Financial Markets Resume Ascent on Hopes of Continuing Liquidity Flood

By: Lloyds_TSB

Financial markets have resumed their ascent, partly on expectations/ hopes that policy comments and actions this week will underscore the likelihood that markets will remain flooded with excess liquidity for some time to come. In this regard, the ECB is due to conduct another 12-month repo operation today. Although the size of the operation is expected to be nothing like the €442bn injected into the system in late June, the fact the ECB is content to provide further long-term liquidity support, despite growing signs of economic recovery, is being viewed as positive for equities and short-dated bonds.

In the US, the July Case Shiller house price survey is due, along with the Conference Board's consumer confidence report for September. Both are expected to show further improvements. Given the growing signs of recovery, it will be interesting to see what Dallas Fed President Richard Fisher, one of the most hawkish members of the Fed, says when he addresses a network of business leaders in Texas today.

In the UK, last week's MPC minutes hinted that, given the recent strength in construction and industrial production, today's final Q2 gdp number could be revised up slightly. Q2 current account figures are also due, along with the September CBI distributive trades survey and the August mortgage lending and consumer credit figures. The latter will be watched particularly closely after consumers paid down £0.2bn of credit in July - the first repayment since the series began in the early 1990s. There is a possibility of another repayment in August.

For more information: Emile Abu-Shakra Manager, Media Relations Lloyds TSB Group Media Relations Tel 020 7356 1878 http://www.lloydstsbcorporatemarkets.com/

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