France: GDP Growth Second Quarter 2010

During August, we will not be providing the 'Markets Afternoon' report due to holiday and site development work. Use the relevant links below for the latest data.

German GDP growth in Q 2 2010 was a stunning 2.2% in the quarter (see link to story in Box below); France's growth was 0.6%, Italy's was 0.4% and Spain's was 0.2%; Italy reported last week. Spain confirmed the central bank's forecast of 0.2% this morning and France's national statistics office, INSEE (Institut National de la Statistique et des Études Économiques), reported growth of 0.6%  in Q2, following 0.2% in the previous quarter.

France's production’s growth slightly increased (+0.7% after +0.3% in Q1). After eight quarters of contraction, total GFCF (gross fixed capital formation) increased (+0.8% after –0.9%), whereas households’ consumption’s expenditures edged up (+0.4% after 0.0%). Altogether, total domestic demand (excluding inventory changes) positively contributed to GDP growth: +0.5 point after –0.1 point in the first quarter. Foreign trade balance deteriorated on the second quarter and negatively contributed to GDP growth (–0.4 point after +0.5 point): exports decelerated (+2.7% after +4.2%), however imports speeded up strongly (+4.2% after +1.8%). Inventory changes positively contributed to GDP by +0.6 point after –0.2 point in Q1. This mainly resulted from consumption and intermediate goods.

Softer US numbers not helping risk market sentiment: Davy chief economist, Rossa White, comments  -- "Following the Fed's downgrade on Tuesday and Wednesday's sharp sell-off, the equity market could have done with a strong US data point yesterday. That did not happen. Instead, initial jobless claims missed the consensus estimate by some distance. It continues the trend of generally weaker economic data in July and August with the important exception of the ISM indices earlier this month. The latest will sustain bond yields at current levels, but the boost to the economy from low rates (which would aid equities) has thus far disappointed.

For some time the US bond market has been rallying (10-year yields have dropped 130bps in four months), fuelled initially by the euro crisis, then by weaker data and more recently by dovish Fed actions. But the equity market managed to park the negative news for over a month. One or the other had to give, and in the last few days, risk markets (both equities and credit) have reversed. This year's moves in equities have been eerily similar to 2004 and on that basis, the rallies and sell-offs may not have ended for the year in a market that struggles to make any headway overall.

Initial jobless claims reached 484,000. That eclipsed last week's number only marginally but it was still the highest total since February. At this stage of the recovery, initial (and continuing) claims remain too high for comfort. This has spurred the bond market, but the resulting lower financing costs are yet to really lift the economy. Granted, there are lags involved. However, despite the new record low in mortgage rates this week, the housing market still looks a bit sick. Capital goods orders are rising gradually, but the overall recovery in business investment may fail to convince while spending remains sluggish. It will be vital to watch if smoother credit transmission will lead to increased traction from lower interest rates in the months ahead."

The global economic recovery will become more self sustaining going into the coming quarters, says Fan Cheuk Wan, head of research Asia Pacific at Credit Suisse Private Bank. She tells CNBC's Karen Tso, Martin Soong and Sri Jegarajah why she's confident there will be no double-dip:

Economic View: Ireland continues to bridge the price gap versus Europe - - Goodbody economist, Deirdre Ryan, commented  - - "The rate of consumer price deflation in the Irish economy continues to slow sharply, with the rate of price decline almost flat on an annual basis in July. Mortgage interest costs have played a significant role in the moderation. On an annual basis prices in the housing category, which includes mortgage interest, were ahead by 5.5% in July. This category has added 0.8% to the CPI over the past 12 months, a contribution which is fully accounted for by mortgage interest, with mortgage costs up 17% yoy in July. With further increases in mortgage interest rates announced by some of the main lenders over recent days, this effect will continue to feature in the near term.

Stripping out mortgage interest indicates that consumer prices outside of this component are continuing to decline modestly, and were 1% lower yoy in July. Despite these latest trends, price movements versus Europe remain favourable. The HICP measure shows consumer prices down 1.2% yoy in July (-2% yoy in June), against a wider Eurozone inflation rate of 1.7%. Also the CPI is still 6.6% below peak levels. So a reduction in consumer price levels vis-à-vis the Euroarea is still in train. Costs in other sectors are continuing to adjust also, with downward pressure remaining on areas such as pay, utility costs and property and rental costs. Nevertheless, these trends do indicate that Irish consumer price deflation is coming to an end, although only very modest increases in the CPI are likely from here. The index is set to average at -1% for the year as a whole before a modest 1% rise in consumer prices in 2011."

Greek GDP fell by 1.5% in the second quarter against estimates of a 1% drop and unemployment continued to increase in May, data showed Thursday. Anke Richter from Conduit Capital Markets has analysis:

Irish Financials: Wholesale cost of funding: Goodbody's Eamonn Hughes comments  - -"Watching Irish bond yield spreads relative to bunds over the past week or so hasn’t been pleasant and the T-bill results yesterday showing c100bps higher costs than the July event is sobering. The market is clearly fretting over sovereigns again the goodwill for the banking sector post the recent stress tests is fading fast.

However, having said that, the elevated cost of funding is something that has been on our mind in terms of our bank forecasts and in the past 2 weeks we have cut our margin forecasts at both banks. Even this week, post the BOI H1 results, we have pitched our forecast into H2 below management guidance. BOI management guidance is for 135bps for this year, which including the cost of the ELG scheme is closer to 125bps. We have a figure of 120bps, which implies a 110bps run-rate in H2 versus management guidance of 120bps (net of the ELG cost). This gives us some comfort that we are reflecting much of the market’s concerns though obviously wouldn’t like to see the current elevated levels remain indefinitely."

Laurence Meyer, vice chairman of Macroeconomic Advisers and a former Federal Reserve governor, discusses the Federal Reserve's recent statement and its plan to revive the economy:

US Markets

On Thursday, the Dow fell 59 points or 0.57% to 10,320.

The S&P 500 slid 0.54% and the Nasdaq slipped 0.83%.

Asia Markets

The MSCI Asia Pacific Index gained 0.7% Friday - -  ending a fourth day losing streak.

The Nikkei 225 added 0.44%; China's Shanghai Composite climbed 1.21%; Australia's S&P/ASX 200 Index rose 1.33% and India's Sensex Index advanced 0.79%.

Asia benchmarks

In Europe, the Dow Jones Stoxx 600 has risen 0.69% Friday.

The ISEQ has gained 0.30% in Dublin.

CRH is up 1.53%; Elan has added 0.49%; Glanbia has climbed 3.26%.