Thursday, May 24, 2012

20120524 1105 Global Market Related News.

Asian Stocks Swing Between Gains, Losses on Europe Talks (Source: Bloomberg)
Asian stocks swung between gains and losses as investors await the outcome of a summit in Brussels at which European leaders have clashed over how to fight the region’s debt crisis. Nintendo Co., a maker of video-game players that depends on Europe for a third of its sales, fell 3.6 percent in Tokyo. Hitachi Construction Machinery Co (6305), a Japanese machinery maker that gets 17 percent of its sales in China, gained 0.6 percent ahead a report today on Chinese manufacturing. Hanwha Corp., a trader of petrochemicals and machinery, gained 4.8 percent in Seoul after its construction unit won an $8 billion deal to build housing units in Iraq. The MSCI Asia Pacific Index fell 0.1 percent to 111.90 as of 10:20 a.m. in Tokyo before the Hong Kong market opened. It swung between gains and losses at least four times. “The market is right now confused and obviously worried about whether Greece will end up leaving the euro or not,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “The market is pretty convinced Greece will leave at some stage, but the big difference is if their exit will be orderly or disorderly, and an orderly exit has already been priced into the market.” The Asian Pacific gauge has dropped 13 percent from this year’s high on Feb. 29 as amid investor concerns that Greece may abandon the euro and put other debt-stricken nations such as Italy and Spain at risk. Greece is scheduled to have a second election on June 17 following an inconclusive ballot this month.

China Stock Futures Rise on Government Pledges to Favor Growth (Source: Bloomberg)
China’s stock-index futures rose, signaling gains for the benchmark index, after the nation’s leaders pledged to intensify “fine-tuning” of policies to support growth. Anhui Conch Cement Co. (600585) and China Railway Construction Corp. may gain after the government said it will start a series of infrastructure projects and will speed up construction of railways. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, may pace losses by shipping lines on concern Europe’s debt crisis will stifle demand for foreign trade. “We may see a new round of stimulus centered on infrastructure construction,” Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. said by phone today. “That’ll help reduce market pessimism.”
Futures on the CSI 300 Index (SHSZ300) expiring in June, the most active contract, gained 0.4 percent to 2,597.6 as of 9:15 a.m. local time. The Shanghai Composite Index (SHCOMP) dropped 9.87 points, or 0.4 percent, to 2,363.44 yesterday. The CSI 300 Index declined 0.4 percent to 2,616.87. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.1 percent in New York.

Japan Stocks Swing Between Gain, Loss on Europe Meeting (Source: Bloomberg)
Japanese stocks swung between gains and losses as European leaders debate ways to tackle the debt crisis. Canon Inc. (7751), the camera maker that counts Europe as its biggest market, dropped 3.1 percent. Fanuc Corp., a maker of factory automation systems, and Komatsu Ltd., a heavy equipment exporter, advanced as China said it would undertake more “fine tuning” to boost its economic growth. Inpex Corp., the nation’s largest oil explorer by market value, lost 0.5 percent after crude prices dropped overnight. The Nikkei 225 Stock Average (NKY) was little changed at 8,555.57 as of 10:33 a.m. after swinging between gains and losses in Tokyo, with volume equal to the 30-day average. The broader Topix Index was little changed at 720.72, with about about the same number of shares rising as falling.
Futures on the Standard & Poor’s 500 Index (SPXL1) were little changed today. The gauge rose 0.2 percent in New York yesterday, reversing a decline of as much as 1.5 percent, after Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the Federal Reserve has the tools to insulate the U.S. economy should Europe’s debt crisis worsen.

U.S. Stocks Erase Loss Amid Optimism on Europe Efforts (Source: Bloomberg)
U.S. stocks erased early losses amid optimism that European leaders will do more to halt contagion from the region’s debt crisis, helping the market reverse a plunge triggered by growing concern Greece will leave the euro. Bank of America Corp. (BAC), Alcoa Inc. (AA) and FedEx Corp. (FDX) advanced at least 1.4 percent to pace gains among the biggest companies. Facebook Inc. (FB) increased 3.2 percent after losing 19 percent in the previous two days. Dell Inc. (DELL) tumbled 17 percent, the most since 2000, amid a disappointing revenue forecast. Hewlett- Packard Co. rallied 10 percent at 5:02 p.m. New York time after reporting quarterly results and saying it will cut 27,000 jobs.
The S&P 500 rose 0.2 percent to 1,318.86 at 4 p.m. New York time, reversing a decline of as much as 1.5 percent. Earlier today, it approached the average price from the last 200 days of about 1,280. The Dow Jones Industrial Average decreased 6.66 points, or 0.1 percent, to 12,496.15, trimming this year’s gain to 2.3 percent. About 7.6 billion shares changed hands on U.S. exchanges today, or 12 percent above the three-month average. “Huge turnaround,” said Tim Ghriskey, who oversees about $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York. “There’s speculation that European leaders will take action to stabilize the situation with Greece. In addition, there’s a lot of cash on the sidelines looking to get into the equity market. Certainly, the decline we’ve had recently might provide an opportunity.”

