Stocks Slump in China But Rising in Europe

July 13, 2010

China’s stock market fell 1.6% after government indications that property market curbs will be retained.  Signs such have been effective already include a 0.1% dip in property prices last month and a smaller 608 billion yuan rise in bank loans.  Elsewhere in the Pacific Rim, equities declined 0.7% in Australia, 0.6% in Taiwan, 0.3% in Thailand and 0.1% in Japan.

Alcoa kicked off the second-quarter corporate earnings season with a positive report of net profits of 13 cents per share and a prediction of rising demand.  In Europe, the Paris Cac and Spanish IBEX are 1.5% higher, and the German Dax and British Ftse have traded up 1.4%.

The uncertain results of Euroland bank stress tests being done this month continued to weigh on investor psychology especially after the German finance minister intimated that some banks that fail the studies may require government aid to fortify their balance sheets.

Moody’s downgraded Portuguese debt by two notches to A1 but left the outlook “stable.”  Markets took this news in much better stride than would have been the cast a month or two ago.

The dollar is narrowly mixed with losses of 0.3% against the British and Canadian currencies and 0.2% versus the yen and kiwi, but it has ticked up 0.1% relative to the euro, Swissy and Aussie dollar.  The yuan is unchanged against the greenback.

Ten-year British gilt and German bund yields firmed four basis points, and the 10-year JGB is up 2 basis points.

Oil and gold prices rose 0.6% to $75.39 per barrel and $1206.20 per ounce.

Japanese industrial production in May was revised to a 0.1% rise from a 0.1% drop.  It was 20.4% greater than in May 2009.  The inventory ratio increased 4.8% in the month but was 22.7% lower than a year earlier.  Capacity usage climbed 0.8%, while capacity itself was steady.

Consumer confidence in Japan improved to 43.5 in June, best since September 2007, from 42.8 in May.  Confidence in 2Q averaged 42.77 versus 39.90 in the first quarter.

Business confidence in Australia slid a point in June to 4, while business conditions rose 2 points to 8.

Lot’s of price data were released today.

  • British consumer prices firmed 0.1% on month and by a slightly higher than expected 3.2% on year in June.  Such has been 3.0% or higher in every month so far this year.  Core inflation returned to April’s 3.1% after dipping in May to 2.9%.  The 12-month increases in the RPI and RPIX (excluding mortgages) each dipped a tenth to 5.0%.  Britain has experienced more stubborn inflation than other advanced economies. 
  • The Swiss combined PPI/import price index fell 0.4% in June, its first drop in four months, and to an on-year pace of 0.9% from 1.4% in the year to May.  In conjunction with a lower CPI, this is reviving concerns about Swiss deflation.
  • Spanish consumer prices rose 0.2% in June and 1.5% from a year earlier.  Core CPI was just 0.4% on year.
  • French consumer prices were unchanged on month in June and up 1.5% from a year earlier.  Core CPI was at 1.4%.
  • Hungary’s CPI firmed 0.2% in June and accelerated to 5.3% from 5.1% in its 12-month comparison.
  • German wholesale prices slid 0.2% in June, trimming the 12-month increase to 5.1% from 6.2% in May.  This was the first monthly decline since last October.

The German ZEW Institute published its July indices of investor sentiment for Germany and Euroland.  The former fell to 21.2 from 28.7 in June, while the latter dropped to 10.7 from 18.8.  Investor perceptions of present conditions improved to 14.6 in Germany from minus 7.9 the month before, while the present situation index for Euroland rose to minus 26.5 from minus 40.8.

The Dutch trade surplus narrowed to EUR 2.8 billion in May from EUR 3.15 billion in April.

Sweden’s 4.8% jobless rate was as forecast.

The British Department of Communities and Local Government reported an 11.0% on year rise in its house price index.  Little change from April’s 10.1% result had been expected.

Scheduled U.S. data today include the monthly trade deficit, the IBD/TIPP optimism index, the JOLTS index, the NFIB survey, and the monthly federal budget figures. Canada also is reporting trade data.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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