What’s Important in the Financial World (4/12/2012) China Slowdown, EU Production, Italian Bond Yields

Italian bond yields rose to their highest levels since January as capital markets investors continued to express worry that more EU nations have set austerity plans that will not close budget deficits. The victim earlier in the week was Spain. And Portugal’s stock market fell 2% today. There are very few reasons to believe that the ability of the three nations to raise capital will not remain under siege.

Global Oil Supply

The International Energy Agency reported good news about supplies. Global oil inventories were boosted by as much as 1.2 million barrels a day in the first quarter as production from members of the Organization of Petroleum Exporting Countries ran ahead of demand by more than a million barrels a day. And Saudi Arabia and China stockpiled oil, the IEA said in its monthly market report, MarketWatch writes. The data should help press crude prices lower — a direction in which they have largely been moving the past several weeks. WTI crude is currently just below $103, compared to nearly $110 six weeks ago. While there is not a direct correlation between oil and gasoline prices, there is a loose one. Regular gas prices, which were predicted to reach $4 on average in the U.S. this summer, may never get there.

EU Industrial Production

Industrial production, a key measure of economic health, is still poor in the 17 euro area nations. Eurostat reports that seasonally adjusted industrial production grew by 0.5% in February compared to January. However, year-over-year, industrial production dropped by 1.8% in both the euro area and the EU 27. Across the region:

Among the Member States for which data are available, industrial production rose in seven and fell in fifteen. The highest increases were registered in Slovakia (+8.4%), Latvia (+7.3%) and the  Netherlands (+6.7%), and the largest decreases in Luxembourg (-14.4%), Malta (-11.4%) and Greece (-8.5%).

China’s GDP

China’s growth will be slower than believed just a few months ago, according to the World Bank:

A new World Bank report projects GDP growth in China will be 8.2 percent in 2012 and 8.6 percent in 2013. The China Quarterly Update, released today, says that the prospects for a gradual adjustment of growth remain high.

The GDP figures are very low compared to the 10% or better number turned in by China for several years. Economists have argued that weakness in most EU economies has hurt demand for China’s exports. In addition, signs indicate that the emerging middle class in the People’s Republic has slowed consumption. This is either because of high inflation or fear that the slowdown of China’s economy will accelerate and undermine employment opportunities.

Douglas A. McIntyre