Uncertainty about the prospects for global growth kept the mood in the markets wary, even as the euro and peripheral eurozone government bonds enjoyed some respite.
Disappointing data releases in the US, Germany and the UK highlighted the extent of the headwinds facing the world economy. US equity investors were further unsettled by an earnings miss from Apple.
But some glimmers of hope emerged on the eurozone debt crisis front as Ewald Nowotny, a member of the European Central Bank’s governing council, was reported to have said there were arguments in favor of giving a banking license to the European Stability Mechanism, the region’s permanent rescue fund.
“There is no doubt that this would dramatically reduce the negative risk premium carried by the euro, but of course, Mr Nowotny’s actual words were more balanced,” said Elsa Lignos, senior currency strategist at RBC Capital Markets.
“Mario Draghi [European Central Bank president] has previously ruled it out and the ECB seems to be miles away from contemplating such a move – bear in mind the ESM hasn’t even cleared Germany’s constitutional court yet.”
Nevertheless, on the Forex markets, the euro pushed back above $1.21 and recovered some ground against the yen. Spain’s 10-year government bond yield fell below 7.5 per cent while the two-year moved back below 6.5 per cent. Yields on Italian debt also retreated, while that on Germany’s 10-year Bund edged up 1bp to 1.26 per cent.
The day’s European data releases, however, painted a gloomy picture. The latest ECB bank lending survey showed that eurozone banks’ credit standards tightened in the second quarter of this year at roughly the same pace as in the first quarter.
German business sentiment, meanwhile, fell for a third successive month in July to the lowest in 28 months, according to the latest survey from the Ifo institute. Analysts said the report was consistent with recent purchasing managers’ data showing Germany’s private sector shrinking at the fastest rate in more than three years.
The grim news continued as UK second-quarter GDP data showed the country’s economy contracting more than economists had expected, prompting speculation that the Bank of England might move to provide further stimulus measures.
In the US, sales of new homes fell 8.4 per cent in June – although the previous three months’ data were all revised higher, highlighting the volatility of the series. John Ryding at RDQ Economics said: “We believe that housing has stabilised and is beginning to show signs of mild recovery and we do not view this report as evidence against this thesis.”
The figures helped unsettle US equity investors – but possibly not as much as news that Apple’s quarterly net income and sales had risen by “just” 21 per cent and 23 per cent respectively, falling short of analysts’ expectations. “Apple has become the China of corporates in that the growth rate at which people worry about it is a multiple of what anyone else would be happy with,” noted Gary Jenkins at Swordfish Research.
The S&P 500 was down 0.3 per cent by midday in New York, but the Dow Jones Industrial Average was 0.3 per cent higher after results from Dow components Caterpillar and Boeing were better received.
The pan-European FTSE Eurofirst 300 index slipped 0.1 per cent.
In commodities, Brent oil fell below $103 a barrel as news of a rise in US crude stockpiles added to worries over demand. But gold pushed back above $1,600 an ounce for the first time in three weeks as speculation increased about further central bank easing to bolster global growth.
31st July 2012
Stocks Gaining Grounds Amid Positive Sentiment On Central Banks | Forex Signals | Automated Forex Trading
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[...] Stocks extended last week’s gains, buoyed by growing hopes that European policy makers would take action to tackle the region’s protracted debt crisis and that the US Federal Reserve could deliver new measures to shore up the slowing US economy. [...]
14th August 2012
Gold and Copper Off – Growth Worries Re-ignited | Forex Signals | Automated Forex Trading
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[...] Equities around the world slipped back from multi-month highs as disappointing Japanese GDP data offered a reminder of the challenges facing global growth. [...]