[B]Equity markets retraced this week as investors returned to the risk off trade. [/B] Prices of riskier currencies, along with petroleum and grains retreated as investors absorbed a number of economic data points that where softer than expected. For the week the S&P 500 Index declined by 42 points or 3.8 percent.
[B]Gross domestic product for the European Monetary Union grew 1.0% compared with the first three months of the year, the strongest quarterly expansion since the second quarter of 2006, according to European Union’s Eurostat statistics agency.[/B] GDP, which measures the total value of goods and services in the economy, was also 1.7% higher than in the second quarter of 2009, the sharpest annual increase since the first three months of 2008. The figures were much stronger than economists’ estimates in a survey last week for growth of 0.7% on a quarter-to-quarter basis and 1.4% on the year. The euro zone grew 0.2% on the quarter and 0.6% on the year in the first quarter. The quarterly growth rate was marginally weaker than the 1.1% expansion in the U.K. in the second quarter, but outpaced the U.S., where GDP grew 0.6%, according to Eurostat. The GDP data was a surprise to the market especially since the industrial output, which was released by Eurostat Thursday, was weaker than expected. The consensus for output was a 0.6% rise in June but instead the market received a 0.1% decline. May’s advance was revised up slightly (1.1% from 0.9%) but that did not change the underlying picture. Additionally, Greece, whose economy is 2-3% of the euro zone economy, reported Thursday that Q2 GDP contracted 1.5% after a 0.8% decline in Q1 that was revised from -1.0%. The consensus had been for a 1.1% decline. Strong demand from around the world for Germany’s exports helped Europe’s largest economy grow 2.2% between April and Jun, the fastest quarterly rate since reunification in 1990 and far stronger than economists’ expectations of a 1.4% expansion. France’s economy, the second biggest in the euro zone, grew 0.6% on the quarter, slightly stronger than forecasts of 0.4% growth. ECB President Trichet noted last week that Q2 growth was stronger than expected and that Q3 was off to a good start.
Analysis provided by Exto Capital