Prices for Russian Ural oil increased this week on the tensions between Iran and Western countries which fear they will cease Iranian oil imports. The UK and Canada already imposed financial sanctions on Iran, France proposed banning Iranian crude oil imports across Europe. The countries protest against Iranian nuclear program.
Italian retail sales have been decreasing for five months signaling on the worsening situation in the third-largest EU economy. Retail sales declined by 0.4% in September, Istat reported. Economists projected sales to be flat. Total decline in sales for Q3 is estimated as 0.6%. Industrial production also fell in Q3 contributing to bleak economic outlook of Italy.
European equities erased gains and swung back into downward trend as Financial Times reported that European Financial Stability Facility may not manage to raise sufficient amount of funds to boost its firepower over 1 trillion euros. Stoxx Europe 600 Index lost 0.3% reaching 219.43 in morning trade. According to FT even lower funding level might be problematic to reach.
Japan's seasonally adjusted unemployment rate is projected to remain at 4.1% in October, the same as a month earlier. Meanwhile, the proportion of job offers to seekers improved to 0.68 in October as compared to September 0.67, according to survey of Market News International. However, the experts claim the decrease in jobless rate does not necessarily imply better economic situation in the country.
The outlook for UK's housing market has worsened in last months as unemployment rises and economic growth fades. Centre for Economics and Business Research (CEBR) lowered price growth predictions and currently its analysts claim that housing prices may decline by 1% this year and climb in 2012. The CEBR has cut its forecast for home value growth in 2012 from 2.4% to 1.6%.
The German government decreased its forecast for public deficit to 1% of GDP from 1.5%, reported Handelsblatt. However, the debt level is still high, even though it is expected to decrease to 74.5% of GDP by 2015 while the target is 71%. Total deficit figure for the year is projected to be 1% falling from 4.3% in 2010. For 2012 the central bank predicts
Spanish premier Mariano Rajoy has required proposals from academics how to make a "bad bank". Proposals are expected to outline mechanisms to purchase damaged assets (e.g. real estate) from commercial banks at reduced prices. Spain needs about $133 bn from EFSF or IMF to provide asset transfer to bad bank.
The euro fell by 0.4% against US dollar to $1.3267, hitting seven-week low. Investors lose confidence in euro and euro-based assets after no certain solutions to the spreading debt crisis coming from the meeting of the EU leaders. The euro also was down against British pound by 0.07%, currently EUR/GBP is traded at 0.8608.
Italian short-term debt has a higher yield compared to long-term debt signaling on distress in the bond market. Yields on Italian bonds increased while the price of bonds fell. The yield on two-year bonds increased by 37 basis points to 7.45%, reported by FactSet Research. Meanwhile, five-year bonds yield increased to 7.61% and 10-year bond yield jumped to 7.17%.
One more sign of instability of property market in China is that more construction companies face essential delays in payments from property developers. More than 80% of construction companies experience delays in payment, reported Credit Suisse. Moreover, builders were asked to slow down the speed of work on the current construction projects.
Hungarian stocks decreased rapidly after it was announced that the country's credit rating was decreased to junk status by Moody's Investors. The rating agency claimed Hungary's ability to implement fiscal consolidation is doubtful; moreover, there is turmoil in public-sector debt cut. The BUX index was down 4.3% in the early trade in Budapest.
The pace of economic growth in China probably will decrease; China's GDP is projected to be 8.4% in 2012 being lower than 9.1% in 2011, reported the World Bank of China. China's inflation is projected to be moderate of 4.1% in 2012 as compared to 5.3% this year. Trade surplus forecast for 2011 is 3.5% of GDP and 3% of GDP in 2012.
Russia has decided to leave benchmark interest rate untouched for a second consecutive month. According to Bank Rossii statement released today it will keep borrowing rate at 8.25%. Russia is trying to restrict inflation to 7% - the lowest since the collapse of Soviet Union in 1991. However, depreciation of ruble may boost inflation next month as export power is increasing.
Michael C. Woodford, a former president of Olympus Corp. together with Japanese officials is working on a rescue plan that would dodge Olympus delisting. The key goal for company is create accounts by December 14 placed by regulators to evade being delisted from trading. Olympus has been exposed to delisting after 3 executives were detected to engage in scheme to shroud losses.
According to Jesse Wang, China Investment Corp. executive vice president China's national health fund could indirectly support Europe via investments. Wang pointed out that fund could not play the role of main rescuer in EU debt crisis; however, if there would show up prospective investment opportunities, China's fund could help to boost growth through investing.
Japan's Nikkei Stock Average Index experienced slight downturn ending up at 8,160.01 or 0.6% down on Friday trade. Nevertheless, the index is still fluctuating in the area of 2.5 year-low. Financial institutions gave negative contribution to index, though by the end of trade it was offset by leading exporters. Shinsei Bank Ltd lost 5.2% while Nikon Corp. and Mitsubishi Motors Corp. each added 3.0% and
Borrowing costs on Brazilian interest rate futures fell after Dilma Rousseff told the nation has capacity to apply monetary policy to stimulate growth. Yields on futures maturing January 2013 dropped 0.14% or 14 bp reaching 9.76%. Brazil experienced the slowest growth during the last 3 months since January, therefore government seek opportunities to fuel the economy.
Japanese 10-year bond yields experienced an increase of 3 bp reaching 1.025% on growing worries that country's debt burden may increase. Surge in yields was fuelled by Standard & Poor's unexpected announcement saying Japan is close to credit rating downgrading. Twenty-year rates jumped 5.5 bp to 1.785% while 30-year notes gained 5 bp to 1.96%.
On Friday Hong Kong's Hang Seng Index extended its losses, giving up 1.29% or 231.09 points and closing at 17,704.01 as Angela Merkel rejected issuance of Eurobonds fuelling investors' fears about deepening debt crisis. Banking, energy and real estate shares led the decline in index. Bank of Communications Ltd fell 1.8%, China Merchants Bank Ltd dropped 2.6%, while China Resources Land Ltd. gave up 4.3%. Crude
UK's Deputy Prime Minister announced the plan to create 400,000 work and training placements in order to combat high unemployment among young people. The program is worth ВЈ1bn with salary subsidies of ВЈ2,275 provided to employers for employing 160,000 young people aged between 18 and 24. However, there are still questions about program financing. Youth unemployment in the UK reached 1.02 million.
UniCredit SpA's rating was changed from buy to neutral at Nomura. UniCredit is going to make €7.5 billion capital boost that will affect shares. However, Nomura experts see more potential in Mediobanca Banca di Credito Finanziario SpA that is rated as buy despite slight target share price cut from €6.9 to €6.6.
European stock markets started Friday's trading from flat to slightly higher. The Stoxx Europe 600 index was flat at 219.78, the German DAX index increased by 0.3% to 5,443.39 and the French CAC index was up by 0.3% to 2,834.93. The FTSE 100 index decreased by 0.2% to 55,118.72.
Olympus, Japanese camera maker, may be delisted from the Tokyo Stock Exchange because of hiding losses. It will be delisted in case it fails to provide truthful financial data till December 14. However, even if the company succeeds in financial reporting till due date, the authorities can delist the company taken the scale of malpractice or in case some connection with Japanese criminal authorities
In recent years China's offshore property developers were focusing on developing economies as Middle East and North Africa. Currently these regions experience a political turmoil thus increasing the level of risk of construction projects. Now China's construction contractors see high potential in entering developed economies, said Yu Zhende, vice-president of Overseas Operations for China State Construction Engineering Corp Ltd.