Wednesday, 10 February 2010

Europe provides good news for markets

Bloomberg reports some good economic news from Germany on Tuesday.

German exports unexpectedly jumped in December, notching their fourth successive monthly gain, as the global recovery bolstered demand for goods from Europe’s largest economy.

Sales abroad, adjusted for working days and seasonal changes, increased 3 percent from November, when they gained 1.1 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast a 0.1 percent decline, the median of 10 estimates in a Bloomberg News survey showed. From a year earlier, exports rose 3.4 percent, the first annual increase since October 2008...

Imports rose 4.5 percent in December from the previous month, the statistics office said. The trade surplus narrowed to 13.5 billion euros ($18.5 billion) from a revised 17.2 billion euros in November.

However, it was another piece of news from Europe that was the main focus of investors' attention.

European officials said they are considering assistance for Greece as its struggle to contain the European Union’s highest budget deficit threatens to erode confidence in the euro.

“We are talking about support in the broad sense,” Olli Rehn, the EU’s new economic affairs commissioner, said in an interview in Strasbourg, France today. Michael Meister, financial affairs spokesman for German Chancellor Angela Merkel’s Christian Democratic Union, said in an interview in Berlin that aid would come “under strict conditions and if the Greek government undertakes far-reaching state reforms.”

Investors reacted positively to the turn of events.

Stocks rallied, with emerging-market equities recovering from the worst three-day slide in a year, and the euro and commodities gained as European officials said they were considering financial assistance for Greece. Treasuries tumbled, while Greek bonds surged.

The Standard & Poor’s 500 Index rose 1.3 percent at 4:10 p.m. in New York. The MSCI Emerging Markets Index increased 1.9 percent after falling 6.1 percent in the past three sessions. Greece’s ASE Index climbed 5 percent, rebounding from four days of losses. The euro strengthened the most in more than five months against the dollar, snapping four days of declines, and ended a three-day drop against the yen. Oil, copper and aluminum surged at least 2.2 percent to help lead gains in commodities.

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