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Prospects Daily: European shares fall on renewed debt worries

Global Macroeconomics Team's picture

Important developments today:

1. European shares fall on renewed debt worries

2. Industrial production picks-up in France


European shares fall on renewed debt worries. European stocks fell for a second day on Monday as lingering concerns over the region’s sovereign debt crisis continued to plague market sentiment, though resurgent merger and acquisition activity limited losses. There were reports that pressure from Germany and France (and other countries) was growing on Portugal to seek financial assistance from the European Union and International Monetary Fund to prevent the region’s debt crisis from spreading. The benchmark Stoxx Europe 600 Index was down 0.7% in mid-day trading, with commodity and bank stocks continuing their decline. The gauge gained 1.9% last week after better-than-expected manufacturing data overshadowed a weaker-than-expected jobs data.

Industrial production picks-up in France. Industrial production in France, was up by 2.3% in November according to figures released today by the French National Statistics Agency. The sharp rise in November’s production was in contrast to the 0.8% contraction in October, when output was weighed down by strikes against a pension reform. Recent Purchasing Manager’s Index (PMI) from Markit shows that the expansion in the French manufacturing sector continued through December, inspite of weather disruptions.  Indeed, though the PMI for December dipped to 57.2 from November’s 57.9, it still remains close to a ten-year high. Strengthening manufacturing activity in France, the euro zone’s second largest economy, should provide support to recovery elsewhere in the eurozone through increased intra-euro zone trade. 

Among emerging markets

In East Asia and Pacific, China reported a $13.1 billion trade surplus in December, with exports rising by some 17.9% (y/y) to 154.2 billion and imports up by 25.6% (y/y) to $141.1 billion. Though imports and exports rose to record levels in 2010, the full year trade gap narrowed by some 6% to $183.1 billion, and the trade surplus as a share of gross domestic product dropped to 3%, much below its 2007 peak of over 11%.  

In Sub-Saharan Africa, New vehicle sales in South Africa for the month of December were up by almost 30% (y/y), reflecting strengthening domestic demand. The National Association of Automobile Manufacturers of South Africa noted that the industry benefitted from the hosting of the FIFA world cup and increases in consumer spending for the second and third quarters in response to lower interest rates. However, though 2010 figures are above 2009 figures, they  were still below annual aggregates between 2005 and 2008.