Forex Blog

June 29, 2010

China Growth Fears Push Down Bond Yields

Fears that growth in China is weakening and falling Asian stocks conspired with the on-going European debt crisis to give investors greater concern for the safety of US debt. As a result, two-year Treasury yields fell to a record low today while 10-year yields fell below 3 percent.

“If you look at the Chinese stock market, it looks particularly ugly, and China has a tendency to lead in the ‘rest-of-the-world’ category,” said a trader in London.

In Europe the FTSEurofirst index of top European shares lost around 1.9 percent, with euro zone bank funding worries ahead of the repayment of 442 billion of European Central Bank emergency loans adding to concerns.

“A lot of (negative sentiment) is still emanating from concerns over Europe and the European banking system and the impact that might have if it rolls out globally,” said David Page, economist at Investec.

Source: Reuters

Japan’s Unemployment on the Rise, Spending Decreases

Analysts were caught off guard today on news that Japan’s unemployment rose to 5.2 percent in May from 5.1 percent the previous month. It was expected that unemployment would actually fall slightly to 5.0 percent in May.

Household spending fell 0.7 percent in May when compared to May 2009. Again, this was a surprise as the forecast called for a 0.4 percent increase year-over-year.

“Today’s reports show Japan’s economy is clearly slowing down” after growing at an annual 5 percent pace in the first quarter, said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. “Consumer spending is weakening because the impact from government stimulus measures is fading.”

Source: Bloomberg

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