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Report Raises Hopes for Euro Zone Recovery

July 24, 2013 by Leave a Comment

The survey of purchasing managers by Markit, a data provider, suggested that Europe may be near the end of a prolonged slump that has pushed unemployment to record highs. But the recovery is likely to be slow and fragile, economists warned, and recession could persist in some countries in Southern Europe.

There were also signs on Wednesday that a credit crunch in the euro zone is easing. A survey of banks by the European Central Bank showed that credit for consumers was becoming more available for the first time since the financial crisis began in 2008. While credit for business remained tight, there were tentative signs that lending could begin to recover in coming months.

“The recession in the euro zone seems to be coming to an end after two years,” Ralph Solveen, an economist at Commerzbank in Frankfurt, said in a note to clients. But he added that the upturn could be uneven, with some indicators continuing to fall in coming months. “Activity is still dampened by numerous problems,” he wrote.

The Markit index of economic output rose to its highest level in 18 months, to 50.4 in July from 48.7 in June, according to preliminary figures. A reading above 50 is considered a sign that the euro zone economy is growing. It was the first time the index was above 50 since January 2012.

European stocks rose after release of the survey. Benchmark indexes in Frankfurt, Paris and Rome were all up more than 1 percent in early afternoon trading, while the euro gained slightly against the dollar.

The Markit index suggested that growth is picking up in Germany and that France is close to exiting recession. Manufacturing is rebounding in both countries, perhaps aided by growth in the United States economy, which has increased demand for European exports.

Daimler, the maker of Mercedes cars, said Wednesday that unit sales of passenger vehicles rose 9 percent in the second quarter of 2013, in part because of surging demand in the United States for models like its redesigned S-Class luxury sedan.

The Markit survey showed that the French economy continues to contract overall, but at a slower pace, while manufacturing is growing again for the first time since February 2012. The data suggest that the French economy, the second-largest in the euro zone after Germany, is stabilizing and could emerge from recession soon.

In Germany, managers reported solid growth in both manufacturing and services, raising hopes that the country could help haul the rest of the Continent out of its slump.

Markit did not issue separate data for other European countries, but an index of economic sentiment in the rest of the euro zone that was part of the report also showed signs of stabilization.

The various encouraging data probably mean the European Central Bank is not likely to cut the benchmark interest rate, already at a record low of 0.5 percent, when it meets next week. Unemployment, often one of the last problems to respond to economic growth, could be near its peak after reaching 12.2 percent in the euro zone, its highest ever.

Still, the region remains vulnerable. More than a quarter of all workers are unemployed in Greece and Spain. Signs of slowing growth in China, which accounts for about 25 percent of European exports, also present a risk for the euro zone.

“An economic recovery is looming, which is encouraging,” Martin van Vliet, an economist at ING Bank said in a note, “but we still doubt whether the region is about to embark on a sustainable recovery.”

Article source: http://www.nytimes.com/2013/07/25/business/global/report-raises-hopes-for-euro-zone-recovery.html?partner=rss&emc=rss

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Data on Factories and Lending Raise Hopes for Euro Zone Recovery

July 24, 2013 by Leave a Comment

The survey of purchasing managers by Markit, a data provider, suggested that Europe might be near the end of a prolonged slump that has pushed unemployment to record highs. But the recovery is likely to be slow and fragile, economists warned, and recession could persist in some southern countries.

Evidence also appeared Wednesday that a credit squeeze in the euro zone was easing. A survey of banks by the European Central Bank showed that credit for consumers was becoming more available for the first time since the financial crisis began in 2008. While credit for businesses remained tight, tentative signs indicated that lending could begin to recover within months.

“The recession in the euro zone seems to be coming to an end after two years,” Ralph Solveen, an economist at Commerzbank in Frankfurt, said in a note to clients. But he added that the upturn could be uneven, with some indicators continuing to fall. “Activity is still dampened by numerous problems,” he wrote.

