Saturday 28 January 2012

US economy accelerates, Fitch downgrades five European countries

The Commerce Department reported on Friday that the US economy grew at a 2.8 percent annual rate in the fourth quarter, accelerating from the 1.8 percent rate in the prior quarter. Growth was boosted by a large increase in inventories.

An improvement in consumer sentiment in January provides hope that the economic momentum can be maintained in the current quarter. The final reading of the Thomson Reuters/University of Michigan's consumer sentiment index rose to 75.0, the highest since February 2011, from 69.9 the month before.

Earlier on Friday, there was also positive news from Japan, where retail sales rose 2.5 percent in December from a year earlier.

Another report from Japan on Friday showed that consumer prices excluding fresh food fell 0.1 percent in December from a year earlier.

Meanwhile, Europe got hit by another wave of credit rating downgrades on Friday. Fitch Ratings cut the credit ratings of Italy, Spain, Belgium, Slovenia and Cyprus.

However, investors have become less pessimistic about Europe's debt problem. Italy successfully sold 11 billion euros of Treasury bills on Friday after having sold 5 billion euros of inflation-linked and zero-coupon bonds the previous day.

But Europe's problems are far from over. Even as talks on Greece's bailout and debt restructuring remain on-going, analysts are now seeing an increasing probability that Portugal will also need another bailout.

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