European Stocks Slump After GDP Data Are Released

August 16, 2011

The German Dax, Paris Cac and British Ftse are down 2.1%, 1.4%, and 0.7%.  Euro area 2Q GDP results were softer than feared.  Expectations are low on the outcome of a meeting today between French President Sarkozy and German Chancellor Merkel.

In the Pacific Rim, stocks had rallied 4.8% in South Korea but fallen by 1.5% in Singapore, 0.8% in Australia, 0.7% in China, 0.4% in India and 0.2% in Hong Kong and Indonesia.  Japan’s Nikkei edged up 0.2%.

Renewed risk aversion has lifted the dollar by 0.6% against the Canadian and Australian dollars, 0.4% against the euro, 0.3% versus the kiwi, and 0.1% relative to sterling.  The Swiss franc recouped 0.4% amid scepticism that the franc can be successfully pegged.  The yen edged 0.1% higher and retains a 76 handle.  The yuan rose another 0.1%.

Ten-year German bund and British gilt yields fell by four and two basis points.  The JGB yield is one basis point lower.

Gold leaped 22.5% to $1780.50 per ounce.  Oil fell 0.9% to $86.97 per barrel.

Real GDP in the euro area rose just 0.2% last quarter, a quarter as much as in 1Q, and on-year growth slowed to 1.7% from 2.5%.

German GDP slowed from a gain of 1.3% in 1Q to a rise of just 0.1% last quarter, cutting the four-quarter increase to 2.8% from 4.6%.

French GDP stagnated last quarter and posted a smaller 1.6% advance from a year earlier.

Italian GDP increased 0.3% on quarter and by 0.8% on year.

Dutch GDP edged up 0.1%, same as the German pace, and by 1.5% on an on-year basis.

GDP in Portugal was unchanged on quarter and 0.6% lower than a year earlier.

Spanish GDP rose 0.2% from 1Q and by 0.7% from 2Q10.

Austria (+1.0%) and Finland (1.2%) were the growth leaders in the second quarter.  GDP in those economies posted on-year growth of 4.1% and 3.7%.

Czech and Romanian GDP firmed 0.2%, while Hungarian GDP was unchanged on quarter. 

Euroland’s seasonally adjusted trade balance was in deficit every month of the first half of 2011.  The shortfall doubled in June to EUR 1.6 billion from EUR 0.8 billion in May, as exports plunged 4.7%.  Imports dropped almost as much, 4.1%.  The unadjusted first-half deficit of EUR 21.3 billion compared to a deficit of EUR 11.9 billion a year earlier. 

British consumer price inflation accelerated to 4.4% in July from 4.2% in June despite prices holding steady in on-month terms.  Core consumer prices were also unchanged on month but showed a greater on-year rise of 3.1%.  Retail price inflation held steady at 5.0%.  The Department of Communities and Local Government house price index was 2.0% lower than a year earlier in June.

China’s current account surplus widened sharply to $69.6 billion last quarter from $28.8 billion in 1Q.

Minutes from the Reserve Bank of Australia’s August meeting worried about intensifying global uncertainty that could weaken Aussie demand.  A strong Aussie dollar was cited as one factor containing inflation.  All in all, the minutes had a dovish tone, and on this day that saw risk aversion reassert itself, the currency has backed downward.

Scheduled U.S. data today include housing starts, building permits, import prices and weekly chain store sales. Canada releases results of its latest monthly survey of manufacturers.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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