Friday Morning Cheat Sheet: 3 Stories Moving Markets

Markets were mixed in Asia on Friday. The Nikkei suffered a fourth consecutive session of losses and fell 0.76 percent, punctuating its worst losing streak since November. The Hang Seng edged up 0.10 percent, while the S&P/ASX 200 lost just 0.01 percent.

Markets were up but relatively flat in Europe in mid-day trading. Germany’s DAX was up 0.18 percent, London’s FTSE 100 was up 0.25 percent, while the STOXX 50 index was off 0.07 percent.

U.S. futures at 8:35 a.m.: DJIA: -0.02%, S&P 500: -0.06%, NASDAQ: +0.05%.

1) Benchmark Rates Fall in Europe: As expected, the European Central Bank announced on Thursday that it will lower the interest rate on both the marginal lending facility and main refinancing operations within the Eurosystem. Effective May 8, the rate on the marginal lending facility will be decreased by 50 basis points to 1.0 percent, and the rate on main refinancing operations will be decreased by 25 basis points to 0.50 percent. The interest rate on the deposit facility will remain unchanged at 0.0 percent.

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The decision to lower key interest rates punctuates a series of underwhelming economic indicators released over the past few months that paint a picture of a worsening European downturn. Europeans have faced at least three years of severe debt crisis and five consecutive quarters of shrinking economic growth through the end of 2012. Unemployment in the region has increased slowly but steadily to a recent high of 12.1 percent.

2) United Kingdom Defies Euro Zone Downturn: The UK service sector grew at its fastest rate in eight months, according to a report released by Markit today. Markit’s headline Business Activity Index for the nation climbed from 52.4 in March to 52.9 in April, and has reflected growth every month since the start of the new year.

Chris Williamson, chief economist at Markit, commented: “A broad-based improvement is becoming evident in the UK economy, greatly reducing the likelihood of the Bank of England seeing any need to increase its asset purchases in the immediate future.”

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3) March Producer Prices Slip in Europe: Eurostat’s gauge of industrial producer prices fell 0.2 percent on the month in both the euro area 17 and the EU27. This compares against respective gains of 0.2 and 0.4 percent in February. On the year, producer prices in both regions were up 0.7 percent.

The sequential decline was led by a 0.6 percent drop in energy prices. Outside of energy, prices in nearly every category were flat. This weak PPI data suggests that inflationary pressures in the pipeline are weak, and reinforces the European Central Bank’s decision to lower benchmark interest rates, announced yesterday. A separate report released by Eurostat at the end of April showed that the inflation rate in the euro area was at a 1.2 percent annual rate in April, down from 1.7 percent in March.

Industrial Produce Prices Europe March

Source: Eurostat

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