Wednesday, 11 April 2012

Stocks plunge in Europe as Spanish and Italian yields surge

Markets fell sharply on Tuesday as Europe's sovereign debt problems returned to the centre of attention. Bloomberg reports:

The S&P 500 fell for a fifth day, losing 1.7 percent to close at 1,358.59 at 4 p.m. in New York, and the Dow Jones Industrial Average lost 213.66 points. The Stoxx Europe 600 Index decreased 2.5 percent as national benchmark indexes tumbled 5 percent in Italy and about 3 percent in Spain and France. Ten-year U.S. Treasury yields slid below 2 percent, while Spanish yields approached 6 percent for the first time this year and Italian yields surged 23 basis points. The yen rose versus all 16 peers and the dollar climbed against 13. Copper led commodities lower and oil sank to an eight-week low.

Spanish bonds tumbled as Economy Minister Luis de Guindos declined to rule out a rescue for the nation as 10 billion euros ($13 billion) of additional budget cuts failed to alleviate investor concerns...

Weakening investor sentiment in the euro area had already been reflected in the Sentix index, which fell to minus 14.7 in April from minus 8.2 in March.

Economic data on Tuesday were mixed.

The OECD's overall composite leading indicator rose to 100.5 in February from 100.3 in January, with Japan and the US driving the improvement. The CLI for the euro area was flat in February, which is still an improvement over the negative trend in previous months.

Outside the OECD area, China also saw a rise in its CLI.

However, an unexpected return to a trade surplus for China left analysts with doubts over the strength of its economy. Imports rose 5.3 percent from a year ago in March, well below the 39.6 percent increase in February. Exports rose 8.9 percent, also below an 18.4 percent increase in February.

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