Overnight Markets Leading News -Update 1

RSA Finally Clamps Down on Mining Deaths


Italian Banks ECB Borrowing Increase to Record High In April


German Industrial Output Surges in March-Economy Contracts

 German industrial output rose more than three times as much as economists forecast in March, adding to signs Europe’s largest economy may have avoided recession.

Production jumped 2.8 percent from February, when it dropped 0.3 percent, the Economy Ministry in Berlin said today. February output was revised up from a 1.3 percent decline. Economists forecast a March gain of 0.8 percent, the median of 38 estimates in a Bloomberg News survey shows. In the year, production advanced 1.6 percent when adjusted for working days.

Germany’s economy shrank in the final quarter of 2011 as the euro region’s debt crisis damped demand for its goods. Today’s report is the latest to suggest a second quarter of contraction — the technical definition of recession — may have been averted as companies tap faster-growing Asian markets. Factory orders gained a better-than-forecast 2.2 percent in March and business confidence unexpectedly rose to a nine-month high in April.

“The debt crisis damps demand for German products in Europe but Russia, China, India, Brazil and South Africa should generally be able to compensate declining sales,” said Gerd Hassel, an economist at BHF Bank AG in Frankfurt. “Germany’s recovery is also based on strong domestic demand as high employment, rising wages and increasing investment fuel consumption and industrial output.”

Improved Outlook

Germany’s benchmark DAX share index pared losses after the report and traded at 6,510 at 12:13 p.m. in Frankfurt, down 0.9 percent today. It is up 10 percent this year. The euro was little changed at $1.3016.

Production of investment goods rose 2 percent in March and consumer goods increased 3 percent, today’s report shows. Construction activity surged 30.7 percent after a 16.9 percent slump in February due to cold winter weather.

The Economy Ministry said first-quarter production matched output in the fourth quarter. “Industrial activity is gathering pace and the outlook has improved markedly,” it said.

Germany’s top three carmakers and their suppliers have benefited most from thriving demand in China, with first-quarter profits at Bayerische Motoren Werke AG, Volkswagen AG (VOW) andDaimler AG (DAI) all beating analyst estimates.

At the same time, companies from Hugo Boss AG (BOS) to Beiersdorf AG (BEI) are profiting from increased consumer spending.

With unemployment at the lowest level since reunification, German workers are securing some of the biggest wage increases in two decades. By contrast, joblessness in the 17-nation euro region rose to a 15-year high in March and manufacturing contracted for a ninth month, adding to signs the economic slump is deepening.

Decoupling ‘Unlikely’

Italian manufacturing output has been contracting since August and Spanish industrial production slumped 10.4 percent in March from a year earlier.

“Demand from China is not going to entirely offset the weakening demand from the region’s periphery,” said Jens Sondergaard, senior European economist at Nomura International Plc in London. “When you have the third- and the fourth-largest economies of the euro area in a freefall in terms of industrial production, it is unlikely that Germany can decouple from the other euro-area countries’ economic cycle.”

The International Monetary Fund forecasts the euro economy will contract 0.3 percent this year, compared with projected expansions of 2.1 percent in the U.S. and 7.3 percent in developing Asia. It predicts 0.6 percent growth in Germany.

European Central Bank President Mario Draghi last week left open the door for more stimulus if the debt crisis continues to weaken the euro-area economy.

“We saw stabilizing economic activity at low levels in the first three months” of the year, Draghi said after policy makers kept interest rates at a record low on May 3. “The most recent survey indicators show uncertainty prevailing.”


FX Concept-Greece Likely to Exit Euro

Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC.

“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker and Sara Eisen. “The Europeans aren’t going to give them the money, theInternational Monetary Fund’s not going to give them an OK. They will be out of money in June…..


Samaras Fails to Form Government 


China’s Gold Imports Jump as Country May Become Biggest User

Mainland China’s gold imports from Hong Kong surged more than sixfold in the first quarter, adding to signs that the country may displace India as the world’s largest consumer of the precious metal on an annual basis.

Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) between January and March, from 19,729 kilograms in the year-earlier period, according to data from the Census and Statistics Department of the Hong Kong government. Shipments in March rose 59 percent from February, yesterday’s data showed.

Demand has climbed in the world’s second-largest economy as rising incomes and curbs on property speculation boosted purchases. China may become the biggest user annually this year, according to a forecast from the producer-funded World Gold Council. Last year, total Indian demand including for jewelry and investment was 933.4 tons to China’s 769.8 tons.

“We’re looking at another solid year for Chinese demand based on these early numbers,” said Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “While it’s largely related to price, negative real interest rates should keep demand strong.”

Gold has lost 15 percent from its record $1,921.15 an ounce in September as the European debt crisis, combined with reduced expectations for further monetary easing by theFederal Reserve, boosted the dollar. Spot gold traded 0.6 percent lower at $1,629.20 at 5:24 p.m. in London.

The prospect of China becoming the largest bullion user reflects the country’s economic ascendance. Per capita gross domestic product has more than doubled since 2000, according to World Bank data. The country is already the world’s top consumer of copper and biggest producer of steel.

Gold shipments to the mainland climbed in March to 62,913 kilograms, the Hong Kong data showed. That compares with 39,668 kilograms in February and 9,166 kilograms in March 2011. China doesn’t publish gold-trade data. Last year, imports from Hong Kong more than tripled to 431,226 kilograms.

The purchases through Hong Kong may signal that the mainland is accumulating reserves, London-based brokerage Sharps Pixley Ltd. said in February. The nation last made its reserves known more than two years ago, stating them at 1,054 tons.

“Summer is usually the low season for gold consumption,” said Liang Ruian, director at Pinpoint Investment Consulting Ltd. in Beijing. “If we can see growth even in the low season, it represents the resilient nature of China’s gold consumption.”

China expanded 8.1 percent in the first three months of 2012 from a year earlier in the fifth quarterly deceleration as authorities cracked down on property speculation. Inflation was 3.6 percent in March, below a government target of about 4 percent. So-called real interest rates are negative when the amount paid to savers on deposits is less than inflation.

Indian Finance Minister Pranab Mukherjee said yesterday that he was withdrawing an excise tax on precious-metal jewelry, boosting prospects for the country’s gold demand this year. Imports in April had plunged to 30 tons to 35 tons from 90 tons a year earlier, according to the Bombay Bullion Association.

“China’s strong demand for bullion may help support gold prices at lower levels,” said James Steel, an analyst at HSBC Securities (USA) Inc. “A recovery in Indian gold demand should be an important factor in support of gold prices.”


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