The US and Britain have both backed away from spending proposals worth 2pc of global GDP, accepting that each country [...]]]> Gordon Brown’s plans for a $2 trillion (£1.4 trillion) “New Deal” to revive the global economy have been quietly dropped to preserve the facade of unity as world leaders gather in London for the G20 summit.

The US and Britain have both backed away from spending proposals worth 2pc of global GDP, accepting that each country must find its own way. White House officials confess that there is no chance of a deal that entails further public debt.

“Nobody is coming to London to commit to do more right now. No single number is sacrosanct,” said Michael Froman, the US deputy national security advisor.

British Foreign Secretary David Miliband disowned a leaked draft retaining talk of a $2 trillion boost, insisting that it was an old document that merely lists spending packages already under way across the world. “This G20 summit was never about writing national budgets. Let us not hear that somehow the Anglo-Saxons are for fiscal policy and the other Europeans are somehow for regulation – you have got to do both,” he said.

The text reiterates the traditional pieties, calling for an “an open world economy based on market principles” and a determined effort to “resist protectionism”. It comes as the World Trade Organisation predicts a 9pc fall in global shipments this year following a violent plunge in the last quarter of 2008.

The pledge to uphold free trade has already been cast into doubt by China, which announced a raft of export tax rebates on Friday to shore up exports.

The protectionist move is likely to irk Washington. There is grumbling on Capitol Hill that the US stimulus is leaking out to surplus states in east Asia and northern Europe which seem to be counting on American demand to rescue the world again.

But the two sides are so far apart in their diagnosis of this crisis that no real agreement seems possible. German Chancellor Angela Merkel said over the weekend that the “German economy is very reliant on exports, and this is not something you can change in two years. It is not something we even want to change”.

Czech premier Mirek Topolanek, holder of the EU presidency, attacked the US fiscal plan last week as the “road to Hell”. Europe’s leaders insist the region is already doing enough since generous unemployment payments – starting at 80pc of earnings in Germany – act as an automatic stabiliser.

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Yesterday saw a bit of an up and down day on the stock markets with the US indices ending higher at the close on bargain hunting for [...]]]> US holiday will leave the markets desperately thin this afternoon with complete closure of their fixed interest and equity markets plus there being no Dollar cash settlement today.

Yesterday saw a bit of an up and down day on the stock markets with the US indices ending higher at the close on bargain hunting for technology and energy stocks. this has filtered through to a better opening in European bourses and will hopefully hold for the rest of the week.

A bit of positive Corporate news would help but at present, that doesn’t seem to be on the cards. The sad demise of Woolworths and MFI along with the less than buoyant economic data lend themselves to this being another of those false dawns.

Yesterday’s economic data from Europe, UK and the US all failed to inspire and although the numbers came in as expected, they did sound a bit like Frankie Howard’s soothsayer with her €˜Woe, Woe and Thrice Woe’.

GDP figures affirmed, as if we needed it, that the UK and US are deep in recession and there is concern that the measures that have been taken by Governments in all areas to combat the downturn might take an overly long time to trickle through. Pressure will be on to make sure that the initiatives are effective.

The weak US data had an adverse effect on the return on US Treasury Bills with yields hitting 50-year lows. The yield on the 10-year note dropped to its lowest ever level, down 0.13% to 2.98%.

As reported yesterday, China cut rates savagely, the largest reduction in 11-years, in reaction to the rapidly falling growth rate in the country. Even though the economy is still growing at about 7.5% per annum, this level of growth is the minimum required increase for the country to effectively ‘stand still’. The Chinese leaders are obviously very concerned. Metal prices jumped on the back of the cut.

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A stronger yuan would make Chinese exports more expensive overseas. Wen said China will work to “increase (the currency’s) flexibility and gradually make the [...]]]> Chinese Premier Wen Jiabao pledged on Monday to resolve trade imbalances after the country’s surplus hit a record high in October, and to work to let the yuan move more freely.

A stronger yuan would make Chinese exports more expensive overseas. Wen said China will work to “increase (the currency’s) flexibility and gradually make the yuan convertible under the capital account”.

