Europe close: Stocks drop as Greek worries increase again
Mon 08 Oct 2012
LONDON (SHARECAST) - -Weidmann (ECB): Monetary policy cannot address causes of debt crisis
-Buba´s Dombret believes IMF over-emphasizes role of monetary policy in crisis
-ECB says further major labour and product market reforms needed
-Asmussen (ECB): Calm on financial markets is deceptive
-Asmussen (ECB): Cannot give Greece more time
-Spanish 10 year bond yields up 3bp to 5.71%
Shares have finished at their worst levels of the day as investors keyed in on the prospects for economic growth and company profits world wide. Not to be missed in that regard, Alcoa will kick-off the US quarterly earnings season tomorrow.
Also contributing to the above is the fact that in its semi-annual World Economic Outlook (WEO) –which is slated for release tomorrow- the International Monetary Fund (IMF) is expected to cut its forecast for world growth. This as some observers worry that “global rebalancing” is proceeding too slowly.
In the same vein, much was made this morning of the fact that the World Bank has cut its growth forecast for economic growth in “developing East Asia” this year to 7.2% from 8.3% in 2011, its slowest pace since 2011 and below the 7.6% forecast in May. Although similar downwards revisions for growth in China were announced by the Asian Development Bank last Wednesday investors chose to focus on market commentary regarding the risks for a further slowing down in economic activity.
Of more immediate concern, investors were closely watching events in Greece and Spain. More specifically, European Central Bank (ECB) governing council member Jorg Asmussen was cited over the weekend as saying that Greece cannot be given more time –by the central bank- to meet its commitments, as that would amount to state financing (although Eurozone states do have that option at their disposal).
Meantime, Merkel’s chief spokesman, Steffen Seibert, reiterated that Greece must implement the measures agreed with the IMF and EU within the established timelines.
As if all of the above were not enough, the Financial Times´ Wolfgang Munchau wrote today that Spain may well follow in Greece´s footsteps as excessive austerity weighs on growth, creating a negative feed-back loop.
That comes before German Chancellor Angela Merkel visits Greece tomorrow.
Greek banking M&A dominates headlines
Greek lenders National Bank of Greece and Eurobank Ergasias led gains this morning on reports of a possible merger.
From a sector stand-point, and on the corporate front, the worst performance was to be seen in the following industrial groups within the DJ Stoxx 600: Automobiles (-2.47%), Banks (-1.65%) and Construction (-1.36%).
German industrial production ahead of forecasts, but flat GDP expected
German industrial production fell by 0.5% month-on-month in August (Consensus: -0.6%). However, economists at Barclays Research had this to say: "Today’s release, despite being better than expected, mirrors the decrease in German factory orders in August as well as the current deterioration of sentiment at a global level. Data in the coming months will be crucial in order to access how well the German economy is able to weather the generalised slowdown in activity and trade expected in H2 12. We continue to forecast a flat reading for GDP in Q3."
The Sentix survey of Eurozone investors´ confidence has come in at -22.2 for November (Consensus: -20.9), versus -23.2 for the month before.
The Swiss consumer price index for the month of September has come in at -0.4% year-on-year, as expected, and above last month´s reading of -0.5%.
The French central bank´s business confidence index for the month of September has come in at 92 points, versus 93 for the previous month (Consensus: 91).
The German trade surplus for the month of August rose to €16.3bn; ahead of the €15.3bn forecast by the consensus, that on the back of a 2.4% month-on-month increase in exports (Consensus: -0.5%).
Germany´s current account surplus on the other hand fell back towards €11.1bn in August, versus the €11.7bn seen in July.
Swiss unemployment remained unchanged at 2.8% in September.
Slight retreat in the single currency
The euro/dollar is now down by 0.47% to 1.2972.
Front month Brent crude futures are falling by 0.313 dollars to the 111.67 dollar mark on the ICE.