Germany Demonstrates Vulnerability of Eurozone Core
European stock indices advance despite disappointing Economic Sentiment Index from Germany.
The major European stock indices made solid advances on Tuesday, despite a disappointing report from the ZEW Institute, which revealed that economic sentiment in Germany declined more than expected this month 
(NYSEARCA:EWG). The ZEW Economic Sentiment Index for November dropped 4.2 points to negative 15.7. Economists had been expecting the index to make a less-significant decline to negative 10. The lower result followed a series of reports demonstrating an industrial slowdown in Germany, underscoring how the European debt crisis is now affecting the Eurozone Core, as recently discussed by ECB President Mario Draghi. Draghi’s Warning about Germany Rings True
Greece was granted a two-year extension by European Union finance ministers to comply with the deadline to meet its targeted primary budget surplus of 4.5 percent of GDP. Nevertheless, the finance ministers have not yet determined how to fund the next tranche of €31.5 billion in loans to the troubled country, which will run out of money on November 16. As of 10:19 EST, the Greek ASE Index advanced 0.37 percent to 775 and the Global X FTSE Greece 20 ETF (NYSEARCA:GREK) advanced 0.20 percent to 15.14. Although the resilience of the Greek stock market has resulted in a loyal following for the GREK ETF, its share price remains just below the 50-day moving average of 15.80 and a “head and shoulders” pattern on the GREK chart remains unbroken. Shareholders should be mindful of the maxim, “failed breaks make fast moves” and remain on the alert for a rapid decline. Dollar Steady Amid Greece Aid Uncertainty
As of 11:20 EST, the Euro STOXX 50 Index advanced 0.85 percent to 2,494 (NYSEARCA:VGK). Nevertheless, the Euro STOXX 50 Index remains below its 50-day moving average of 2,515. The FTSE 100 Index crept upward by 0.17 percent to 5,777 (NYSEARCA:EWU). The German DAX Index advanced 0.07 percent to 7,168 (NYSEARCA:EWG). France’s CAC 40 Index climbed 0.52 percent to 3,429 (NYSEARCA:EWQ). Spain’s IBEX 35 Index surged 1.83 percent to 7,706 (NYSEARCA:EWP). Italy’s FTSE MIB Index jumped 1.20 percent to 15,303 (NYSEARCA:EWI).
As of 11:28 EST, the euro advanced 0.05 percent against the dollar, trading at $1.2716 (NYSEARCA:FXE).
Spain’s ten-year bond yield dipped to 5.79 percent on Tuesday from Monday’s closing level of 5.80 percent. Spain’s two-year bond yield remained at 3.09 percent on Tuesday from Monday’s closing level of the same amount (NYSEARCA:EWP).
Italy’s ten-year bond yield slipped to 4.97 percent on Tuesday from Monday’s closing level of 4.99 percent (NYSEARCA:EWI). ECB Bond-Buying: The Rape of Europe Continues
On London’s ICE Futures Europe Exchange, January futures for Brent crude oil declined by $1.15 (1.06 percent) to $107.00/bbl. (NYSEARCA:BNO, NYSEARCA:USO).
December Gold futures advanced by 10 cents (0.01 percent) to $1,731.00 per ounce (NYSEARCA:GLD).
In China, stocks took a hard fall after Jiang Weixin, minister of Housing and Urban-Rural Development, held a press conference at the 18th National Congress of the Chinese Communist Party on Monday. Mr. Weixin emphasized that the government will continue with its restrictions on home purchases and that it may expand the experimental property tax program. The Shanghai Composite Index sank 1.51 percent to 2,047 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index fell 1.13 percent to 21,188 (NYSEARCA:EWH).
In Japan, stocks continued their slide which began on November 7, as the yen continued to strengthen (NYSEARCA:FXY). A stronger yen makes Japanese exports less competitively-priced in foreign markets. The Nikkei 225 Stock Average declined 0.18 percent to 8,661 (NYSEARCA:EWJ).
American stock index futures were in negative territory ahead of Tuesday’s opening bell, as anxiety about the fiscal cliff increased with the return of Congress from its election week hiatus. The December 12 Dow Jones Industrials future declined 0.66 percent to 12,696 as of 9:15 EST. The December 12 S&P 500 future fell 0.75 percent to 1,367 (NYSEARCA:SPY). The December 12 Nasdaq 100 future sank 0.91 percent to 2,557.
Bottom line: The major European stock indices demonstrate renewed investor confidence, despite a downbeat report on economic sentiment in Germany, as the European Union’s ability to help rebuild the Greek economy fuels investors ’ appetite for risk.
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