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Thursday, 8 December 2011

Man Utd AND European Pain

Man Utd, Basel, Europe, Pain

Manchester United crashed out of Europe last night at the hands of Swiss minnows Basel and Nemanja Vidic will be feeling the pain as much as Ferguson; the Scot has only seen United drop out at the group stages 3 times in his 17 years as manager. Vidic suffered a painful knee ligament injury, and as Manchester United were evicted from Europe's premiere tournament, the Eurozone itself struggles to avoid a crippling injury that could kick-start a Global Financial Meltdown.

Following yesterday’s sterling surge the Pound is currently trading at a strong 1.172 against the Euro. Markets were in a state of limbo this morning as the world awaited a series of important economic releases. The Bank of England Interest rate decision was announced at midday alongside the BoE’s Asset Purchase Facility; analysts correctly predicted figures to remain unchanged at 0.5% interest and £275 billion in the form of Quantitative Easing. With looming recession fears and underperforming retail sales compounded by yesterday’s lowest industrial output figures for 6 months, there was a case for further QE but bank officials remain committed to ‘waiting it out’ until February before tweaking the asset purchasing programme.

The most impactful release today however, is the European Central Bank’s Interest Rate decision and its accompanying press conference. Markets expected a 25 basis point drop from 1.25% to 1.0% and the ECB didnt disappoint; they also chucked in a gloomy growth forecast - just for good measure.

There is also speculation that new ECB President Mario Draghi will announce an extensive provision of liquidity to Euro commercial banks as he seeks to prevent price stability falling either below or rising above the 2% stipulated ceiling range: ‘This applies to both the setting of official interest rates and the implementation of non-standard measures.”

The EU summit kicks off tonight with an informal dinner in Brussels. The EU is divided as it approaches the 8th crisis summit of the year; summit chairman Herman Van Rompuy has urged leaders to avoid a laborious treaty change that could take up to two years to implement; Merkel argued that stricter budget enforcement is absolutely vital and stated some leaders and institutions still didn’t understand the severity of the crisis.

The Lisbon treaty that governs all 27 EU countries took 8 years to negotiate and was subject to both intra- and inter-national referendums; some of the EU states who are not part of the Eurozone are less than keen to hand over power from within to Brussels; Czech Republic Prime Minister Petr Necas falls into this category. UK Prime Minister David Cameron has stated that he will do his upmost to protect the needs of Britain, but reiterated the overarching importance of a functioning Eurozone to the UK economy.

Market sentiments will mirror the outlook provided for tomorrow's EU summit; expect volatility; expect the unexpected as Basel showed Manchester United last night, and remember the Eurozone and by definition the Global Economy is at stake.

Cutting Edge Current Affairs Courtesy of:
Josh Ferry Woodard 

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