Eurozone Recession Takes Its Toll on Stocks
After Thursday’s European GDP reports revealed that the Eurozone is back in recession, stocks continued to slide across Europe.
The major European stock indices declined again on Friday as the realization that the Eurozone is now officially in recession continued to hammer stocks (NYSEARCA:VGK). Spain’s IBEX 35 Index finally declined, after somehow 
managing to make a 0.29 percent advance on Thursday, despite reporting its fifth consecutive quarter of economic contraction (NYSEARCA:EWP). The ongoing inability of European Union finance ministers to resolve the issue of funding Greece’s next €31.5 billion bailout tranche also undermined investor enthusiasm.
As of 10:19 EST, the Euro STOXX 50 Index declined 0.78 percent to 2,442 – staying below its 50-day moving average of 2,516 (NYSEARCA:VGK). The FTSE 100 Index dropped 0.90 percent to 5,626 (NYSEARCA:EWU). The German DAX Index sank 0.68 percent to 6,995 (NYSEARCA:EWG). France’s CAC 40 Index fell 0.64 percent to 3,360 (NYSEARCA:EWQ). Spain’s IBEX 35 Index dropped 1.13 percent to 7,608 (NYSEARCA:EWP). Italy’s FTSE MIB Index declined 1.83 percent to 14,886 (NYSEARCA:EWI).
As the chart below indicates, the Euro STOXX 50 Index is declining from a triple-top (see green bar), suggesting a further move downward. Chart courtesy of Stockcharts.com.
As of 10:25 EST, the euro declined 0.70 percent against the dollar, trading at $1.2693 (NYSEARCA:FXE).
Spain’s ten-year bond yield dipped to 5.86 percent on Friday from Thursday’s closing level of 5.89 percent. Spain’s two-year bond yield rose to 3.25 percent on Friday from Thursday’s closing level of 3.24 percent (NYSEARCA:EWP).
Italy’s ten-year bond yield declined to 4.90 percent on Friday from Thursday’s closing level of 4.92 percent (NYSEARCA:EWI).
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In China, stocks were mixed on concerns that the new leadership will be reluctant to proceed with reforms, including and end to the monopoly of state-owned enterprises. The Shanghai Composite Index sank 0.77 percent to 2,014 (NYSEARCA:FXI). Nevertheless, Hong Kong’s Hang Seng Index advanced 0.24 percent to 21,159 (NYSEARCA:EWH).
In Japan, stocks made fat gains on enhanced hopes that the new government could advocate more aggressive monetary easing. The mood caused the yen to make another decline (NYSEARCA:FXY). The Nikkei 225 Stock Average skyrocketed 2.20 percent to 9,024 (NYSEARCA:EWJ).
American stock index futures were in positive territory ahead of Friday’s opening bell, with President Obama scheduled to meet with Congressional leaders later in the day to discuss measures for avoiding the fiscal cliff. The December 12 Dow Jones Industrials future declined 0.10 percent to 12,535 as of 9:12 EST. The December 12 S&P 500 future rose 0.21 percent to 1,354 (NYSEARCA:SPY). The December 12 Nasdaq 100 future climbed 0.25 percent to 2,528.
Bottom line: The major European stock indices fell again on Friday after Thursday’s GDP reports revealed that the Eurozone is back in recession. The bad news finally took its toll on Spain’s IBEX 35 Stock Index, which was the only major Eurozone stock index which was in POSITIVE territory on Thursday, despite five consecutive quarters of economic contraction.
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