Wednesday, 6 June 2012

Spain sounds alarm, RBA cuts interest rates

Spain has sent another distress signal, with Treasury Minister Cristobal Montoro saying on radio on Tuesday that Spain has lost access to credit markets.

Markets ignored the signal, though, as Spanish bonds rose for a fourth day and its 10-year yield dropped 11 basis points to 6.3 percent.

Markets also shrugged off negative data out of the euro area on Tuesday. German factory orders fell 1.9 percent in April after having jumped 3.2 percent in March. Eurozone retail sales fell 1.0 percent in April after having risen 0.3 percent in March. Markit's composite index of manufacturing and services dropped to 46.0 in May from 46.7 in April after the services index fell to 46.7 from 46.9.

Other reports on Tuesday, though, indicate that services performed better in the US and China. In the US, the Institute for Supply Management’s index of non-manufacturing rose to 53.7 in May from 53.5 in April. In China, the HSBC/Markit services PMI rose to a 19-month high of 54.7 in May from 54.1 in April.

Still, concern over the economic outlook led the Reserve Bank of Australia to cut its official cash rate by 25 basis points to 3.50 percent on Tuesday.

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