Investor disappointment sent Asian markets sharply lower on Friday, after Fed chairman, Ben Bernanke failed to announce any new stimulus plans on Thursday. Surprisingly, even China’s unexpected .25% rate cut on Thursday failed to lift the markets. Investors interpreted the move as a warning for dismal economic data, scheduled to be released over the weekend.
The data was released on Saturday, indicating a significant drop in inflation along with slowing growth. CPI rose by 3%, a significant drop from last month’s 3.4% reading, dropping to a 2-year low. PPI contracted by 1.4%, far in excess from last month’s .7% drop. The two figures suggest demand from both consumers and manufacturers is dropping quickly. Industrial production rose slightly, but also far short of forecasts.
On the European front, the leading indexes fell moderately, while Spain’s IBEX jumped 1.8%, amid expectations that the debt-burdened country would request a bailout over the weekend. On Saturday, Euro zone finance ministers agreed to lend Spain up to $100 billion euros, an amount that will hopefully cover all potential needs. Madrid said it would not specify the exact amount needed until two independent consultancies completed their assessments. Spain is now the fourth European country to require a bailout, joining Portugal, Ireland, and Greece.
Panning West, US wholesale inventories rose by .6%, slightly more than expected, potentially indicating a drop in demand. The grim growth outlook hit copper particularly hard, as the industrial-metal sank 2.5% to 3.285.
Markets are expected to open higher on Monday, as investors applaud the Spanish bailout, but those gains may be short lived, given the broader economic concerns. Greece’s elections are scheduled for June 17th, and the polls will be closely monitored over the next few days. A victory by the left could indicate a Greek exit from the Euro, and reignite another round of panic.
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