tax band! Some good news though from across the pond with the US holiday season shopping getting off to a good start, rising 3% over the same time last year.

House prices in England and Wales fall by over 10%

In the year to October fell by just over 10%, with the average house price falling to 2006 levels at £165,529. One of the main causes for the fall is that house sales between May and August this year have dropped by more than 50% as a result of the financial crisis. However, the fall in November has slowed according to the Nationwide to just 0.4% over the fall of 1.3% in October.

Unrest in the world as the slowdown hits

China has already seen unrest amongst redundant workers as the world slowdown has hit China in a big way, with over 50% of toy manufacturers going in to liquidation and as recession bights things are expected to get worse. This week saw 500 workers over turn police cars outside of a toy manufacturer over a pay dispute.

End of the week saw:
Stock exchanges:
FTSE 100: 4,288
DOW: 8,829
S&P: 896
Nikkei: 8,512

Currencies
UK Sterling £ to US Dollar $ 1.53836
UK Sterling £ to Euro € 1.21130
UK Sterling £ to Aus $ 2.34940
US Dollar $ to Euro € 0.78740

Commodities
Nymex Crude oil – $55.00
Gold – $819.00

The pound has continued to fall against the US dollar, hitting its lowest level since April 2006 on fears that the UK is heading into a recession this year.

Sterling fell to a low of $1.7771, and was recently trading at $1.7668. The weak pound weighed on shares, and the FTSE 100 stock index lost more than 2%.

Sterling has fallen sharply over the past month, down from July highs that saw one pound buying two dollars.

Wednesday’s slide comes as the Bank of England starts a rate-setting meeting.

The Bank is due to give its verdict on interest rates at midday on Thursday, with most analysts expecting it to keep borrowing costs unchanged at 5%.

Measured against a basket of currencies used by the UK’s main trading partners the pound is at a 12-year low.

Earlier on Wednesday, the pound had staged a small rally after better than expected figures on the service sector.

However, analysts had warned that any rebound may be short-lived because of the negative sentiment surrounding the currency.

Any rise in the pound would give “an excuse to sell sterling again at slightly better levels”, said Lee Hardman, currency analyst at BTM-UFJ bank.

Difficult outlook

The US currency has been gaining ground in recent weeks and on Tuesday the euro fell to a eight-month low versus the dollar, dipping to below $1.44.

Falling oil prices, which hit a five-month low on Wednesday, have been a factor behind the dollar’s rally.

Investors had bought commodities to protect against the dollar’s weakness earlier this year but are now unwinding those positions – to the US currency’s benefit.

Analysts also said the dollar was strengthening because the US economic outlook appeared better than the deteriorating picture in the UK and the eurozone economies.

“We’re seeing a continuation of the trend where sentiment on the rest of the world is deteriorating while sentiment in the US is improving, albeit from a very low base, and the dollar is outperforming as a result,” said Adam Cole of Royal Bank of Canada.

Gloomy comments over the weekend from UK Chancellor Alistair Darling, who warned that Britain was facing its toughest economic challenge for 60 years, triggered sterling’s plunge on Monday, which were exacerbated when the OECD predicted that the UK would be the only major industrial country to plunge into recession this year.

News reported by The BBC

The pound has fallen to two-and-half-year low against the US dollar and record low against the euro amid fears about the health of the UK economy.

Sterling fell as low as $1.7850, and was trading at 81.62 pence per euro.

Measured against a basket of currencies used by major trading partners, the pound is now at a 12-year low.

Sterling has fallen sharply over the past month – in mid-July one pound bought two dollars – as fears increased the UK was heading for a recession.

At the same time, the dollar has been helped by a fall in the price oil.

Difficult outlook

The US currency has been gaining ground in recent weeks and on Tuesday the euro fell to a seven-month low versus the dollar, dipping below $1.45.

Falling oil prices, which hit a five-month low on Tuesday, have been a factor behind the dollar’s rally.

Investors had bought commodities to protect against the dollar’s weakness earlier this year but are now unwinding those positions – to the US currency’s benefit.

Analysts also said the dollar was strengthening because the US economic outlook appeared better than the deteriorating picture in the UK and the eurozone economies.

“It is difficult to see an improvement in sentiment in the UK in the very near term,” said analysts at Barclays Capital.

Gloomy comments over the weekend from UK Chancellor Alistair Darling, who warned that Britain was facing its toughest economic challenge for 60 years, triggered sterling’s plunge on Monday.

Weak mortgage approval data added to the dark mood.

News reported by The BBC

The pound has fallen further against the dollar, hitting its lowest level in almost two years amid fears the UK will fall into recession.

Sterling touched its lowest level since October 2006 at $1.8617 but later bounced back to $1.8736.

Measured against a basket of trade-weighted currencies, the pound is now at its weakest level since 1996.

The pound dropped sharply on Wednesday after the Bank of England issued a gloomy assessment of the UK economy.

The fall in sterling will hurt holidaymakers who have benefitted from a strong pound when travelling overseas- and make it more expensive for people to buy second homes abroad.

However, it could help exporters whose goods will be cheaper overseas.

The Bank’s governor Mervyn King said economic growth would be flat for the next year or so and that inflation would rise to 5% or above before falling.

But with domestic demand weak, a revival of exports could help the economy and limit job losses.

Rate cuts

Economists had thought inflation would prevent the Bank of England from cutting rates, but the Bank’s suggestion that inflation will begin to ease raised expectations of interest rate cuts and this hit the pound.

“We have long argued that sterling has been significantly overvalued in recent years” Jonathan Loynes, Capital Economics

Lower interest rates mean investors get lower returns on sterling deposits, which makes the pound less attractive.

Simon Derrick, currency strategist at Bank of New York Mellon, described the pound’s fall this week a “dramatic collapse” that recalled the aftermath of sterling’s ejection from European Exchange Rate Mechanism (ERM) in 1992.

However, he said the currency’s slide should begin to ease.

“Even within the most ferocious sterling downtrends in the past, significant corrections emerged in the middle of the moves,” he said.

But Jonathan Loynes, chief European economist at Capital Economics, thinks the pound could fall as far as $1.65 by the end of 2009.

“We have long argued that sterling has been significantly overvalued in recent years,” he said.

Deteriorating outlooks

Recent official figures have already shown the UK is struggling with high inflation and faltering growth.

Fears about European growth have also helped the dollar bounce back from record lows.

The US economy is still reeling from the credit crisis but analysts say the deteriorating outlook elsewhere in the world has given the dollar a boost.

Falling commodity prices have also supported the US currency. Investors had bought gold and oil to protect against dollar weakness and are now unwinding their positions.

The euro was trading at $1.4910 on Thursday, slightly above the 6-month low of $1.4815 struck this week. Earlier this year, the euro was trading at $1.60.

The euro has been further undermined by the military conflict in Georgia.

News reported by The BBC