Investors Worried about Europe and China

June 25, 2012

The last week of June started on a down note, with softer share prices, bond yields, European currencies and oil prices.  There have been few data releases so far this Monday, but three U.S. indicators are scheduled.

Press reports over the weekend claim that China’s economy has slowed more abruptly than official data imply.  According to the government, real GDP rose 7.4% at an annualized rate in the first quarter and by 8.1% between 1Q11 and 1Q12.

Mohammed Mursi of the Muslim Brotherhood was declared the winner of Egypt’s June 17th presidential election.

In Europe, all eyes are on the June 28-29 summit of EU leaders in Brussels.  German Finance Minister Schaeuble made hawkish remarks about the euro crisis over the weekend.  Spanish officials formally requested aid from the Eurogroup for its beleaguered banks, but the amount sought was not quantified.

Equities dropped by 2.2% in China, 2.1% so far in Spain, 1.2% in South Korea, 1.4% so far in Germany and France, 0.8% in Indonesia, Taiwan, and the U.K. so far, 0.7% in Japan, 0.6% in India, and 0.5% in Australian, Hong Kong, and Singapore.  U.S. stock futures point to a drop at the open.

The euro slipped below $1.2500.  Such has weakened 0.6% from last week’s closing level but remains 1.6% above the June 1st low against the dollar.  The U.S. currency also has risen 0.7% relative to the Australian dollar, which dipped a tad under parity, and has advanced by 0.6% against the kiwi and Swiss franc.  The dollar gained 0.4% versus the loonie but just 0.1% against sterling.  The yuan is unchanged.

The ten-year German bund and British gilt yields are down by nine and five basis points.  The Japanese JGB is steady.

Oil prices fell 0.8% to $79.14 per barrel.  Gold edged up 0.2% to $1569.70 per ounce.

Consumer price inflation in Singapore eased to 5.0% in May from 5.4% in April and 5.2% in March.

Spanish producer prices fell for a second consecutive month, albeit by just 0.1% in May after a 0.8% decrease in April and a gain of 0.8% in April.  The 12-month Spanish PPI inflation rate was 3.2% versus 3.0% in April and 4.5% in March.  Finnish PPI inflation slowed to 0.9% from 12-month increases of 1.4% in both March and April. 

The Greek trade deficit narrowed 23.4% to EUR 1.05 billion in April.  Exports and imports each fell sharply on month.  Dutch producer confidence recovered 0.2 points to minus 4.8 in June.

Czech economic sentiment worsened 0.8 points to a reading of negative 2.2 in June.  Business sentiment fell to 4.6 from 6.0 in May and 7.5 in April, while consumer confidence improved 1.7 points to minus 29.3.  Retail sales volume in Hungary posted a 1.0% monthly drop and a 2.7% on-year decline in April.

Scheduled U.S. data today feature new home sales, the Chicago Fed National Activity Index, and the Dallas Fed manufacturing index.  Analyst anticipate a 25-basis point cut in the Bank of Israel’s benchmark interest rate.

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

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