The Chinese economic growth unexpectedly lost momentum in the first quarter of 2013 as gains in factory output and consumption weakened; driving stocks and commodities lower on concern of a slowdown in global expansion. Gross domestic product, GDP, rose 7,7% from a year earlier. The GDP numbers did not meet analyst forecasts of 8,0% growth. March industrial production gained less than estimated. Retail-sales growth are, however, in line with forecasts.
The weaker than estimated forecasts put oil prices under new pressure. Brent crude fell to USD 101 a barrel as gold tumbled to a 21-month low. The steep decline in gold and silver prices started last Thursday and gained momentum during Friday night and early Asian trading. Gold hast lost USD 150 an ounce in less than one week and trades at 1441. The gold prices decline follows a bearish note from Goldman Sachs which foresees continued falls in the precious metals and strongly recommend sales.
The depreciation of the Japanese yen, JPY, has halted as US authorities warned Japan against devaluation. USD/JPY licked on 100 mark several days during last week. It is now trading at 97,67. Euro/USD keeps steady at 1.3074. USD/GBP (British pound sterling) stays at 1.5321. Inside the Euro zone it might be quiet before new storm forecasts. European finance ministers adopted last Thursday a 10 Billion Euro bail-out for Cyprus.
The Cypriot government has simultaneously lifted the forecasts of its own contribution to the banking bail-in from Euro 5,8 to the double amount. This will put private account deposits in the Cypriot banks under new hair-cut pressure. The increase in bail-in demand comes on top of rumors that Cyprus is selling major part of its gold reserves. That has added to the downward pressure on gold prices. The Governor of the Cyprus Central Bank, CBB, has voiced concern that the independence of the CBB is under government pressure.
The weaker growth in China adds to concerns that the global recovery is struggling. Monetary easing by injecting money into economic system has led to new records on the stock exchanges, but no new working places are added. There are fears that new record high stock markets barely represent a new bubble. The International Monetary Fund, IMF, is said to consider to lower its forecast for US growth. The guru investor, George Soros, warns that Germany shall be in recession by end of September. Soros is also forecasting a breakup of the Euro either by a unilateral German exit or by member states exiting following the Cyprus crisis.
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