Europe’s debt crisis continued to influence global stocks as Euro-zone leaders agreed to a $1 trillion loan package for countries struggling to finance their budget deficits. The European central bank said it will conduct interventions to ensure depth and liquidity in markets.
These were met with some skepticism as Deutsche Bank AG chief executive officer Josef Ackermann said Greece may not be able to repay its debt in full, while Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t solid as the sovereign-debt crisis is deepening. Former Federal Reserve chairman Paul Volcker added that he’s concerned the euro area may break up as a result of the crisis.
Still, Spain’s government responded to European calls for deeper budget cuts by announcing it will reduce public wages by 5 percent this year and suspend a planned increase in pensions, in an effort to reduce the country’s deficit by an additional 1.5 percentage points of gross domestic product over two years, taking the shortfall to 6 percent of GDP in 2011. Portugal followed with its own austerity measures.
Moody’s Investors Service said there is a strong possibility it will cut its rating on Greece’s debt again as the government struggles to push through measures to reduce its budget deficit.
The EU’s statistics office reported that gross domestic product in the 16 euro nations expanded faster than expected at 0.2 percent in the first quarter.
In the U.K., new British Prime Minister David Cameron pledged an emergency budget within 50 days containing GBP 6 billion ($9 billion) to narrow the country’s shortfall.
China’s statistics bureau reported that consumer prices rose 2.8 percent in April from a year earlier, and property prices jumped 12.8 percent during the month. Another report showed that industrial production in China expanded 17.8 percent in April.
Retail purchases in the U.S. increased 0.4 percent in April, the Commerce Department reported, indicating that economic activity is improving. This was backed by a Federal Reserve report that showed output of factories, mines and utilities increased 0.8 percent in March.
The Week Ahead
Investors in the US will be looking at the housing market as a gauge for economic growth as the National Association of Home Builders will release its housing market index for April showing housing demand. These numbers will be followed by a report showing the number of new housing starts in April.
Europe will present its April trade balance index showing the difference in worth between exported and imported goods. A consumer confidence measure will also give indication of consumer sentiment in the euro-zone.
Japan’s industrial production report is scheduled in the coming week as well as the country’s first quarter gross domestic product data. The bank of Japan will announce its short term interest rate decision.