Stocks Reverse Loss as Euro Pares Drop on Summit Optimism (Source: Bloomberg)
U.S. stocks erased losses amid optimism European leaders will do more to halt contagion from the region’s debt crisis. The euro pared its drop after sinking to an almost two-year low and U.S. Treasuries trimmed gains. Oil closed below $90 a barrel for the first time since October. The Standard & Poor’s 500 Index rose 0.2 percent to close at 1,318.86, reversing a 1.5 percent tumble. The Dow Jones Industrial Average ended down 6.66 points at 12,496.15 after plunging as much as 191 points. The euro was down 0.7 percent at $1.2592 after dropping to as low as $1.2545. Ten-year Treasury yields lost 3.6 basis points to 1.73 percent, trimming a drop of 6 basis points. Demand for assets considered safe earlier sent German 30-year yields below 2 percent for the first time.
European leaders were meeting today to discuss the region’s debt crisis after deepening concern Greece will exit the euro wiped about $4 trillion from equity markets worldwide this month. Spain will recapitalize BFA-Bankia with as much public money as necessary, as the nationalized group needs at least 9 billion euros ($11 billion) to comply with banking rules, Economy Minister Luis de Guindos said after markets closed in Europe. “Huge turnaround,” said Tim Ghriskey, who oversees about $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York. “There’s speculation that European leaders will take action to stabilize the situation with Greece. In addition, there’s a lot of cash on the sidelines looking to get into the equity market. Certainly the decline we’ve had recently might provide an opportunity.”

Emerging Stocks Fall Most in Six Months on European Debt Concern (Source: Bloomberg)
Emerging-market stocks slid the most in six months as concern deepened that Europe’s debt crisis will reduce developing-nation exports and curb demand for riskier assets. The MSCI Emerging Markets Index (MXEF) fell 2.4 percent to 896.96 by 4:31 p.m. in New York, the biggest drop since Nov. 23. A gauge of materials producers slid to the lowest since September 2009 as metals retreated and Posco (005490), South Korea’s biggest steelmaker, slumped to a seven-month low. Russia’s Micex Index (INDEXCF) tumbled to the lowest since 2010 on declines for power utility companies. Brazil’s Bovespa slipped 0.8 percent as Oi SA fell to the lowest level since 2004.
European leaders are meeting in Brussels today to discuss the region’s debt crisis that has wiped more than $4 trillion from equity markets worldwide this month. The Standard & Poor’s GSCI Spot Index, which tracks 24 raw materials, lost 1.9 percent to the lowest level since Oct. 7. Silver, platinum and palladium declined, along with base metals including copper, zinc and lead, on concern Europe’s debt crisis may hurt global growth and sap demand. “There are already signs of exports slowing in Asia and Europe,” Neil Shearing, a senior emerging-market analyst at Capital Economics Ltd., said by phone from London today. “Risk appetite is hurt by the possibility of a messy break up of the euro that could lead to a broader financial crisis. Investors go to safe haven assets at the expense of emerging-market assets.”

Stocks Decline in Europe Amid Greek Concern; LSE Plunges (Source: Bloomberg)
European stocks slid the most in a month amid growing concern that Greece may leave the euro as the region’s leaders prepared to meet in Brussels. London Stock Exchange Group Plc tumbled the most in 2 1/2 years after UniCredit SpA and Intesa Sanpaolo SpA sold a combined 11.5 percent stake. Vedanta Resources Plc (VED) and Petropavlovsk Plc led a drop in basic-resources shares as copper and gold sank. Michelin & Cie. paced tiremakers lower, falling 4.5 percent. The Stoxx Europe 600 Index (SXXP) slid 2.1 percent to 239.51 at the close of trading after surging 2.5 percent over the previous two days. That’s the biggest drop since April 23. The gauge has retreated 12 percent from this year’s high on March 16 amid mounting speculation that Greece will be unable to form a government willing to implement pledged austerity measures.
Concern about Greece “is a big weight on the market and makes things uncertain,” said Emmanuel Soupre, who helps oversee $5.5 billion at Neuflize Private Assets in Paris. “Companies are functioning well but the macro economy is complicated. It’s best to remain cautious.”

