Unified European protest against austerity takes place in Spain, Italy, Portugal, Belgium and France hits Europe’s ETFs.
The major European stock indices made significant declines on Wednesday as a Eurozone-wide protest against austerity accompanied more bad news about the Greek economy. The Greek Statistical Authority (ELSTAT) announced that the nation’s third quarter GDP fell 7.2 percent compared with the third quarter of 2011 (NYSEARCA:GREK). The economic contraction represents a more severe situation than the government’s anticipated 6.5 percent decline. Greek Default Avioded, for Now
Portugal’s National Statistics Institute reported that the nation’s third-quarter GDP contracted 3.4 percent from the same period of 2011.
Britain’s Office for National Statistics reported that the nation’s unemployment rate for the third quarter declined to 7.8 per cent of the economically active population, compared with 8.0 percent during the second quarter (NYSEARCA:EWU). In its November 2012 Inflation Report, the Bank of England discussed the employment situation:
Private sector employment remains puzzlingly robust. Around a quarter of a million private sector jobs were added in 2012 Q2, taking the cumulative total of jobs created since the summer of 2010 to almost one million. Annual regular private sector pay growth remains subdued at around 2%, restrained in part by a sizable margin of slack in the labour market. Despite weak pay growth, the stagnation in productivity has meant that companies’ unit labour costs have continued to increase at or above their average historical rate.
The Bank of England report explained that although GDP increased by 1 percent during the third quarter, headline growth is likely to retreat sharply during the fourth quarter. The BoE downgraded its 2013 economic growth forecast to 1 percent, with the explanation: “The outlook for UK growth remains uncertain”.
As of 11:10 EST, the Euro STOXX 50 Index declined 0.81 percent to 2,473 – remaining below its 50-day moving average of 2,516 (NYSEARCA:VGK). The FTSE 100 Index dropped 0.94 percent to 5,731 (NYSEARCA:EWU). The German DAX Index sank 0.86 percent to 7,107 (NYSEARCA:EWG). France’s CAC 40 Index fell 0.83 percent to 3,402 (NYSEARCA:EWQ). Spain’s IBEX 35 Index slipped 0.18 percent to 7,679 (NYSEARCA:EWP). Italy’s FTSE MIB Index declined 0.49 percent to 15,258 (NYSEARCA:EWI). Forget About the BRICs – Buy These Rising Stars Instead
As of 11:20 EST, the euro advanced 0.29 percent against the dollar, trading at $1.2741 (NYSEARCA:FXE).
Spain’s ten-year bond yield climbed to 5.93 percent on Wednesday from Tuesday’s closing level of 5.78 percent. Spain’s two-year bond yield jumped to 3.21 percent on Wednesday from Tuesday’s closing level of 3.09 percent (NYSEARCA:EWP).
Italy’s ten-year bond yield rose to 4.99 percent on Wednesday from Tuesday’s closing level of 4.96 percent (NYSEARCA:EWI).
On London’s ICE Futures Europe Exchange, January futures for Brent crude oil advanced by 83 cents (0.77 percent) to $108.17/bbl. (NYSEARCA:BNO, NYSEARCA:USO).
Given the ongoing economic and social strife in the Eurozone, Nouriel Roubini’s characterization of the European situation as a “slow motion train wreck” is being validated. Storm Clouds Over The Eurozone
In China, stocks advanced on gains in the materials sector following a report from the China Securities Journal that the China State Bureau of Material Reserve will begin buying the first batch of 160,000 tons of aluminum for reserves. The Shanghai Composite Index advanced 0.37 percent to 2,055 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index surged 1.20 percent to 21,441 (NYSEARCA:EWH).
In Japan, stocks advanced slightly after Prime Minister Yoshihiko Noda announced that he will dissolve Parliament on November 16. The move would require new elections, which could result in a transition of power to the opposition party. The Nikkei 225 Stock Average advanced 0.04 percent to 8,664 (NYSEARCA:EWJ).
American stock index futures were in positive territory ahead of Wednesday’s opening bell, following the better-than-expected earnings report from Cisco Systems, which caused the stock to gain 7.8 percent in pre-market trading. The December 12 Dow Jones Industrials future advanced 0.33 percent to 12,759 as of 9:13 EST. The December 12 S&P 500 future rose 0.45 percent to 1,377 (NYSEARCA:SPY). The December 12 Nasdaq 100 future climbed 0.60 percent to 2,575.
Bottom line: The major European stock indices took a hard hit on Wednesday, as worker unrest combined with downbeat economic reports to signal more trouble ahead.