However European Central Bank president Jean Claude Trichet, speaking at the meeting of central bankers in Cape Town, refused to make any specific comments on the strong euro.

Instead he reiterated previous comments that “excess volatility in currency markets is undesirable”. EU economic commissioner Joaquin Almunia made similar comments later in the afternoon saying that the euro’s recent moves may be brutal but fundamentals are the ultimate factor in respect to free market volatility.

Later this week, attention should switch back to fundamentals. The minutes to the US Federal Reserve Oct 31 rate decision come today and investors will be looking for any signal that borrowing rates will come down again in December, following a quarter-point cut at the Oct 31 meeting.

With the market relatively confident about the prospects for a rate cut in December, the risk is these expectations will be disappointed somewhat, which would be positive for the dollar and negative for risky assets.

The latest Rightmove house price survey showed the average asking price was 0.7 % lower in November compared to October. In the UK the main focus later this week will be on the Bank of England’s minutes to its rate decision earlier this month.

The central bank left rates unchanged at 5.75 % but the subsequent, surprisingly dovish Inflation Report, along with weak housing indicators, has raised expectations for a cut in the coming months. Investors will be keen to see whether the Monetary Policy Committee was divided in its decision.

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Mr Siwei told a conference in Beijing: “We will favour stronger currencies over weaker ones, and will readjust accordingly.”

Besides sterling, the dollar was [...]]]> The mortgage market’s renewed weakness was sparked by comments from Cheng Siwei, vice chairman of China’s National People’s Congress, who suggested China will diversify some of its $1.33 trillion (£660bn) of foreign-exchange reserves.

Mr Siwei told a conference in Beijing: “We will favour stronger currencies over weaker ones, and will readjust accordingly.”

Besides sterling, the dollar was down against 14 of the world’s 16 biggest currencies this morning, hitting the lowest since the 1950s versus the Canadian dollar, reaching a new record against the euro and its weakest in more than 20 years against the Australian dollar.

Sterling’s move higher comes a day before Bank of England Governor Mervyn King and the rest of the Monetary Policy Committee are due to give their latest decision on interest rates.
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While the majority of economists expect interest rates to be left at 5.75pc, the surge in the currency is likely to put parts of the country’s manufacturing industry under pressure.

The flight from the dollar is helping to fuel oil’s assault on the $100-a-barrel mark and investors’ appetite for gold, which is denominated in the US currency. The dollar was also hit yesterday by a report that the Fed’s loan officer survey reported evidence of an incipient credit crunch across broad reaches of the US economy, with banks tightening lending standards on prime mortgages.

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Even though consumer [...]]]> Durable goods orders dropped 7.8 percent in the month of January, which was the largest decline in 3 years due mainly to civilian airline orders helping to push orders for non-defense goods. Orders which are heavily skewed by aircraft fell by 3.1% in January following a downwardly revised 2.8% gain in December.

Even though consumer confidence hit a 5 year high and existing home sales increased by the largest amount in 2 years, the drop in durable goods orders was what mattered.

The combination of low inflation, softer growth and problems in the sub-prime lending market will make it difficult for the Federal Reserve to raise interest rates again this year

Today we have Fed Chairman Bernanke Speaking at 3pm and his comments will be closely watched for any indication on future direction.

World stock Markets crashed yesterday sparked by a massive 9% slide on the Shanghai. Chinese wobbles fed through to Europes markets and by 3pm Germany’s main Dax shedded 2.4% with Frances sliding by 2.8% with the FTSE down by 2.4%. Many feel the growing tension with Iran led investors to take some risk off their table.

German CPI accelerated in the month of February even though the rise was slightly softer than expected to 0.4% from an anticipated 0.5%. Also German retail manufacturing activity jumped slightly in the month of January to 45.0 compared to last month’s 43.9. All eyes today will be on Trichet’s comments at 2pm.

There was no major data released from the uk yesterday which means that we will have to look ahead to today’s data, including the consumer confidence survey at 10.30am. Earlier this morning we saw the Nationwide Housing price report come in slightly higher than anticipated at 0.7%.

Loans Calculators Blog- loans rates blog for news about interest rates- unsecured and secured loans, mortgages, remortgages and refinancing including home loans, equity release and debt consolidation.