The Markit index of economic output rose to an 18-month high of 50.4 in July, from 48.7 in June, preliminary figures showed. A reading above 50 is considered a sign of economic growth. The July figure was the first above 50 since January 2012.

European stocks rose after the survey was released. Benchmark indexes in Madrid, Paris and Rome all ended up more than 1 percent, and the euro gained slightly against the dollar.

The Markit index suggested that growth was increasing in Germany and that the recession was nearly over in France. Manufacturing was rebounding in both countries, perhaps aided by growth in the United States economy, which has increased demand for European exports.

Daimler, the maker of Mercedes-Benz cars, said on Wednesday that unit sales of passenger vehicles rose 9 percent in the second quarter, in part because of surging demand in the United States for models like its redesigned S-Class luxury sedan, and its net income more than doubled from the period a year ago.

The Markit survey showed that the French economy continued to contract over all, but more slowly, while manufacturing was growing again for the first time since February 2012. The data suggested that the French economy, the second-largest in the euro zone after Germany, was stabilizing and could emerge from recession soon.

In Germany, managers reported solid growth in manufacturing and services, raising hopes that the country could help haul the rest of the Continent out of its slump.

Markit did not issue separate data for other European countries, but an index of economic sentiment in the rest of the euro zone that was part of the report also showed signs of stabilization.

The various encouraging data mean the European Central Bank is probably not likely to cut the benchmark interest rate, already at a record low of 0.5 percent, when it meets next week. Unemployment, often one of the last problems to respond to economic growth, could be near its peak after reaching 12.2 percent in the euro zone, its highest.

Still, the region remains vulnerable. More than a quarter of workers are unemployed in Greece and Spain. Signs of slowing growth in China, which accounts for about 25 percent of European exports, also present a risk for the euro zone.

“An economic recovery is looming, which is encouraging,” Martin van Vliet, an economist at ING Bank said in a note, “but we still doubt whether the region is about to embark on a sustainable recovery.”

Article source: http://www.nytimes.com/2013/07/25/business/global/report-raises-hopes-for-euro-zone-recovery.html?partner=rss&emc=rss

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Manufacturing in China Picks Up in March

March 21, 2013 by Leave a Comment

HONG KONG — Manufacturing activity in China perked up in March after a lull during the Lunar New Year holiday in February, underlining that China’s economy appears on track for solid — but not sizzling — growth this year.

A closely-watched index of sentiment in China’s vast manufacturing sector, published by HSBC on Thursday, showed a reading of 51.7 points in March. That was a marked improvement from the 50.4 in February, when many factories shut for a week or more during the New Year break, and took the reading well above the level of 50 that separates expansion from contraction.

But despite the rebound, the March result was shy of the level seen in January — yet another indicator that the Chinese economy has settled into a more modestly paced growth stage than it experienced prior to global financial crisis.

The purchasing managers’ index reading “implies that the Chinese economy is still on track for gradual growth recovery,” Qu Hongbin, chief China economist for HSBC, wrote in a statement accompanying the data release. “Inflation remains well behaved, leaving room for Beijing to keep policy relatively accommodative in a bid to sustain growth recovery.”

Improving overseas orders for Chinese-made goods and a flow of government-mandated investment into infrastructure projects helped pull the Chinese economy out of a slowdown last year, averting the so-called “hard landing” that many economists had feared might occur.

The upturn has, however, been gradual, in part because the policymakers in Beijing have been eager to steer the economy away from the overheated growth seen before the financial crisis and towards more a modest pace of expansion, easing the risks of inflation, potential loan defaults and inefficient investment.

Longer term, China’s demographics — its labor force will shrink as the population ages — mean that the productivity of workers and companies will have to rise. The new leadership in Beijing is betting on faster urbanization as a key driver of future growth and rising wealth for China’s 1.3 billion inhabitants.

Analysts caution, however, that a range of potentially tough reforms will also be needed — including, for example, allowing more private-sector competition in areas currently dominated by sprawling state-owned enterprises, and weaning the economy off its reliance on state-driven investment and exports.

