Markets fall, South Korea raises rates

Markets ended the week on a negative note on Friday. Reuters reports:

Major stock markets fell for a fifth week in six on Friday on growing worries about the global economy, while U.S. crude oil prices sank more than $2 on Saudi Arabia's offer of more oil to Asian refiners.

The euro declined the most against the dollar in a month as concern over Greece's debt crisis returned to center stage and investors scaled back expectations on the pace of future interest-rate hikes in the euro zone.

World stocks as measured by the MSCI world equity index lost 1.5 percent on the day, posting their fifth down week in six. The index has lost 7 percent over the past six weeks, erasing almost all of its gains so far this year.

In Asia, market sentiment was not helped by another round of monetary tightening by South Korea. AFP/CNA reports:

South Korea's central bank Friday raised the key interest rate by 25 basis points to 3.25 per cent as authorities vowed to step up their battle against inflation.

The June rate rise, the third this year, came despite data suggesting the economic recovery is slowing at home and abroad.

Meanwhile, data from China on Friday gave mixed signals about the direction of its economy. Again from AFP/CNA:

China's politically sensitive trade surplus expanded to US$13.05 billion in May from the previous month as the value of exports hit a new record high, government data showed Friday...

Exports growth slowed last month, rising 19.4 per cent year-on-year to US$157.16 billion -- but still a record high for a single month based on previous data -- customs authorities said in a statement.

Imports gathered pace, soaring 28.4 per cent from a year earlier to US$144.11 billion.

Industrial production data from Europe have been giving a clearer indication though, with Bloomberg reporting on Friday that French industrial production fell in April.

French industrial output dropped for a second month in April as a cooling global expansion slowed demand at home and abroad.

Output from factories, mines and utilities fell 0.3 percent from March, when it declined a revised 1.1 percent, statistics office Insee said today. Economists forecast a 0.4 percent gain, according to the median of 12 estimates in a Bloomberg survey.

UK industrial production fell even more in April. From Reuters:

Factory output fell at its sharpest monthly pace in around two years in April, hit by an extra holiday for the Royal Wedding and supply chain disruption from Japan's earthquake, and suggesting the economy made a lacklustre start to the second quarter...

The Office for National Statistics said industrial output fell 1.7 percent in April, confounding the median forecast for a rise of 0.1 percent, and the biggest fall since August 2009.

The narrower measure of manufacturing output -- which does not include utilities or oil and gas extraction -- dropped 1.5 percent in April, the steepest fall since January 2009.

But inflation in the UK may finally be moderating.

The [Bank of England's] May inflation attitudes survey showed that average public inflation expectations for the next 12 months fell for the first time since February 2009, dropping to 3.9 percent from 4.0 percent in the February 2011 survey...

Separate data from the ONS showed factory gate inflation eased in May, as manufacturers' input costs fell at their fastest monthly pace in two years.

Producer output price inflation eased to 5.3 percent in May from an upwardly revised 5.5 percent in April.

However, in the US, inflation may prove more persistent than expected as import prices continued to rise in May. From Bloomberg:

Prices of goods imported into the U.S. unexpectedly rose in May as increasing costs for consumer goods like autos and clothing overshadowed the first drop in fuel expenses in eight months.

The 0.2 percent increase in the import-price index, its eighth consecutive gain, followed a revised 2.1 percent climb in April, Labor Department figures showed today in Washington. Economists projected a 0.7 percent decrease for last month, according to the median estimate in a Bloomberg News survey. Costs advanced 12.5 percent from May 2010, the biggest 12-month increase since September 2008.