Thursday, 19 January 2012

Positive news for euro area

The reports on the euro area on Wednesday were relatively positive.

The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to cope with the European debt crisis.

In the meantime, Eurozone countries have been tapping private investors relatively successfully in recent days. That pattern continued on Wednesday, with Portugal selling the maximum target of 2.5 billion euros of securities at a sale of three-, six- and 11-month treasury bills at mostly lower yields than in previous sales while Germany sold two-year notes at a record-low yield of 0.17 percent.

Construction output in the euro area rose 0.8 percent in November after three months of contraction.

China, though, showed more signs of cooling on Wednesday. A report from the National Bureau of Statistics showed that home prices in 52 out of 70 major cities fell in December from November, with only two cities seeing price increases. Meanwhile, foreign direct investment in China fell for a second straight month in December, declining 12.7 percent year on year to $12.2 billion.

In the UK, the jobless rate rose to 8.4 percent in November, no doubt contributing to the Nationwide's consumer confidence index dropping to 38 in December, the second lowest since the survey started in 2004, from 40 in November.

In contrast, US economic data maintained their positive trend on Wednesday. Industrial production rose 0.4 percent in December, the NAHB/Wells Fargo Housing Market index rose to 25 in January from 21 in December while producer prices fell 0.1 percent in December.

Still, central bankers seem to be taking no chances. Brazil’s central bank cut its benchmark interest rate by half a point for a fourth straight policy meeting to 10.5 percent on Wednesday.

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