“China’s new leaders pledged to make the Chinese dream come true by bringing benefits of growth to the people. This requires a difficult balance between growth and reform,” economists at Citibank wrote in a research note on Monday. “Reform is likely painful but there is no alternative.”

Article source: http://www.nytimes.com/2013/03/22/business/global/manufacturing-in-china-picks-up-in-march.html?partner=rss&emc=rss

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U.S. Stocks Reverse Back, Up 4%, on Economic Data

August 11, 2011 by Leave a Comment

Stocks surged on Thursday, with the broader market rising more than 4 percent. It was the fourth day this week of major swings in stocks, following a drop on Monday, a sharp rise on Tuesday and steep declines on Wednesday.

Stocks have zigzagged to an extent that has not been seen for years. Thursday’s close was the first time that the S. P. 500 had a change of at least 4 percent for four straight trading sessions since 2008. It closed up 51.88 points, or 4.63 percent, at 1,172.64.

It was also the first time that the Dow Jones industrial average closed with a net change of 400 points or more for four straight sessions. It closed 423.37 points higher, or 3.9 percent, at 11,143.31.

Apart from calculating the records, analysts sought explanations. Some noted that the declines had reached such a point this week that stocks were buoyed by bargain-hunting investors. Others pointed to scraps of positive economic data. And some said the upturn in the market could have been caused by an easing of concerns about the financial health of some of Europe’s banks and what their problems might mean for banks in the United States.

Brad Sorensen, director of market and sector analysis at the Schwab Center for Financial Research, said those concerns appeared to have waned a bit.

“I think that has taken a little of that fear off the table,” he said.

The financial markets this week have been held hostage to worries about the global economy, Europe’s troubles and the implications of a ratings agency’s unprecedented downgrade of the United States’ credit rating. Benchmark United States bond yields have hit lows, while gold has swung above $1,800. On Thursday, the VIX index, also known as the “fear” index because it represents expectations of volatility, was down to 39 from 48 at the beginning of the week.

The market is “just a yo-yo,” said Myles Zyblock, chief institutional strategist and managing director for capital markets research at RBC Capital Markets. “I think the primary structure is still in place, and that is a structure of concern.”

“People are trying to bottom-pick today, and it might be the bottom,” said Mr. Zyblock. “I would like to see the collective message start to stabilize to give me confidence there is a hardened floor underneath this market.”

Eric Thorne, an investment advisor at Bryn Mawr Trust, called it a “shoot first, ask questions later” market.

“It is a very, very tense, emotional and momentum-driven market right now,” he said.

“Yes, the economy is slowing, but it is not anywhere near as bad as investors are acting right now,” he added. “Emotional selling that happens in periods like this is not pinpoint specific.”

Even as new economic data was released on Thursday, showing, for example, that weekly jobless claims were lower at 395,000, investors were hesitant to read too much into one piece of data in the bigger economic picture.

Some corporate results bolstered the broader market, like those of Cisco Systems. Its shares were up nearly 16 percent, helping to lift the technology sector.

The yield on the United States 10-year Treasury was at 2.33 percent, compared with 2.1 percent on Wednesday. A $16 billion auction for 30-year Treasury bonds on Thursday showed the first cracks in investor demand since Standard Poor’s downgraded the nation’s debt earlier this month. Foreign central banks, asset managers and other investors had been flocking to the safety of Treasury bonds amid the turbulent markets of the last few weeks.

Thursday’s auction suggested the buying binge was over. Yields on 30-year bonds were 3.75 percent, about 0.13 percentage points higher than the preauction estimate of 3.62 percent. American money managers sharply cut back their purchases of 30-year bonds amid concerns about the economy and the fallout from the European debt crisis, according to market participants.

Demand was stronger for the two previous auctions of shorter-dated government securities. Earlier in the week, the government sold $32 billion of three-year notes and $24 billion of 10-year securities at record low yields.

The announcement that the leaders of Germany and France would meet might have helped stocks strengthen, said Paul G. Christopher, chief international investment strategist for Wells Fargo Advisors.

