Promises of aid of up to e100bn (£80.9bn) for Spain’s ailing banks provided brief relief for everybody, but the metal markets could not get away from the ebb and flow of general financial market sentiment.
The eurozone’s fate remains central to the markets’ concerns. While the aid to Spain appears substantial, the EU has a record of announcing that it would do everything needed to resolve the problem, only to flinch from doing the necessary.
Greece is due to vote for a new parliament, and pundits express hopes or expectations that pro-bailout parties will get a majority. But the worrying thing is that others now see that as relatively unimportant since the focal point of the euro’s problems has moved beyond Greece.
Rating agency Moody’s, for example, has cut the ratings of six German banks. Some analysts suggest that resolution of the eurozone’s problems will accelerate only when Germany starts to feel the pain.
All this is causing difficulties elsewhere. Data from China was not as bad as some had feared. The consumer price index was running at 3% a year in May, down from 3.4% in April, while industrial production rose at an annual 9.6% in May, up from 9.3% in April.
But this was not enough to stop the People’s Bank of China from cutting rates by 25 basis points (0.25%). In the current mood this increased anxieties that the economy faced problems which the Chinese authorities were trying to assuage, rather than welcoming the stimulus.
Noises from the US Federal Reserve suggested that officials were concerned about growth of around 2% a year and a labour market that seemed to be running out of steam. There was no official confirmation of this from the chairman ahead of the next important meeting scheduled for 19-20 June.
But there was some good news from Japan. Consumer confidence has improved, to 40.7 in May from 40.0 in April. And a survey of company capital spending was now pointing to an 8.4% increase this year, whereas an earlier survey had suggested a decline of 0.3%. The one worry was that this was boosted by government aid for reconstruction after last year’s devastating tsunami.