Strained relations between Germany and France became apparent Monday, when the finance ministers from both countries failed to resolve whether the euro zone would benefit from issuing joint European bonds. Berlin rejected the idea, stipulating that struggling economies must deal with economic mistakes before being given a reason not to. Paris, taking the side of stimulus spending under its new socialist leadership, said bonds should be issued now in order to raise funds to create jobs. The disagreement set the stage for Wednesday's informal E.U. summit in Brussels.
Chinese Premier Wen Jiabao's comment that his government is considering policies to promote economic growth was received as a sign Beijing is considering measures to counteract slowing industrial production. The comment was interpreted by market watchers as a sign China would consider further reductions in banks' minimum reserves. China has said it's committed to maintaining a minimum 7.5 percent growth for the year; anything below 7 percent would be considered a hard landing that would rile global markets.
Markets appeared indifferent to the weekend G-8 summit where leaders agreed it was in everyone's best interest that Greece remain in the euro zone. The Dow Jones Industrial Average, S&P 500 and Nasdaq all closed up -- the latter closing up above 2 percent -- as stocks rebounded from the worst week so far this year.
Stocks. Most major world markets were up; the ones that fell were down slightly. Sectors that exhibited strong performance in the U.S. included basic materials, capital goods, energy and technology. The stock price of Irish electrical equipment manufacturer Cooper Industries plc (NYSE: CBE) shot up more than 25 percent after power manager Eaton Corp. (NYSE: ETN) of Cleveland announced it would buy the company for $11.8 billion in cash and stock. A big loser was Lowe's Companies Inc. (NYSE: LOW), which saw its stock price fall 10 percent after the company downgraded its annual earnings-per-share estimate.
Bonds. U.S. benchmark 10-year note yields rose slightly, indicating a cautious return to investing in stocks. The Spanish 10-year bond fell slightly to 6.3 percent after climbing to its highest level since late November. Italy's 10-year note dropped to 5.83 percent, the lowest level since late January. The benchmark German bund yield dipped to the near-record low it struck last week before rebounding to a flat 1.47 percent.
Currencies. The euro climbed back from a four-month low against the dollar after reassuring statements out of Germany and France that the two countries are committed to keeping Greece in the currency bloc. The euro drilled down below $1.27 last week for the first time since mid-January. India's rupee found a new low against the dollar for the fourth consecutive session, as the currency continued to face the brunt of global uncertainty.
Commodities. The S&P GSCI Spot Index of 24 commodities has continued its downward march, erasing year-to-date gains and hitting its lowest level since October. Oil rose for the first time in seven sessions on the news China was likely to implement policies to maintain growth. Oil for June delivery rose slightly. Natural gas for June delivery fell 3.7 percent on expectations that warmer- than-usual weather would reduce short-term demand to an extent that supplies in the fall would be near capacity. Gold for June delivery registered its first loss in three trading sessions.