JAPAN QUAKE COULD SEE EXPECTED ECB RATE RISE RECONSIDERED - Shares on Japan's Nikkei have closed up 5.6% this morning. The index had dropped by more than 16% earlier this week - its biggest two-day fall in 23 years - but investors are now cautiously optimistic about a recovery. Japan's problems also could mean that the European Central Bank drops plans to raise rates next month, as signalled.
Financial analyst Paul Sommerville lived in Tokyo and worked in its financial services for several years in the 1900s. He says a 'simple' earthquake would have been bad enough, but Japan has suffered a triple blow with the quake, the tsunami and the problems at its nuclear plants. He says the country had been planning to increase its nuclear power up to 41% by 2017 from its current level of 34%, but those plans will now be on hold. He says the effects of the week will be longer lasting and harder to recover from.
Before the earthquake, Japan already had massive debt levels, but Mr Somerville says that Japan also has a huge savings rate and some of these savings will be spent on construction and rebuilding the country. He says Japan's central bank will also start to print money and will keep interest rates at their current record lows. He says that most analysts have shaved 0.5% off the country's growth prospects for the rest of 2011.
From a global perspective, Mr Sommerville says that oil demand from Japan has dropped dramatically and this has caused oil prices to fall from their recent highs. He also says the events in Japan will lead central banks around the world to reconsider raising their interest rates - including the European Central Bank. The analyst says that since the quake last week there is now just a 50% chance of the ECB raising rates next month as opposed to a 90% chance before the dramatic sequence of events in Japan. He says the ECB would be making a huge mistake if it put up rates next month.
***
MORNING BRIEFS - You Tube, which is owned by Google, has bought Irish digital video company Green Parrot Pictures for an undisclosed sum. Green Parrot's technology can help to improve the quality footage uploaded to the video sharing site. 35 hours of video is uploaded to You Tube every minute - some of it is not great quality. the Irish firm is able to sharpen images, reduce visual noise and make video quality better, all while it is being uploaded.
*** On the currency markets the euro is trading at $1.3971 cents and 86.94 pence sterling.
