Wednesday, 18 April 2012

Markets jump on Spanish debt sale despite mixed economic data

Markets had a good day on Tuesday after Spain sold more debt than targeted. The Standard & Poor’s 500 Index rose 1.6 percent while the STOXX Europe 600 Index rose 2.0 percent.

However, although the IMF raised its global growth forecast to 3.5 percent this year from 3.3 percent, economic data on Tuesday were mostly not very positive.

In Japan, the consumer confidence index rose to 40.3 in March, the highest since February 2011, from 39.9 in the previous month. However, industrial production fell 1.6 percent in February, more than the initially-estimated 1.2 percent.

In the US, industrial production for March was also disappointing, staying unchanged as manufacturing output fell 0.2 percent. Another negative came from housing, where starts on new homes fell 5.8 percent in March. However, building permits did jump by 4.5 percent.

Meanwhile, inflation in Europe has come in higher than expected. In the euro area, inflation held at 2.7 percent for a fourth month in March, higher than the initial estimate of 2.6 percent. In the UK, inflation rose to 3.5 percent in March from 3.4 percent in February.

The persistence of inflation around the world led the Bank of Canada to say that higher interest rates “may become appropriate” even as it left its benchmark rate at 1.0 percent on Tuesday.

Inflation concerns, though, did not stop the Reserve Bank of India from cutting its benchmark repo rate by 50 basis points to 8.0 percent on Tuesday.

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