German Stocks Fall; Snapping Two-Day Rally; Banks Decline (Source: Bloomberg)
German stocks fell, snapping a two- day rally, as concern mounted that Greece will leave the euro area and Japan’s exports grew at a slower pace than estimated. Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest lenders, both slid 2.8 percent. Deutsche Boerse AG (DB1) fell 4 percent. ThyssenKrupp AG (TKA) slumped after Fitch Ratings downgraded its outlook on the shares to negative from stable. The DAX Index (DAX) retreated 2.3 percent to 6,285.75 at the 5:30 p.m. close in Frankfurt, paring its 2.6 percent over the previous two days. The broader HDAX Index also decreased 2.3 percent today. “Banks do not have a positive sentiment because of euro- zone fears,” said Christian Schmidt, a market analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt. “Banks are under pressure because it is unclear what the future will bring in terms of Greece, Spain and Italy.”

FOREX-Euro hits 21-month low vs dollar before EU summit
LONDON, May 23 (Reuters) - The euro hit a 21-month low   against the dollar ahead of an EU meeting later,   with investors doubtful that leaders would come up with measures  to stem the euro zone debt crisis.    
"The risk for the euro is on the downside short-term, but I   do think there's a potential for a short-covering rally back   towards $1.30," said Carl Hammer, chief currency strategist at   SEB in Stockholm.

Euro Is Near 22-Month Low After European Summit (Source: Bloomberg)
The euro was 0.2 percent from the lowest level since July 2010 after German Chancellor Angela Merkel said following a European Union summit that her nation stands by its opposition to jointly issued common bonds. The 17-nation currency maintained a drop versus the yen before data forecast to show Europe’s services and manufacturing industries shrank for a fourth month. The Japanese and U.S. currencies remained higher after gaining yesterday against most major counterparts on increasing demand for haven assets amid Europe’s deepening debt crisis. New Zealand’s dollar halted a two-day slide as the nation reported an increased trade surplus. “The euro remains in a bearish trend,” said Callum Henderson, global head of currency research in Singapore at Standard Chartered Plc. “There needs to be a greater focus on growth, but at the same time, there also has to be a credible long-term plan for fiscal and debt consolidation throughout the region. At the moment, you have neither” for Europe, he said.
The euro was at $1.2576 as of 10:45 a.m. in Tokyo from $1.2582 at the close in New York yesterday, when it touched $1.2545, the least since July 13, 2010. The common currency traded at 99.93 yen after losing 1.4 percent to 100 yen yesterday. The dollar was little changed at 79.46 yen.

Sales of New Homes in U.S. Climb More Than Forecast: Economy (Source: Bloomberg)
Demand for new U.S. homes rose more than forecast in April, indicating residential real estate may contribute to economic growth for the first time in seven years. Purchases rose to a 343,000 annual rate, up 3.3 percent from a revised 332,000 in March, the Commerce Department reported today in Washington. The median estimate in a Bloomberg News survey of 72 economists was 335,000. Data yesterday showed April sales of previously owned homes rose in every region. “It’s very clear now that the housing market has turned a corner,” said Richard DeKaser, deputy chief economist at Parthenon Group LLC in Boston, who projected sales would increase to a 339,000 pace. “The only question is how strong the rebound is going to be. It bodes well for the broader economy.”
Job growth, improving affordability and record-low interest rates are helping propel sales at builders such as Toll Brothers Inc. At the same time, some banks remain reluctant to lend and foreclosures continue to move through the system, signaling a sustained housing recovery will take time to take hold.

