Weekly Economic Review

The U.K. is officially back in recession. Preliminary figures show the economy contracted 0.2% in Q1. The figures confirm analysts' fears of a double-dip recession. The U.K. was last in recession in 2009 and, despite a strong 2010, has failed to recover in the way many had hoped. The economy has shown no growth over the past year and has recovered less than half the output lost during the recession in 2008 and 2009.

Meanwhile, a survey of eurozone banks allayed fears of a eurozone credit crunch. Only a net 9% of 131 banks tightened their lending conditions in the last three months, according to the European Central Bank's latest quarterly survey. Data suggests that emergency loans provided by the ECB have helped stave off a sudden curtailment of lending. But ECB President Mario Draghi said that the outlook for the eurozone economy this year remained weak and warned that, despite the greater readiness of banks to lend, the demand for loans from businesses was likely to remain subdued.

Spain could damage European and global growth if it misses budget deficit targets. The government reassured it will take all measures to stave off any increases in deficits. Just how they will do that remains to be seen.

As we tweeted, S&P lowered India's sovereign credit outlook to negative from stable on risks of slower economic growth and a widening current-account deficit, taking the nation a step closer to junk status.It reaffirmed its BBB- long-term India rating, the lowest investment grade and noted that India's rating reflects at least a one-in-three likelihood of a downgrade. Bonds fell, stocks declined and the rupee pared gains after the downgrade.

U.S. companies are surpassing earnings estimates at the highest rate in two years as economic growth at home helps drive demand and counter a drag from Europe. So far 86% of the companies that reported have been estimates, far above the average of around 70%.

China's stocks rose recently after Premier Wen Jiabao pledged to maintain steady economic growth and U.S. housing data bolstered the outlook for exports to the world's biggest economy.Earnings are still a major concern and will limit a rebound. Trading will be range-bound for the time being. The Shanghai index has climbed 9.4% this year on  expectations the government will take measures to boost the economy.

Gold fell to the lowest level since April 5, on concern the political climate in France and the Netherlands may complicate Europe's struggle to contain the debt crisis. The Akshaya Tritiya festival, considered an auspicious day to buy precious metals, is celebrated today in India, last year's biggest bullion buyer. Jewelry demand is seen as limited.

Author: Chris Davies

Posted in: gold , India , U.K.