ECB Austerity Affirmation Bites Stocks
December’s Monthly Bulletin of the European Central Bank continues to promote ECB austerity program, despite ongoing recession.
The ECB Austerity program is going full speed ahead into iceberg-laden waters, despite the ongoing Eurozone recession. European stocks declined on Thursday after December’s Monthly Bulletin of the European Central Bank 
emphasized that the ECB Governing Council will stubbornly stick with its painful, counterproductive austerity program, despite the fact that the Eurozone is in a recession (NYSEARCA:VGK). The ECB’s acknowledgement of the recession took a back seat to the Governing Council’s belief that its special magical powers will solve the problem:
Available statistics and survey indicators continue to signal further weakness in activity in the last quarter of the year, although more recently some indicators have stabilised at low levels and financial market confidence has improved further. Over the shorter term, weak activity is expected to extend into next year, reflecting the adverse impact on domestic expenditure of weak consumer and investor sentiment and subdued foreign demand. A gradual recovery should start later in 2013 as the ECB’s accommodative monetary policy stance and significant improvement in financial market confidence work their way through to private domestic expenditure, and a strengthening of foreign demand should support export growth.
The “tough talk” appears at page 81 of the Bulletin. Here is an important passage:
Fiscal strategies should therefore strictly comply with all commitments under the Stability and Growth Pact and notably the EDPs. Countries facing difficulties in reaching their EDP deadlines should amend their 2013 budgets to step up structural efforts that allow the nominal budget deficit to be reduced to below the 3% of GDP reference value in a sustainable manner by the agreed deadlines. Indeed, compliance with the agreed nominal budget targets provides an important anchor of expectations regarding the path towards sustainable public finances. At the same time, the Stability and Growth Pact provides leeway for countries that are subject to an unexpectedly protracted period of low growth. This notwithstanding, any decision to grant an extension to the EDP deadline must be led by the overarching objective of achieving fiscal sustainability without delay.
As of 11:17 EST, the Euro STOXX 50 Index declined 0.22 percent to 2,624 – staying above its 50-day moving average of 2,524. Despite Thursday’s decline, the STOXX 50 is holding above its March 19 high of 2,608 (NYSEARCA:VGK). The FTSE 100 Index fell 0.37 percent to 5,923 (NYSEARCA:EWU). The German DAX Index dropped 0.44 percent to 7,581 (NYSEARCA:EWG). France’s CAC 40 Index declined 0.17 percent to 3,640 (NYSEARCA:EWQ). Spain’s IBEX 35 Index advanced 0.23 percent to 8,005 (NYSEARCA:EWP). Italy’s FTSE MIB Index climbed 0.56 percent to 15,854 (NYSEARCA:EWI).
As of 11:22 EST, the euro advanced 0.05 percent against the dollar, trading at $1.3080 (NYSEARCA:FXE). Your ONLY Protection from the Coming Currency Wars
Spain’s ten-year bond yield advanced to 5.39 percent on Thursday from Wednesday’s closing level of 5.35 percent. Spain’s two-year bond yield remained at Wednesday’s closing level of 2.90 percent (NYSEARCA:EWP).
Italy’s ten-year bond yield remained at Wednesday’s closing level of 4.66 percent (NYSEARCA:EWI).
On London’s ICE Futures Europe Exchange, January futures for Brent crude oil declined by 64 cents (0.59 percent) to $107.38/bbl. (NYSEARCA:BNO, NYSEARCA:USO).
December Gold futures declined by $19.70 (1.15 percent) to $1,696.90 per ounce (NYSEARCA:GLD).
In Japan, stocks rallied after the yen fell to its lowest level against the dollar since March (NYSEARCA:FXY). Manufacturers led the romp as a weakened yen makes Japanese exports more competitively-priced in foreign markets. The Nikkei 225 Stock Average jumped 1.68 percent to 9,742 (NYSEARCA:EWJ). Three Iconic Japanese Brand Names Are on My Short List
In China, stocks declined as investor confidence about the nation’s economic recovery began to fade. Brokerages felt the pinch as the number of “active” or funded accounts fell to the lowest level in more than twenty months. The Shanghai Composite Index sank 1.02 percent to 2,061 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index declined 0.26 percent to 22,445 (NYSEARCA:EWH). China’ Master Gold Plan
American stock index futures were barely in positive territory ahead of Thursday’s opening bell following the better-than-expected drop in initial unemployment claims. The Dow Jones Industrials future advanced 0.15 percent to 13,250 as of 9:07 EST. The S&P 500 future rose 0.04 percent to 1,427 (NYSEARCA:SPY). The Nasdaq 100 future ticked upward by 0.01 percent 2,670.
Bottom line: December’s Monthly Bulletin of the European Central Bank disclosed that the ECB austerity program will continue despite the ongoing Eurozone recession. The major European stock indices retreated in response.
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