Kocherlakota Says Fed Likely Can’t Totally Revive Jobs (Source: Bloomberg)
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the Fed probably can’t repair all the damage to U.S. employment from the credit crisis and fiscal policy could help to revive the job market. The Federal Open Market Committee “faces an especially large amount of uncertainty about the level of maximum employment that it can hope to achieve,” Kocherlakota said today in a speech in Rapid City, South Dakota. In addition, “the FOMC has no control over” factors that influence the jobless rate like tax policy. U.S. policy makers believe non-monetary factors such as demographics and regulatory policy limit their ability to meet their congressional mandate to achieve maximum employment with price stability. Kocherlakota has said that, even with an 8.1 percent jobless rate, the central bank may be nearing the maximum employment level attainable without spurring inflation.
“Even if employment is close to the maximum level that is achievable using monetary policy, there may well be nonmonetary policy levers that could be used to raise employment still higher,” Kocherlakota said. One tool would be a cut in the payroll tax paid by employers.

Unemployed Burn as Fed Fiddles in Debate Over Natural Rate: Jobs (Source: Bloomberg)
Federal Reserve officials and economic advisers are debating far-reaching differences on whether to accept a jobless rate that doesn’t fall much below 6.5 percent or act more aggressively to reduce it to 5 percent or less. David Horowitz says he’s “not enough of an economist” to know who’s right. He just wants a full-time job again. Horowitz, 47, says he lost his health policy analyst job in Washington a month before the U.S. recession began in December 2007. He has met his expenses with temporary jobs in his field and work as a swim teacher, along with loans and savings. As for the policy makers’ debate on joblessness, “if they’re declaring that it’s a permanent situation, then that does make me angry,” he said. An approach that doesn’t put job creation first “puts a lot of people out of work and makes our educations worthless, and doesn’t give much optimism about working hard and moving up.”

U.S. 7-Year Yield Is 3 Basis Points From Low After Summit (Source: Bloomberg)
Treasury 10-year yields, the benchmark for borrowing costs around the world, were seven basis points from the record low as European officials argued over how to keep the 17-nation currency bloc together. Yields tumbled to their least-ever levels in Germany and the U.K. yesterday as investors sought the relative safety of the highest-rated debt. A $29 billion seven-year Treasury auction today is poised to draw a record-low rate. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said he sees deflation. Fidelity Investments, which oversees $1.62 trillion, said Treasuries offer value. “There’s a fear in the market from Europe,” said Hajime Nagata, who invests in Treasuries in Tokyo at Diam Co., which manages the equivalent of $124.7 billion and is an arm of Dai- ichi Life Insurance Co., Japan’s second-biggest life insurer. “I don’t expect yields to go higher. I’m still relatively bullish on the Treasury market.” Nagata said he added to his holdings this week.
U.S. 10-year yields held at 1.74 percent as of 10:35 a.m. in Tokyo, Bloomberg Bond Trader data show. The record low was 1.67 percent set Sept. 23. The 1.75 percent security due in May 2022 changed hands at 100 2/32.

China’s New Leaders May Back More Reform, Huntsman Says (Source: Bloomberg)
The new leaders that will take over China in the next year may find themselves forced to open the country’s economy and political life as they try to maintain its economic growth, said Jon Huntsman Jr., a former U.S. ambassador to China and Republican presidential hopeful. “Their opening to the rest of the world will require a certain standardizing of the way business is done,” Huntsman said yesterday at an event in New York organized by the National Committee on United States-China Relations. “You just can’t make decisions behind the velvet curtain.” China is in the midst of a once-in-a-decade political transition to its fifth generation of leaders since its People’s Republic was established in 1949, with Vice President Xi Jinping set to succeed President Hu Jintao, who has served in that role since 2003. “The Deng Xiaoping dynasty pretty much comes to an end,” at the Congress, Huntsman said, referring to the Chinese leader who began the country’s market-oriented reforms in 1978.

China Pledges More ‘Fine-Tuning’ in Support for Growth (Source: Bloomberg)
China’s leaders pledged to intensify “fine-tuning” of policies in the second government statement in four days signaling a commitment to growth as domestic demand slows and Europe’s debt crisis escalates. “We must proactively take policies and measures to expand demand and to create a favorable policy environment for stable and relatively fast economic growth,” the government said on its website yesterday, summarizing a meeting of the State Council, or Cabinet. The statement builds on Premier Wen Jiabao’s comments published May 20 showing a bigger focus on bolstering growth, which spurred speculation the government will step up efforts to combat a slowdown after April trade and industrial output were below forecasts. Authorities this month cut banks’ required reserves for the third time since November.
“The State Council meeting confirms stimulus will come,” Zhang Zhiwei, Nomura Holdings Inc.’s chief economist for China, said in a note to clients yesterday. China’s government is going through a standard procedure in reaction to bad economic conditions, which will probably be completed with stimulus policies being implemented in June, said Zhang, who is based in Hong Kong.

