TRADERS who stayed on the floor throughout August 2011 will remember it for many things, but tranquility will not be one of them.
While European chief executives left the office for their customary four-week holiday, global equity markets kicked off a month of instability as US lawmakers dithered over a last-minute increase in the country’s debt ceiling.
Morning reports were punctuated by premature calls on rallies, brief upticks and steep declines as investors flitted between selling off stocks and buying into traditional safe havens.
When rating agency Standard & Poor’s downgraded the triple-A credit rating of the US on 5 August, the country’s stocks saw their biggest one-day decline in three years. The UK also suffered as the FTSE fell below the 5,000 mark for the first time in more than a year – a sinking feeling that hit it again ten days later as banks plummeted on fears over short-term funds.
All eyes turned to Brussels on 16 August as Nicolas Sarkozy and Angela Merkel met to discuss Europe’s debt crisis. But hopes they would consider eurobonds were short-lived, as instead they mulled a financial transaction tax and shares fell again.
A fitting political backdrop to the volatility was provided by the violent riots that swept across the UK and by a renewed focus on the Arab spring, as Libyan rebels took Tripoli and the UN launched an enquiry into Syrian human rights violations.
As the month draws to a close, investors will be crossing their fingers that September will mean a relative return to normality. But with the Vickers report due on 12 September, a decision on Greek collateral arrangements mooted for mid-month and Fed chairman Ben Bernanke signalling more easing could be announced on 21 September, hopes of an Indian summer will have to be put aside for now.
OBAMA AVOIDS DEBT DEFAULT
Just hours ahead of a 2 August deadline to avert an unprecedented default, President Obama (below) signs a bill that raises the $14.3 trillion debt ceiling and sets in motion a plan to reduce US deficits over 10 years.
AMERICA LOSES TRIPLE-A RATING
Rating agency Standard & Poor’s cut the top-tier AAA credit rating of the US on Friday 5 August, rattling markets across the globe.
UK CITIES HIT BY RIOTS
Riots (below) spread across London and beyond after police shoot dead Mark Duggan in Tottenham. Shops are burnt and looted and close to 2,000 people are arrested.
FTSE FALLS BELOW 5,000
The FTSE dropped below the 5,000 level on 9 August for the first time since 7 July 2010, as markets reacted to the US downgrade.
MERKEL-SARKOZY MEETING FAILS TO CALM MARKETS
France and Germany unveiled far-reaching plans for closer Eurozone integration (below) but disappointed investors by declaring that any thoughts of common eurobond issuance would have to wait. They also unveiled a plan to explore a financial transaction tax, hitting interdealer brokers ICAP and Tullett Prebon who were among the top fallers on the FTSE 100 and FTSE 250 indexes respectively.
RISE IN UNEMPLOYMENT AND INFLATION
The latest UK unemployment figures show the number of people out of work rose by 38,000 in the three months to July (above) as UK consumer price inflation rises to 4.4 per cent.
JOBS RESIGNS FROM APPLE
Steve Jobs (right) resigns from Apple, sending its shares plunging seven per cent after-hours before trading is temporarily suspended. They have since regained their losses.
SECOND DIP BELOW 5,000
Energy and mining companies lead the FTSE below 5,000 again in early trading on 19 August, before an afternoon rally that saw it close at 5,040.
BERNANKE DELAYS QE3 DECISION
US Federal Reserve chairman Ben Bernanke says there will be “no new stimulus – yet” at the annual Jackson Hole meeting of central banks. The FTSE is yet to react, but the S&P 500 gained 1.8 per cent following the speech.