“The markets need to have reassurance from governments that they are going to take care of their budget deficits and going to backstop their banks,” he said.

European indexes had been mixed, but rallied after the market opened higher in the United States.

The FTSE 100 rose 3.1 percent. The CAC 40 in Paris closed 2.89 percent higher, and the Dax in Germany gained 3.28 percent. Société Générale shares rose 3.7 percent after earlier declines. On Tuesday the stock gave up almost 15 percent of its value amid worries about the debt and economic woes of Europe and the United States.

Frédéric Oudéa, the bank’s chief executive, told Le Figaro in an interview published Thursday that the bank had “suffered a series of attacks in the market,” on the basis of rumors about its financial condition that he denied “most vigorously.”

Société Générale called Thursday on French market regulators to “investigate the origin of these rumors that have gravely impacted the interest of its shareholders.”

Christian Noyer, the governor of the Bank of France and a member of the European Central Bank’s governing council, addressed the market concerns in a statement, saying the first-half results of French banks had “confirmed their solidity in a difficult economic environment, thanks to rigorous risk management and a universal banking model based on diversified businesses.”

In Asia, the Hang Seng index in Hong Kong fell almost 1 percent, while the Nikkei 225 in Japan closed down 0.6 percent.

Gold futures briefly topped $1,817.60 an ounce, its highest ever in nominal terms, before receding to about $1,738.60. Adjusted for inflation, the record gold price would be closer to $2,400 an ounce, according to Capital Economics.

Crude oil futures in the United States were up 2 percent at $84.89 a barrel.

Eric Dash contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=82e56a5d5a412c22f77971270a182d95

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Wall Street Ahead After Fed Testimony

July 13, 2011 by Leave a Comment

Stock indexes rose sharply Wednesday as the Federal Reserve chairman spelled out ways the central bank might stimulate the American economy if weakness persists and if the threat of deflation, or falling prices, reemerges. The rally came after three days of losses, but then it lost steam in the final hours of Wednesday trading.

Ben S. Bernanke’s remarks to Congress were far from a promise for more economic stimulus, but markets reacted immediately nonetheless. The Dow Jones industrial average nearly doubled its morning gains in 10 minutes, and the dollar fell as investors shed lower-risk assets. Some of the stock market’s gains fizzled in afternoon trading.

“It’s a complete overreaction,” said Barry Knapp, head of United States equity strategy at Barclay’s Capital. Mr. Knapp said Mr. Bernanke’s remarks indicated the economy would have to deteriorate substantially for the Fed to step in.

In afternoon trading Wednesday, the Dow Jones industrial average gained 54.30 points, or 0.44 percent, to 12,501.18, and the Standard Poor’s 500-stock index gained 5.14 points, or 0.39 percent, to 1,318.78. Both indexes had been up as much as 1.4 percent earlier.

The Nasdaq composite index, which focuses on technology shares, rose 16.04 points, or 0.58 percent, to 2,979.95.

Energy and materials stocks rose more than the overall market as investors bought companies that would benefit most from an upturn in the economy. All 30 of the stocks in the Dow average rose, led by the heavy equipment maker Caterpillar with a 2.2 percent gain.

The Fed’s policy of ultra-low interest rates and buying Treasury bonds on the open market has pushed stocks higher since last August. Many traders were disappointed when the Fed ended its second round of bond purchases in June.

The first sign that Fed governors were considering new stimulus measures came Tuesday afternoon, when the Fed released minutes from its June 21-22 meeting. Those minutes indicated that some Fed officials favored taking more action to prop up the economy if needed.

In his testimony before Congress, Mr. Bernanke spelled out specific steps the Fed might consider if the economy gets worse, including another round of bond purchases. He also detailed what the Fed would do should the economy improve.

Mr. Bernanke’s position remains that the slowdown in the economy this spring was due largely to temporary factors including high gas prices and parts shortages caused by the earthquake in Japan. He said he still expects economic growth to pick up in the second half of the year.

