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Prospects Daily: European bonds and stocks turn lower amid European debt concerns

Global Macroeconomics Team's picture

Important developments today:

1. European bonds and stocks turn lower amid European debt concerns

2. Euro Zone unemployment rate rises

European bonds and stocks turn lower amid European debt concerns. European stock markets and government bonds tumbled on Monday amid concerns that the Euro debt deal agreed at last week’s summit may not be enough to contain the region’s debt crisis. After two summits last week, the Euro Area leaders agreed on October 27th to boost the bailout fund to €1 trillion, recapitalize hard-hit banks and persuaded private lenders to write-down their holdings of Greek bonds by half. However, the initial market rally that followed the EU accord announcement seemed to be fading out as governments bond issued by Italy, Spain, and Belgium declined sharply on Monday. The yields on five-year Italian sovereign bonds rose 17 basis points (bps) to a record high of 5.92% today, while two-year note yields widened by as much as 29 bps to 5.044%, the highest level since July 2008. Yields on Spanish and Belgian government debts rose sharply as well. European shares also fell sharply today with its benchmark Stoxx Europe 600 Index sliding 1.3% in afternoon trading. Bank shares led the decline as investors were skeptical about the funding of the bank recapitalization plan.

Euro Zone unemployment rate rises. According to the latest release by Eurostat, the number of unemployed persons in the 27 countries in the European Union increased to 23.26 million in September. In the Euro Area, the unemployment rate increased from 10.1% in August to 10.2% in September, accounting for 16.2 million of the unemployed people in the EU.The lowest unemployment rates were recorded in Austria and the Netherlands, while Spain and Greece recorded the highest.

Among Emerging Markets

In Central and Eastern Europe and the CIS, Ukraine’s third quarter GDP rose 6.6% (y/y) compared to 2010, up from 3.8% (y/y) growth recorded in the second quarter of this year.

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