The US rate of inflation has risen from 2.1% in February to 2.7%, as a result of persistently high fuel prices and rising food costs, surpassing analyst expectations and leading to increased pressure on the authorities to tackle inflationary pressures.

The US rate of inflation has risen to 2.7% according to figures published by the US Labor Department, as the rising cost of oil and escalating food prices continue to enact inflationary pressures worldwide.

The rate of 2.7% marks a stark jump from February’s rate of 2.1%, prompting some analysts to express concern and call for further action to tackle and curb the potentially devastating impact of inflation on the wider US recovery.

Simultaneously, wages and consumer spending have remained suppressed, hampering recovery in the key retail sectors as a result of the prolonged economic recovery stateside.
The news comes alongside a similar rise in inflation throughout the eurozone, in addition to high rates of inflation in the eastern giants China and India, as global economies continue to be affected by higher commodity pricing.

The European Central Bank, which sets interest rates throughout the eurozone, has today risen the base rate of lending to 1.25%, up from their record low of 1% following concerns over regional inflation and in particular the effects of high commodity prices.

The European Central Bank has today increased interest rates by 0.25% to 1.25%, lifting rates from their historic 1% low where they have stayed for almost two years.

The increase in interest rates comes amidst growing concerns over commodity prices, in particular oil prices, which are fuelling inflation throughout Europe to over 2% beyond the ECB target rate.

However, with Portugal the latest eurozone economy to experience debt difficulties and request EU financial support, some analysts have warned that the impact of rising rates could destabilize the most fragile European economies even further and increase the probability of further future eurozone bailouts.

The move comes alongside the decision of the Bank of England to hold UK interest rates at 0.5% for another month, despite fears about persistently over-target inflation and the impact of high fuel prices on the cost of living.

With the ECB breaking from its lengthy cautious interest rates policy, it remains to be seen whether the UK, which has held interest rates at 0.5% for 25 months, will venture to follow suit.

The price of crude oil has continued to rise to new highs following further uncertainty over the unfolding political situation in Libya and reports of civil unrest in Saudi Arabia and how this may come to affect the supply of oil over the comings months.

The price of crude oil has risen over $1 a barrel to a crude futures price for April of $104.42 – the highest price for US crude futures in over two years – in response to growing unrest in the Middle East and the potential knock-on effects for the world’s oil supply.

The ongoing political crisis in Libya is feared to have the potential to impact oil supply, and with reports of growing protests in Saudi Arabia, the possibility for disruption as uncertainty continues looks set to prop up oil prices for the foreseeable future.

While the Libyan crisis has no doubt had an effect on oil pricing, some analysts have suggested that it is the Saudi Arabian reports that are most concerning, with one analyst at Credit Agricole saying it is the ‘main risk in the region’ as far as oil supply, and as a result oil prices, were concerned.

With oil cruising to new highs, and no sign of an end to the ongoing unrest in the world’s most densely oiled nations, it remains to be seen how long these new market highs can be sustained.

The rate of growth in the UK services industry has been more sluggish than anticipated, prompting some to fear that the recovery in the services sector may be less robust than had been previously thought.
The rate of growth in the UK services sector has fallen below expectations, according to the results of the Markit/CIPS Purchasing Managers Index, which fell from 54.6 in January to 52.6 in February.

The index, which reflects the growth in orders across the services industry, shows a growth in figures above 50, yet the figure of 52.6 is a fall in the rate of growth from January, and a more modest growth than in previous months.

Some analysts have said that the news could factor in to any Bank of England interest rates decision, and would likely put paid to assumptions of an interest rate rise. This could be potentially significant, with commentators suggesting the market has already priced in an anticipated interest rate rise over the coming months.

The slower rate of growth may come to play a pivotal role in determining whether the central bank favours high inflation or shakier economic growth in choosing whether or not to raise interest rates from their current historic lows.

Strong indicators from the UK construction sector have sent the GBP to a new three-month high against the USD, as the markets respond to a series of favourable results for the UK economy in the last few days.
The UK construction sector has enjoyed a significant recovery in the last month, beating analysts’ forecasts and underlining the extent of the recovery of the UK economy across core sectors.

Analysts had expected a slight decline in the sector over the period, which helped add further potency to the growth figures and sparked a rally behind the pound, pushing its value to $1.6232.

The CIPS UK Construction Purchasing Managers’ Index rose to 53.7 in January, up from 49.1 in December and vastly exceeding widespread expectations of 49.9.

The pound was also up against the euro, up over 0.6%, off the back of the significant growth in UK construction – so often a bellwether for the wider UK economy.

The news comes off the back of similarly positive results from the UK manufacturing sector, which has helped settle concerns over last month’s surprise 0.5% decline in economic growth and arguably points towards a more rounded, diversified economic recovery.

And with further weight thrown behind the cause for raising interest rates in order to calm inflation by MPC member Andrew Sentance, the markets have responded in kind by rallying behind the pound.

The rate of growth in the UK manufacturing sector has hit a record high over the last month, growing at the fastest rate since records began and prompting calls for a quicker than expected increase in interest rates in order to dampen inflation.

The UK manufacturing sector has grown at a record rate, surpassing all previous monthly growth figures since 1992, while employment in the sector has also risen at its fastest pace in almost 20 years.

According to the Purchasing Managers Index, a survey compiled by the Chartered Institute of Purchasing and Supply, hit 62.0 in January, up from 58.7 in December as the manufacturing sector continues to enjoy a robust recovery as the wider economy continues to plough forward.

While the news of strong growth in manufacturing is no doubt a positive, there are also fears amongst some in the industry that rising prices as a result of spiralling inflation could hamper growth and stint the already promising progress from this vital economic sector.