Remarks from the Fed chairman often have an immediate effect on stocks. During a speech in Jackson Hole, Wyo., last Aug. 27, Bernanke outlined an effort to spur economic growth, put a floor under consumer prices and push markets higher through the purchase of government bonds.

So was Bernanke’s talk in front of Congress today akin to his 2010 speech at Jackson Hole?

Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, N.J., agreed that the market’s rally was an overreaction. “It’s just silliness in my opinion. There’s nothing new here,” he said. “But the bulls are taking this as `This is fantastic.” ’

Signs of healthy growth in China also helped push stocks higher. The Chinese government reported that the country’s economy grew at a slower but still healthy rate of 9.5 percent last quarter. China is attempting to rein in its expansion and ease inflation, but a sudden drop-off in growth could hurt the American economy by cutting into demand for exports.

Markets were also higher as fears abated that Italy would default on its debt. The SP 500 fell 2.9 percent over the past three days as traders worried one or more European countries would fail to pay their debts, causing a global slowdown in lending.

A successful auction of Italian government debt and a pledge by that country’s leaders to accelerate cost-cutting plans reassured markets that Europe’s third-largest economy was not on the verge of becoming the latest European country to need emergency financial support to avoid a default. Italian stocks rallied 1.8 percent on relief that Italy’s fiscal outlook was not as shaky as believed just a few days ago.

Article source: http://feeds.nytimes.com/click.phdo?i=f898e472297c4b0177b197846f741928

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European Central Banks Hold Rates Steady

June 9, 2011 by Leave a Comment

FRANKFURT — The European Central Bank left its benchmark interest rate unchanged Thursday, but was expected to signal that markets should expect a move next month — despite the euro area’s uneven economic recovery.

The Bank of England, meanwhile, kept its main interest rate at a record low amid concerns that the country’s economy is still too weak to cope with higher borrowing costs. It did not issue a statement.

Jean-Claude Trichet, the E.C.B. president, was to hold his regular news conference at 2:30 p.m. Frankfurt time.

Analysts and economists predicted he would say that the bank is “strongly vigilant” toward inflation. That language would indicate a rate increase in July is probable, though the bank always leaves its options open.

On Thursday, the E.C.B. left its rate at 1.25 percent, after raising it in April from 1 percent, the first increase in two years. The benchmark rate in Britain was left at 0.5 percent and the central bank also kept the size of its asset purchase plan unchanged at £200 billion, or about $328 billion.

With Germany, the euro-zone’s largest economy, growing so quickly that some economists fear overheating, the E.C.B. has been trying to nudge interest rates back to levels that would be normal in an upturn.

But the bank faces a policymaking dilemma because the Greek debt crisis still threatens growth in the 17-member euro area as a whole. Economies in Spain, Ireland and other so-called peripheral countries remain sluggish. Higher rates could make it that much harder for those countries to recover.

The economy also remains fragile in Britain. Consumer confidence took a hit in April as more people claimed unemployment benefits and real wage increases lag inflation, weighing on living standards. Spending cuts and tax increases that are part of the government’s austerity program made households even more reluctant to spend.

“The story of weak growth is still going to continue for a while,” James Knightley, a senior economist at ING Financial Markets in London, said.

Some economists had predicted rates would rise in May this year, but as the economic outlook deteriorated have pushed that back to next February. Mr. Knightley expects an increase as early as November this year.

The British economy stagnated in the six months until the end of March. The Bank of England governor Mervyn King has warned that inflation could accelerate to about 5 percent in the short term before falling again. Higher consumer prices, partly a result of higher commodity prices, have started to dampen household spending as companies remain reluctant to hire and banks continue to hold back on lending.

Paul Fisher, a Bank of England official, argued last week that raising interest rates should be delayed until the economy was stronger. The International Monetary Fund on Monday backed Prime Minister David Cameron’s plan to cut the budget deficit, which had been criticized by the opposition Labor Party as too strict and harming the economic recovery.

Julia Werdigier reported from London.

Article source: http://feeds.nytimes.com/click.phdo?i=d065652efd335b9be0315dd9d7e31a29

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