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News - 14 May 2012

European shares fall as Greek uncertainty continues.

The continuing political uncertainty in Greece is undermining investor confidence as Bank shares HAVE FALLEN, particularly in Spain and France, with Madrid's Ibex index down 2.8% and the Cac down 2.3%. French banks were among the biggest fallers as investors worried about their exposure to other troubled eurozone countries.

BNP Paribas was 3.4% lower, Societe Generale lost 3.3% and Credit Agricole fell 3.4%.

The price of oil also fell on fears about weakening economic activity. Brent crude fell $1.69 to $110.57 a barrel. In March, it was $128 a barrel. US crude fell $1.86 to $94.27.

As the dollar strengthened against the euro on mounting worries over Europe, Oil futures retreated as the euro tumbled to its lowest point against the dollar since January.

Not good news as a stronger US currency makes dollar-denominated oil more expensive for buyers using the euro.

Meanwhile, both Spain and Italy carried out successful bond auctions. Appetite for Spanish and Italian debt was more than strong enough, but the return demanded by investors in Spain's debt was higher than in previous auctions, reflecting a dip in confidence.

The yield, or interest rate, on Spain's key 10-year bonds, which are traded on the market, jumped 23 basis points to a record high of 6.22%.
Italy raised 5.25bn euros, paying a yield of 3.91%, almost unchanged on the previous rate of 3.89%.

Lavinia Newman of ABDS says:
“The undermining factor is again the future of the eurozone. Greece's lack of a government puts in doubt its ability to stick to austerity measures imposed as part of its financial bailout. Without holding to agreed cuts it will not get the rest of the support funds it needs to function.”

With a New French President (Francois Hollande) in place with his main campaign slogan being a focus on growth more than austerity, and with the European powerhouse of Germany also showing signs of anti-austerity as Angela Merkel's party suffered a defeat on Sunday in an election in North Rhine-Westphalia, the country's most populous state.

The question is, will the new French president want to continue the work of his predecessor Nicolas Sarkozy in working closely with the German Chancellor in spearheading the eurozone's fiscal compact. 

Eurozone finance ministers will meet in Brussels this week to discuss the situation in Greece and Spain.

We at ABDS will keep you informed.

If you need any help and advice for your business on Tax, VAT or the implications of the Eurozone, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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