Azumi Calls for Appropriate Step as BOJ Refrains From Easing (Source: Bloomberg)
Japanese Finance Minister Jun Azumi called on the central bank to further ease policy moments before the Bank of Japan (8301) refrained from adding monetary stimulus. “The BOJ must firmly pursue monetary easing to achieve its 1 percent inflation goal,” Azumi told lawmakers in parliament in Tokyo today. The central bank left its asset-purchase and credit-loan programs unchanged, as anticipated by all 14 economists surveyed by Bloomberg News. Azumi told reporters after the decision that the BOJ had already taken “drastic” steps last month when they pledged to increase their purchases of government bonds and reiterated that he hopes they will take “appropriate” policy measures. Half of the economists surveyed anticipate the central bank will add stimulus by July, when its price forecasts will indicate any progress in countering decade-long deflation.
The finance chief’s call for more easing “is a reflection of most market participants and maybe even the public in Japan, in that they want the BOJ to do something to stimulate the economy,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo and a former BOJ official. “One of the BOJ’s important roles is to prevent the strengthening of the yen with further easing.”

Japan April Trade Gap Widens as Exports Below Forecast (Source: Bloomberg)
Japan reported lower-than-estimated exports and a wider trade deficit for April, underscoring risks to the economy’s recovery a day after Fitch Ratings cut the nation’s debt rating. Outbound shipments rose 7.9 percent from a year earlier, less than the 11.8 percent median forecast in a Bloomberg News survey of 27 analysts. The deficit of 520.3 billion yen ($6.5 billion) exceeded a 84.5 billion yen shortfall in March, the finance ministry said in Tokyo today. Constraints on exports show the challenge for the government of sustaining growth without worsening the nation’s finances as a boost from earthquake rebuilding fades. Finance Minister Jun Azumi called today for the Bank of Japan to “take appropriate steps in a timely manner” and Citigroup Global Markets Japan Inc. said the central bank may boost asset purchases in coming months after holding off today.
“If exports stay flat when the effect of the post-quake reconstruction is likely to peak out in the latter half of the year, there’s a possibility Japan’s economy will fall into a lull,” said Kiichi Murashima, an economist at the Citigroup unit said in Tokyo. “There’s a chance for a further monetary easing in July.”

Korean Won Falls on Doubts Europe Can Solve Debt Crisis (Source: Bloomberg)
South Korea’s won fell to a five- month low amid doubts that Europe will succeed in containing its debt crisis. Government bonds were steady. Chancellor Angela Merkel said Germany stood by its opposition to jointly issued euro bonds at a European Union summit at which leaders aired contrasting views on how to overcome the debt crisis. The Kospi (KOSPI) Index advanced even after overseas funds cut holdings of the nation’s shares by $3.2 billion this month through yesterday, exchange data shows. “Speculation that the summit may disappoint is putting downward pressure on the won,” said Jeon Seung Ji, a Seoul- based currency analyst at Samsung Futures Inc. “Currency movements may change depending on the summit results to be announced, and also players shorting the euro and buying the won may limit the won’s losses.” A short position is a bet that a currency may decline.
The won slid 0.4 percent to 1,177.00 per dollar as of 9:21 a.m. in Seoul, taking this month’s loss to 4 percent, according to data compiled by Bloomberg. The currency touched 1,179.70 earlier, the weakest level since Dec. 19. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, rose three basis points, or 0.03 percentage point, to 11.95 percent.

EU Chiefs Clash on Bonds Amid Call Greece Keep Cutting (Source: Bloomberg)
European leaders clashed over joint debt sales as they called on Greece to stick with the budget cuts needed to stay in the euro and offered no immediate relief for recession-wracked Spain. The 18th summit in more than two years of crisis fighting was marked by new French President Francois Hollande’s challenge to the German-dominated deficit-cutting orthodoxy that has failed to stabilize the euro area and led to speculation that Greece might be forced out. “We had a not unheated discussion on euro bonds,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels early today after six hours of talks. Joint borrowing “didn’t find much support, particularly in the German speaking area but found a certain enthusiasm in the French speaking area.”
Futures on the Standard & Poor’s 500 Index declined 0.2 percent at 10:15 a.m. in Tokyo. The euro fell after reaching a 22-month low against the dollar yesterday amid concern that divisions between France and Germany will frustrate the search for answers. Yields on German five-, 10- and 30-year bonds dropped to records, as investors sought a haven.

