Record Unemployment in Euro Zone, Measured Inflation Drops to 1.2%

Nigel Thomas
30 Apr, 2013
New York City

European Markets struggled to advance after the inflation declined and unemployment rate surged to 12.1% in March, record high since 1995. Bond yields hovered near record lows for Germany and France as economists speculate a rate cut later this week.

[R]2:30 PM Frankfurt – European Markets struggled to advance after the inflation declined and unemployment rate surged to 12.1% in March, record high since 1995. Bond yields hovered near record lows for Germany and France as economists speculate a rate cut later this week.[/R]

European markets were little changed after the latest batch of mixed earnings and annual inflation in the euro zone declined and unemployment rate jumped.

In London trading, FTSE 100 index declined 0.1% to 6,452 and in Frankfurt the DAX index increased 0.6% to 7,922. In Paris trading, CAC 40 index fell 0.1% to 3,864.

Euro zone inflation rate declined to a three-year low according to the latest data available from the eurostat based in Luxembourg.

The annual inflation rate fell to 1.2% in April from 1.7% in March, below the target set by the European Central Bank.

The measured inflation rate declined to 1% from 1.5% in the previous month after adjusting for volatile food and energy prices.

Separately, the statistics agency said March jobless rate increased to 12.1% in the currency union, record high since the data series began in 1995.

Unemployed people increased 62,000 to 19.2 million in March and in the largest economy in the region, Germany, jobless rate held at 5.4%. Spanish unemployment rate surged to 26.7%, highest since 1976 and youth unemployment soared to 55.9%.

Youth unemployment rate across the zone increased to 24%.

Bond market rallied for the second day in a row after the release of inflation and record unemployment data.

German Bunds inched up 17 basis points to 1.4683%, near a record low of 1.4689% and French 10-year bond yield fell as low as 1.704% nearing the lows set last week.

Italian and Spanish government bond yields dropped to the lows last seen since 2010 after the preliminary estimate showed Spanish economy shrank for the seventh quarter in a row.

Economists at ten largest banks in Europe highlighted a case for a rate cut at the next European Central Bank meeting later in the week after the release of weak economic data.

Stocks in Review

AB InBev declined 3% to 70.71 euros after the brewer said adjusted operating earnings declined to $3.43 billion in the quarter to March on weak sales in Brazil and the U.S.

BP Plc increased 3.3% to 472 pence after the UK based oil giant reported adjusted earnings of $4.2 billion, beating the estimates of $3 billion by several analysts.

Deutsche Bank soared 7% to 35.28 euros after the largest bank in Germany said first-quarter net income increased to 1.65 billion euros, ahead of 1.2 billion euros of estimate by several analysts.

The bank also reversed its earlier stance and said it plans to raise capital to shore up its balance sheet.

Lloyds Banking Group Plc increased 4% 55.7 pence after the largest UK based mortgage lender said pre-tax profit tripled in the quarter to March to 1.48 billion pounds on lower than expected loan loss provisions.

The loan loss provisions declined 40% to 1 billion pounds.

Lonmin Plc declined 5% to 270 pence after the largest platinum producer halted production at its second largest furnace in South Africa.

UBS AG soared 7% to Sfr 16.81 after the Swiss bank reported first-quarter net income of Sfr 988 million on higher revenues at wealth management unit and in investment banking.