Mixed data from US and UK, Europe to publish bank stress tests

The US economic recovery looks intact for now as Bloomberg reports that the index of leading indicators rose in May.

The world’s largest economy will keep expanding in the second half of the year without stoking inflation or generating many jobs, reinforcing the Federal Reserve’s low-interest-rate policy, reports today showed.

The index of leading indicators, a gauge of the outlook for growth over the next three to six months, climbed 0.4 percent in May, according to data from the New York-based Conference Board...

However, other data released on Thursday indicate growth may be weakening.

Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed...

Manufacturing in the region covered by the Philadelphia Fed expanded in June at the slowest pace since August as a measure of factory employment contracted for the first time in seven months, the branch of the central bank reported today...

Other data from the Labor Department showed consumer prices dropped 0.2 percent in May, a second consecutive decrease and the biggest since December 2008. Excluding food and fuel, the so-called core rate increased 0.1 percent...

There were mixed data from the UK on Thursday. Bloomberg reports that retail sales were up in May.

U.K. retail sales increased more than economists forecast in May as shoppers bought electrical goods such as wide-screen televisions to watch the World Cup soccer tournament.

Sales climbed 0.6 percent on the month, the Office for National Statistics said today in London. Economists predicted a 0.1 percent gain, according to the median of 21 forecasts in a Bloomberg News survey. Sales were unchanged in April, revised down from a 0.3 percent increase.

However, UK manufacturing weakened in June, according to another Bloomberg report.

A U.K. index of factory orders dropped in June for the first time in three months as export sales weakened, the Confederation of British Industry said.

The gauge slipped to minus 23 from minus 18 in May, the nation’s biggest business lobby said in London today. A measure of export orders declined five points to minus 2, showing the first negative balance since December. The CBI surveyed 498 companies from May 25 to June 9.

However, after the recent widening of European bond spreads, markets will be particularly interested in the latest developments in the euro area. From Reuters:

European leaders agreed on Thursday to publish details of "stress tests" showing the financial health of individual banks next month and to toughen budget rules to restore confidence in their currency union.

The euro rose to a three-week high against the dollar and concerns about Spain's financial health eased somewhat after Madrid's successful sale of 3.5 billion euros in 10- and 30-year bonds.

The successful sale of Spanish bonds helped stem the rise in bond spreads. Bloomberg reports:

German government bonds narrowed their yield difference with Spanish debt after investors snapped up the Mediterranean country’s securities at an auction, assuaging concern the nation will struggle to meet redemptions.

Spanish bonds rose, pushing the yield on the 10-year security down from the highest since July 2008. Spain sold 3.5 billion euros ($4.3 billion) of bonds, the maximum amount, at yields below the prevailing market rates, and attracted bids worth as much as 2.45 times the securities on offer.