Concern over Chinese Demand Hits European Equities

March 20, 2012

Share prices have fallen 1.2% in France, 1.1% in Germany and 1.0% in Britain.  In Asia, stocks slumped 1.7% in China where auto sales seem to be sputtering.  The Hang Seng index in Hong Kong fell by 1.1%, and Australia’s bourse lost 0.4%.  Japanese markets were shut for the vernal equinox holiday.

Other indications of a risk off mind set are

  • The U.S. dollar is 1.9% and 1.1% higher against the New Zealand and Australian dollars.
  • Gold and oil prices have sunk 1.1% and 0.8% to $1649.10 per ounce and $107.23 per barrel.
  • The German 10-year bund yields eased three basis points.
  • The dollar also rose 0.5% against the yen, 0.4% relative to the loonie, 0.3% versus the euro and Swissie, and 0.2% against sterling.

German producer prices rose 0.4% in February but eased in on-year terms to a 20-month low of 3.2% from 3.4% in January and 5.2% in the year to November 2011.  Energy prices were 6.9% higher than in February 2012, while non-energy producer price inflation slowed to 1.6% from 1.8% in January and 2.0% in December.

British CPI inflation did not ease as much as anticipated in February.  The CPI rose 0.6% on month, reversing January’s 0.5% decline, and the 12-month pace of 3.4% compared to forecasts of 3.2% and a 3.6% 12-month increase in January.  Core inflation ticked down to 2.4% from 2.6% but also surpassed expectations.  Retail price inflation slowed to 3.7% overall from 3.9% in January and to 3.8% from 4.0% excluding mortgage and interest payments.

The monthly survey of British industrial trends compiled by the CBI weakened five points to minus 8% in March following a 13-point improvement in February.  The average reading in 1Q12 of minus 9% compares to a mean of minus 20% in 4Q11.

The U.K. budget will be presented Wednesday.

Minutes from Australia’s central bank policy meeting earlier this month expressed satisfaction with the current 4.25% Official Cash Rate and hinted that such could drop further if external demand proves weaker than assumed.

U.S. Treasury Secretary Geithner also warned about the drag on all countries of Europe’s continuing debt problems.

The French index of leading economic indicators stagnated in January, and the coincident index slipped 0.1%.

The Greek current account deficit was 31% smaller in January than in December.  Finland’s jobless rate ticked down a tenth percentage point in February to 7.7%.  Dutch consumer confidence fell three points in March to a reading of negative 39.

Swiss industrial production was 1.4% lower in 4Q11 than in 4Q10, matching the decline between the third quarters of 2010 and 2011.

South Africa’s leading and coincident indices rose by 0.4% and 0.3% in January.

U.S. housing starts and building permits figures will be released today, as well as weekly chain store sales.  The Illinois Republican presidential primary today shapes up as a critically important contest for both Romney and Santorum.  The outcome, as in Ohio and Michigan where primaries have been already held, looks close.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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