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Current Futures: Dow -19.00, S&P -2.90, NASDAQ -9.75
Asian and European markets saw downside action during the overnight session. U.S. futures also declined, but so far, the declines have been limited.
Asian markets declined as North Korea tested its nuclear missile. It is not the first time that North Korea has launched missile tests, something that caused tensions in the region over the last few years. As such, investors shed some of their assets for the safety of government bonds, mainly U.S. Treasuries. In Europe, markets declined led by financials and tourism companies, as it seems the swine flu is continuing to expand. Porsche declined, as the company has big financial problems.
A report confirmed during the European session that the German economy contracted 3.8% in the first quarter, the most on record. The biggest drag on the quarterly read came from the trade balance, which subtracted 2.2 points out of 3.8% decline, and from investments, which also had a major contribution to the GDP’s contraction. However, German consumers provided valuable support to the German GDP, adding 0.5%, while the German government boosted the GDP by 0.3% by increasing its spending.
TheLFB-Forex.com Trade Team said that the German economy is in a similar position to the Japanese economy right now. Both countries have a big exposure to international trade, which was affected by the credit crisis. However, the Japanese economy has some other major imbalances and structural problems, which are not present in the German economy.
Even though central banks have their own status, sheltered from the government’s actions, the ECB staff is organizing a strike on June 3, one day ahead of the interest rate decision. The main complaint is the new pension scheme, which would force the bank’s employees to increase their contribution to the pension fund. Despite the strike, the next interest rate decision from the Euro-area will be unaffected, the Governing Council guaranteed.
Overnight, the Japanese Nikkei fell 36.20 points (0.30%) to 9,310.81. The Australian S&P/Asx rose 50.50 points (1.35%) to 3,788.40. The U.K. Ftse slipped 25.42 points (0.58%) to 4,339.87, while the German Dax declined 61.05 points (1.24%) to 4,857.40.
Crude oil for June delivery was recently trading at $60.50 per barrel, lower by $1.10.
Gold for June delivery was recently trading lower by $6.60 to $952.30.
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