Today's international market news drove broad declines across Asian and European equity markets. In Asian, Indian GDP surged in the third quarter, but both India and China are tightening monetary policy in response to rising inflation. In Europe, the opposite is true. Austerity is choking economic growth and economies are failing. This morning, debt spreads widened significantly across Spain, Italy and Portugal on default concerns amidst a report of rising unemployment across Europe.
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Spanish Bond Spread Widens, European Unemployment Grows, Indian GDP Thrives
European Debt Sells Off
Investors sold off the government debt of Portugal, Italy and Spain Tuesday on fear that the thunder will roll from Greece, to Ireland and across Europe's trouble spots before preemptive austerity measures can have any impact. The yield on Spanish 10-year bonds moved as high as 5.7%, 3.05 percentage points greater than the German 10-year. At this time last week, the difference only spanned about 2 percentage points. The Italian 10-year bond opened up a 2.1 percentage point spread, the most since the launch of the age of the euro. Portugal, the next in line to fail according to most pros, saw its bonds move in the same direction.
European Unemployment Record
Unemployment in Europe climbed to a 12-year high. Eurozone joblessness increased to 10.1%, with an extreme 20.7% rate measured in Spain. The next highest rates were seen in Slovakia (14.7%) and Ireland (14.1%). Italian unemployment moved up three-tenths of a point, to 8.6%, while French joblessness improved to 9.8%, from 9.9%. The German labor market also improved over this last month.
Dollar Gains on Foreign Troubles
With all the concerns about Europe, the dollar and yen drew capital, gaining on the euro Tuesday. The dollar is headed toward its first monthly rise against the yen since April, despite QE2. Given the disintegration of Europe and tensions surrounding the Korean Peninsula, the dollar has gained about 0.3% on a Bloomberg compilation of the currencies of 10 developed nations. The yen is doing well also, as you might imagine, rising 12%, while the euro has shed 9.1% against the group in 2010. Today, more money is flowing into dollars and yen, but the Chinese yuan weakened against the yen on speculation it will tighten monetary policy to cool its economic growth.
Indian Growth Heats
India grew its GDP by 8.9% in Q3, exceeding analysts' expectations. Thus, India is expected to raise interest rates, like China, to tame growth. India's second quarter growth was revised higher as well, to 8.5%. Economists are attributing the growth to domestic drivers, favorable weather and foreign investment. Developing market expansion is acting as a nice counter-balance to western weakness, keeping the hemisphere's distress somewhat salvaged. The risk to India and China is runaway inflation, and so India has raised rates for the sixth time this year. CPI measured 11.6% at last check in India, mostly due to higher food prices.
International Market Movers:
* ESTX 50: -1.0%
* FTSE 100: -0.4%
* CAC 40: -1.0%
* DAX: -0.4%
* IBEX 35: -0.9%
* NIKKEI 225: -1.9%
* Hang Seng: -0.7%
* S&P ASX 200: -0.7%
* CSI 300: -1.7%
* KRX 100: +0.4%
* BSE Sensex 30: +0.6%
Relevant tickers include National Bank of Greece (NYSE: NBG), Dexia (OTC: DXBGF.PK), Commerzbank (OTC: CRZBY.PK), Barclays (NYSE: BCS), Lloyds (NYSE: LYG), Royal Bank of Scotland (NYSE: RBS) and Credit Agricole (NYSE: ACA), Deutsche Bank (NYSE: DB), Credit Suisse (NYSE: CS), UBS (NYSE: UBS), Banco Santander (NYSE: STD), Allied Irish (NYSE: AIB), Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), NYSE: UNB, Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), PNC Bank (NYSE: PNC), Morgan Stanley (NYSE: MS), NYSE: RY, NYSE: BAP, NYSE: KEY, iShares MSCI Spain Index (NYSE: EWP), The Ibero-America Fund (NYSE: SNF), The Ibero-America Fund (Nasdaq: XSNFX), European Equity Fund (NYSE: EEA), Vanguard European Stock Index (Nasdaq: VEURX), Powershares FTSE RAFI Europe (NYSE: PEF), Europe 2001 (NYSE: EKH), S&P Emerging Europe (NYSE: GUR), Ultrashort MSCI Europe (NYSE: EPV), Vanguard Europe Pacific (NYSE: VEA), Wisdomtree Europe SmallCap (NYSE: DFE), Wisdom Tree Europe Total Div (NYSE: DEB), iShares S&P Europe 350 (NYSE: IEV), Morgan Stanley Eastern Europe (NYSE: RNE), DWS Europe Equity A (Nasdaq: SERAX), DWS Europe Equity B (Nasdaq: SERBX), Fidelity Europe (Nasdaq: FEUFX), Fidelity Europe (Nasdaq: FIEUX), ICON Europe A (Nasdaq: IERAX), Pioneer Europe Fund (Nasdaq: PBEUX), ProFunds Europe 30 (Nasdaq: UEPIX), Putnam Europe A (Nasdaq: PEUGX), Rydex Europe 1.25x (Nasdaq: RYAEX), Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS.
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