Hollande-Merkel Gulf Opens as 18th Euro Summit Tackles Crisis (Source: Bloomberg)
French President Francois Hollande challenged Germany’s handling of the financial crisis as he headed to his first European Union summit with calls for joint borrowing and cash injections to struggling banks. Hollande teamed with Spanish Prime Minister Mariano Rajoy to press for tonight’s meeting of EU leaders to break with German-dominated budget-cutting policies that have failed to stabilize the 17-nation euro area and led to speculation that Greece might be forced out. France will “put all the ideas for growth and liquidity on the table,” Hollande told reporters in Paris before going to Brussels. “Europeans have to know where Europe is heading. There has to be political direction. Milestones have to be established and goals set.”
The summit, the 18th since Greece was convulsed by debt, takes place with market indicators showing mounting stress. The euro tumbled to a 22-month low against the dollar amid concern that divisions between France and Germany will frustrate the search for answers. European stocks fell by the most in a month. Yields on German five-, 10- and 30-year bonds dropped to records, as investors sought a haven.

BOE’s ‘Finely Balanced’ Decision Keeps QE Options Open: Economy (Source: Bloomberg)
Bank of England policy makers kept open the possibility that they may resume stimulus again, saying a decision to halt bond purchases this month was “finely balanced” because of risks from the euro area. While just one of the nine-member Monetary Policy Committee voted to add to quantitative easing on May 10, the central bank said in the minutes of the meeting published today that there was a case for injecting more and it could do so if needed. Separately, Deputy Governor Charlie Bean said more bond purchases may be needed if conditions “deteriorate significantly.” The central bank is keeping the option of more QE alive as a resurgence of the euro-area debt crisis puts the U.K. into what Governor Mervyn King says is “turbulent waters.” European leaders meet today to discuss the turmoil and grapple with a political impasse in Greece that’s raised speculation the nation may leave the 17-nation currency bloc.
“The Bank of England is clearly maintaining an open mind and a flexible approach,” said Howard Archer, chief European economist at IHS Global Insight in London. “Any deterioration in the underlying growth outlook and it will pull the QE trigger again.”

U.K. Retail Sales Fall Most in Two Years on Rain Effects (Source: Bloomberg)
May 23 (Bloomberg) -- U.K. retail sales fell the most in more than two years in April as record rainfall reduced demand for clothing and fuel sales plunged. Sales including auto fuel declined 2.3 percent from March, when warm weather helped lift sales by an upwardly revised 2 percent, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg survey was for a 0.8 percent decline. Sales excluding fuel dropped 1 percent, the most for almost a year. Consumer spending is being curtailed as inflation outpaces wages and unemployment remains close to a 16-year high. Marks & Spencer Group Plc (MKS), the largest U.K. clothing retailer, cut its sales forecast yesterday and said the economic environment is “challenging.” Stripping out the impact of fuel and wet weather, retail sales were still down on the month, the statistics office said.
“The underlying picture is sluggish,” said Ross Walker, chief U.K. economist at Royal Bank of Scotland Group in London. “Employment remains fragile and wage growth weak.”

Italian Consumer Confidence Falls to Lowest Since 1996 (Source: Bloomberg)
Italian consumer confidence plunged to the lowest in more than 15 years in May as Prime Minister Mario Monti’s austerity drive deepens the recession in Europe’s fourth-biggest economy. The confidence index fell to 86.5, the lowest since the data series began in 1996, from a revised 88.8 in April, national statistics office Istat said in Rome today. Economists forecast a reading of 89.5, according to the median of 12 estimates in a Bloomberg News survey. Monti is implementing 20 billion euros ($25.5 billion) of spending cuts and tax increases to fight the debt crisis, measures that have brought record gasoline prices and helped push the economy into its fourth recession since 2001. Italy’s economy will shrink 1.5 percent this year as corporate investment and domestic demand decline, Istat said yesterday in its annual report. That compares with the government’s forecast for a 1.2 percent contraction.
Household consumption and corporate investment will this year decline 2.1 percent and 5.7 percent respectively, Istat Chairman Enrico Giovannini said in Rome yesterday. Italian business confidence declined to a two-year low in April amid concern that the recession may worsen.

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