The recent fall in GDP of 0.5% has somewhat dampened the spirits of those pushing for an interest rate hike, suggesting that the UK economy may still be facing danger.

However, with the surprisingly robust figures from the manufacturing sector, it is suggested that this will help to fan the flames of calls for an interest rate increase in order to curb inflation and give the Bank of England some breathing space for further stimulus if necessary.

While the Monetary Policy Committee was split for January’s interest rate meeting, it is thought that a move towards raising interest rates as soon as this month is now plausible.

Barclays have been fined a record £7.7m by the FSA, following an investigation into the widespread mis-selling of two investment funds to over 12,000 customers, which it knowingly sold despite unsuitability for investors with minimal experience.

Barclays has been fined some £7.7m by the Financial Services Authority, in response to an investigation into failings in the marketing and management of two investment funds – the Global Cautious Income Fund and the Aviva Global Balanced Income Fund.

Barclays knew of the irregularities in selling the fund from summer 2008, but took no remedial action or steps to curb the misselling, according to FSA findings, in spite of a 14% rate of complaint about the advice and selling of the funds to customers.

This had led to a compensation liability so far of £17m, with up to £42m more possibly outstanding to unsatisfied investors, the majority of whom were in the retirement age bracket.

Barclays was fined £191m in August 2010 for regulatory breaches in the US, and has been subject to numerous fines by the FSA in response to consistent regulatory failings, according to FSA investigations.
Despite the news of the most recent fine, Barclays share prices seem to have been largely immune.

The Monetary Policy Committee of the Bank of England has agreed to keep interest rates on hold at 0.5%, the record low rate first set in March 2009, in spite of growing fears of rising inflation amongst analysts.
The Bank of England has voted to keep interest rates at their record low level of 0.5% for another month, despite increasing concern about the impact of interest rates on persistently high inflation.

The Monetary Policy Committee, the team responsible for setting interest rates, voted overwhelmingly in favour of no-change, with one member suggesting a rise in rates to curb inflation and another calling for more quantitative easing to help strengthen the overall economic recovery.

The Committee’s decision has divided opinion, with some analysts calling for interest rate rises to be implemented in order to counteract the inflationary pressures caused by rising commodity prices and an increase in the standard rate of VAT to 20%.

However, some have suggested that the current inflation issue is not best deal with through the mechanism of interest rates, which they argue may even harm the UK’s fragile economic recovery.
Interest rates have remained at 0.5% for almost 2 years, in an attempt to bolster the recovery and strengthen economic growth in the wake of the global recession.

The success of financial spread betting speaks for itself. From relatively modest beginnings in the early 1970s, where gold was the primary indexed instrument for clients, the phenomenon has reached dizzying heights covering a vast array of instruments from bonds to exotic currencies. There are now more than 20 platforms offering spread betting in London alone, which are FSA regulated and backed by big money. And these firms now regularly reach out to new customers in the form of advertising in newspaper supplements and across the media.

The merits of spread betting are easy to comprehend. The mechanics of spread betting, whereby the broker effectively lends the spread bettor capital in exchange for a marginal deposit, allows the investor to use relatively little capital to “leverage” their investment. This means that a deposit of say £100 can give you access to a £1000 exposure. And because of this leverage, spread betting is the ideal instrument for short-term gain.

This is the great advantage of spread betting over share dealing where ownership of the underlying instrument requires a much larger capital outlay. Financial spread betting has also increased its viability as an investment tool by adopting speedy and user friendly interfaces that allow investors to place bets in real time environments from the comfort of their own PC’s or even mobile phones.

Telephone and online assistance is available from the spread betting brokers, alongside structured tutorials for beginners through to professionals.

In a similar way, Contracts for Difference (CFDs) have also taken off since their inception around 20 years ago. They also benefit from being traded using margin and although there has been much debate about the usefulness of CFDs versus spread betting, they probably suit different trading styles rather than one being better than the other. However, whereas CFDs are liable to capital gains tax, spread betting is exempt – making it instantly attractive to many investors.

Spread betting can also be an advantage when trading in international markets as the spread bettor can often choose which currency they wish to place the wish place the trade in. This differs to CFD’s, where trades are always denominated in the base currency of the underlying instrument.

Funding charges are more transparent through CFD’s as they are debited to the investors trading account, while with spread betting, the charges are factored into the price/spread. CFD’s have no expiry, where spread betting has a fixed expiry date which means the position is closed out at a certain point in time (unless physically closed out earlier).

Finally, the leveraged nature of both spread betting and CFDs means that you can lose more than your initial capital, so caution is advisable when dealing with these dynamic investment tools.

Barclays Bank could be subject to a £7bn shortfall following the enforcement of new rules for capital reserves drawn up this week, as part of a wider bid to shore up the balance sheets of European banks following the global financial crisis of 2007.

As part of the new Basel III rules, UK banks will be required to maintain a capital ratio of some 7%, which will see a significant rise in capital necessary at several large banks. And with additional scope to regulate banks with riskier businesses in a more stringent manner, some analysts are suggesting that Barclays could face a significant shortage of capital, leaving them in an awkward position if they are to maintain compliance.

While Barclays has been singled out as one of the worst affected banks in light of the new rules, it is suggested than many more large financial institutions will find themselves facing a shortage of resources, as European authorities enforce their attempts to stiffen the integrity of the regional banking system.
While UK regulators are by no means obliged to crack down on the larger operates, many analysts are coming to the conclusion that political pressures combined with the perceived substantial ongoing threat of default to the global financial system will lead to UK authorities adopting a much more hard-line approach on those banks perceived to be vulnerable, in order to solidify their balance sheets ahead of any future difficulties.

The measures, announced over the last few days, will be brought into force across several years to enable banks to store up reserves and acquire the necessary capital to meet the threshold 7% retention rate.