Weak Euro Zone Private Sector Data; Spanish GDP Shrinks 0.4%

Arthi Gupta
23 Apr, 2012
New York City

European markets dropped after the latest reading on the private sector activity showed larger than expected weakness in April. French business sentiment index declined. Spanish economy shrank 0.4%, the first quarterly decline after seven quarters of modest growth.

[R]2:30 PM Frankfurt – European markets dropped after the latest reading on the private sector activity showed larger than expected weakness in April. French business sentiment index declined. Spanish economy shrank 0.4%, the first quarterly decline after seven quarters of modest growth.[/R]

The yield on Spain’s benchmark 10-year bond climbed 0.07 percentage point to 6.04% and the Italian bond yields rose 0.09 percentage point to 5.76%.

In political news, French Socialist leader Francois Hollande and President Nicolas Sarkozy progressed to the second round of elections scheduled on May 6.

Hollande won the first round by securing 28.5% of votes while Sarkozy managed to get 27.1% votes National Front leader Marine Le Pen came third capturing 18.1% of votes.

Separately, the Netherlands may face another election after the opposition Freedom Party led by Geert Wilders withdrew its support to the country´s ruling coalition in protest at the government´s proposed austerity budget of nearly €10 billion.

The Dutch Prime Minister Mark Rutte will schedule early elections to seek approval for the budgetary cuts.

Euro-zone PMI Falls

Euro-zone private sector activity dropped in April, flash estimate published by Markit Economics showed.

The composite output index dropped unexpectedly to 47.4 in April from 49.1 in March.

The services Purchasing Managers'' Index fell to 47.9 in April from 49.2 in March. The manufacturing PMI fell to 46.0 in April, from 47.7 in March.

French Sentiment Drops

Confidence among France''s businesses slumped in April, a survey by the statistics office Insee showed today.

The headline synthetic index fell to 95 in April from a revised reading of 98 in March.

The indicator for general production expectations, which represents business leaders'' opinion on French industry as a whole, was at -14 compared to -15 in the preceding month.

Spanish GDP Shrinks

The Spanish economy shrank in the first quarter according to the latest data released by the Bank of Spain today.

Gross domestic product shrank 0.4% sequentially in the first quarter compared to the 0.3% drop in the fourth quarter of 2011.

From a year ago, gross domestic product fell 0.5% in the first quarter compared to the 0.3% growth in the fourth quarter of 2011.

Spanish economy declined for the first quarter from a year after growing modestly in seven quarters in a row. Earlier in year the Bank of Spain had estimated economy to contract 1.2% in 2012 and economists in the private sector have estimated deeper decline.

Spain in targeting to cut its budget deficit in 2012 to 5.3% of GDP compared to 8.5% of GDP in 2011. Separately today, the eurostat, the statistics agency of the European Union confirmed the 2011 deficit estimate of Spanish government ending a row between Spain and the EU officials that cast a doubt on the veracity of the data.