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Investment market update

Early Trading

UK equities are expected to open slightly higher this morning ahead of a quiet day for corporate results.

World Markets

Most Asian stocks gained as a report showed Japan’s economy contracted last quarter by less than economists had forecasted. Investors were also watching the yuan after the People’s Bank of China raised the currency’s reference rate on Friday following three straight daily devaluations earlier in the week that impacted global markets. It kept its currency steady on Monday.

US equities advanced, closing higher for the week, as investors turned their attention to economic reports amid the Federal Reserve’s intention to raise interest rates. Nine of 10 major industries in the S&P 500 advanced, led by financial, industrial and utility companies. Energy shares slipped 0.2%.
UK stocks fell for a fourth consecutive day, as index heavyweights caused a drag. Oil producers Royal Dutch Shell Plc and BP Plc fell, weighing on the benchmark FTSE 100 Index, while Glencore Plc dropped 2.2%.


Bank of England policy maker Kristin Forbes said the central bank risks damaging the UK’s recovery if it waits too long before beginning to raise interest rates. In an article in the Daily Telegraph, Forbes said Britain is enjoying a “solid recovery,” and that delaying an increase could mean more aggressive tightening later. The benchmark rate has been at 0.5% for more than six years.

German Chancellor Angela Merkel said she’s confident the International Monetary Fund will join Greece’s third bailout and signalled willingness to consider debt relief to help make it happen. Merkel’s first public comments since euro-area finance ministers backed the €86 billion-euro (£61 billion) aid package were partly aimed at her party’s lawmakers, who want the chancellor to ensure that the IMF contributes to the latest Greek rescue. Germany’s lower house will vote on the bailout on Wednesday. IMF Managing Director Christine Lagarde has made it clear she will back the fund’s participation starting in October if conditions including eased terms on previous aid loans to Greece are met, Merkel said in an interview on ZDF television Sunday.

China’s economy is growing more slowly than official data suggests and below potential, a Bloomberg survey indicates, helping to explain why policy makers have stepped up stimulus and the move to boost exports with a weaker yuan. The economy expanded 6.3% in the first half, compared to the officially reported 7%, according to the median estimate of economists surveyed last week. For the full year, a 6.6% pace was the median forecast of respondents, who were asked to nominate real growth rates, not what they expect the official data to show.

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