Euro Zone Outlook Darkens

The euro zone’s economy is shrinking, a development that threatens to worsen the global slowdown and intensify debate about Europe’s attempts to restore confidence in the currency bloc.

GERMANY UNDER GROWING PRESSURES

But with over half of its exports going to the eurozone, it’s a matter of
time before Germany starts to feel some pain too. The sharp drop in factory orders in June point to a deceleration for German exports in
Q3. No wonder that the German manufacturing PMI fell in July to the lowest since 2009. And with exports now accounting for over half of its
GDP (higher than even China), it wouldn’t take much for Germany to register at least one negative quarter in the second half of the year. (NBF)

  Spanish and Italian Property:

The FT points out that while Europeans are vacationing, the commercial property markets of Spain and Italy are cratering: “The Spanish and Italian commercial property markets have all but collapsed with the number of transations in both countries falling more than 90 percent in the three months to July.” In the first quarter, there were 58 deals in Spain. In the second? Three. More proof of how European leaders’ dithering over resolving the Continent’s debt and banking crises is chilling economic activity. Startling factoid: “The inactivity meant Spanish property transactions were below those of neighboring Portugal for the first time.” (Spain is the euro zone’s fourth biggest economy; Portugal is nowhere close.) (WSJ)

  Greece seeks two-year austerity extension

More time would improve growth chances, says Athens

 

Spanish Banks Lean on ECB

Bank of Spain data indicated that net ECB borrowing rose to €375.55 billion from €337.21 billion in June. It was the 10th straight month of increases, highlighting how the country’s lenders are having more and more difficulty financing themselves through private investors.

Spanish banks now take up 33% of all the liquidity the ECB is doling out to euro-zone lenders, significantly higher than the weight the economy carries within the monetary union. Spain’s gross domestic product amounts to roughly 12% of total euro-zone GDP.

Banks have in recent months seen deposit volumes shrink, an indication that retail customers are growing wary of keeping their savings in the bank. Capital outflows from Spain also have increased.

BTW, over 40k Spaniards left the country in the first 6 months of 2012, up 44% YoY. Another 229k foreigners living in Spain moved out in the first half.

Mixed Picture for Central European Economies

Second-quarter gross domestic product data issued Tuesday showed export-reliant Hungary falling into recession, while the Czech Republic’s economy continued to contract. Romania, on the other hand, emerged from recession in the second quarter, and Slovakia’s economy also grew.

Poland, the largest economy in the European Union’s eastern region, which is due to issue its second-quarter data at the end of the month, is expected to post continued, but slowing growth.

CHINA

  New “China Beige Book” Sees Growth Rebounding  A private research firm has taken a leaf out of the Federal Reserve’s book by creating a “Beige Book” for China.

The quarterly report, similar to the Fed’s snapshots of U.S. regional conditions (which come out eight times a year), is an effort to provide foreign investors with a better understanding of the economic workings of China. The report drills down to sectors, and to China’s eight regions, including Tibet.

In its second China Beige Book released last month to clients, the report noted there were signs of a rebound largely fueled by increased retail sales, but problems continue to persist in industries like mining and minerals. While metro regions continued to see the strongest surges in retail spending, there were also sizeable spending increases in the central and northern regions, Mr. Charney said.

There are also signs of government stimulus in addition to monetary easing throughout the economy, he said. For instance, state-owned firms are investing in mining and transportation. There also are policies geared to boost consumer spending, including purchases of homes and cars. Consumer spending and services are picking up the slack in exports and some manufacturing sectors, according to the report.

It’s looking more like muddling through based on these ISI charts:

 

From the horse’s mouth:

China’s Wen says economy still under pressure

China’s economy is still facing big downward pressure and the foundation of a recovery is not yet solid, Chinese Premier Wen Jiabao said during a trip to the country’s coastal Zhejiang province, state radio said on Wednesday.

Wen added that economic difficulties may last for a while and that the government must focus on employment in the meantime.

Vale agrees:

Vale, which shipped about 44 percent of its iron ore and pellets to Chinese steelmakers in the second quarter, expects the country to start to recover by the end of the year, said Branco. Vale sees some “early signals” of recovery, which are still “very weak,” he said.

  China Soured Loans Rise For Third Quarter As Economy Slows

Chinese banks’ bad loans increased for a third straight quarter, the longest streak of deterioration in eight years, highlighting pressures on asset quality and profit growth as the economy weakens.

Non-performing loans rose by 18.2 billion yuan ($2.86 billion) in the three months ended June 30 to 456.4 billion yuan, the China Banking Regulatory Commission said in a statement on its website today. Bad loans surged at all types of banking institutions, including the largest state-owned lenders, rural banks and foreign banks, the regulator said.

HOW ABOUT THE U.S.?

  Any early signal from the following chart from John Hussman? Technicians would likely not get bullish with these lower highs and lower lows. And look how low we are!

 

 

Deere Cuts Forecast as Overseas Equipment Demand Slows

“Sales fell short of our expectations due to weakening in certain international markets and short-term manufacturing inefficiencies resulting from the introduction of a record number of new products,” Chairman and Chief Executive Officer Sam Allen said in the statement.

Maersk Has Economic Concerns

Maersk signaled confidence in its ability to weather the choppy economy,   but the group cut its outlook for global container-shipping demand, warning that weaker business conditions in the U.S. and Europe pose the biggest threats to world trade.

Ambrose Evans-Pritchard: Germans face shipping crisis

Germany’s shipping industry faces a wave of bankruptcies over coming months as funding dries up and deepening economic woes across the world cause a sharp contraction in container trade.