Mixed news from Spain, but data that show EuroZone, even Germany, headed into recession

06/21/2012 12:53 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Good news, bad news from Spain’s bond auction this morning, but nothing but bad news on Europe’s economies in this morning’s data.

Spain sold 2.2 billion euros ($2.77) of bonds this morning. The good news is that total sales were more than the Spanish government had set as a minimum target. Bid to cover ratios rose on all three maturities offered for sale from the last auction. The bad news is that yields jumped dramatically. The yield on the five-year bond, for example, climbed to 6.072% from 4.96% at the last auction. That yield is a 15-year high. The yield on the three-year note rose to 5.54% from 4.87% at the previous auction. The yield on the two-year bonds increased to 4.706% from 2.069%.

Meanwhile, the latest purchasing managers survey showed more evidence that the EuroZone is headed into recession. The composite index for the EuroZone as a whole, which combines both manufacturing and services, came in at 46 in June, unchanged from May. Which would be good news except that any reading below 50 indicates a contraction. The services index rose a bit in June to 46.8 but manufacturing fell to 44.8 against May’s 45.1.

On the individual country level, the big bad news came from Germany, which has been holding up better than other EuroZone economies. The June manufacturing index for Germany fell to 44.7 in June versus 45.2 in May. That’s the weakest reading since July 2009. The service sector remains barely in the black at 50.3 but that is still down from May’s 51.8.

We’ll see if the spread of the pain to the German economy results in any concrete actions to end the crisis at the various meeting and summits that stud the next week or so.
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