(MENAFN- Kuwait News Agency (KUNA)) Worries over risks emerging from the Eurozone, especially Spain's debt levels and the Greek Elections combined with disappointing data from major economies spurred volatility across the markets, a specialized report said here Monday.
In the United States, the Dollar had a mixed performance against its counterparts throughout the week, National Bank of Kuwait (NBK) said in its weekly markets' report.
It added that the greenback dropped as investor's risk appetites were lifted by the announcement of the EUR 100 billion to shore up Spanish banks. Investors then quickly moved back to the greenback as fears over the capability of Spain to pay back its debt triggered a sell-off in Spanish bonds, which drove yields higher and closer to the psychological level of 7%; 10-year Spanish yields reached a high of 6.8%.
On Friday, central banks from major economies announced that they will stand ready to take steps, including coordinated action, to stabilize markets as world economies prepare for a possible financial storm or public panic after tight elections in Greece this weekend.
The Euro started the week on a strong footing and reached a high of 1.2671 but quickly dropped as fears from Spain spurred risk aversion in the market. The single currency dropped further as Moody's investor service downgraded Spain's credit rating by three notches citing the nation's increased debt weight and weakening economy driving the Euro to reach a low of 1.2441 mid-week. The currency gradually recouped its losses as traders started to cover their short positions in anticipation of the outcome of the Greek elections on 17 June. The currency closed the week at 1.2660, the report noted.
The Sterling Pound traded in a wide range throughout the week between 1.
5580 and 1.5460. On Friday, the Pound traded in a volatile manner as the BoE Governor announced to channel subsidized loans to British borrowers and pump extra liquidity into banks, an effort to curb risks emerging from the Eurozone.
The Japanese Yen range traded between 79.10 and 79.74 up to Thursday. The Yen quickly gained as investors sought it as a safe haven ahead of the Greek elections. The USD/JPY dropped dramatically to reach a low of 78.62 and closed the week at 78.75.
As for retail sales, they fell in May for a second month in the United States, prompting economists to cut forecasts for economic growth as limited job and income gains curb consumer spending. Sales dropped by 0.2% matching April's downwardly revised figure. Core retail sales dropped by 0.4%, the lowest in two years. The smallest wage gains in a year and unemployment exceeding 8% are taking a toll on consumer spending that accounts for about 70% of the US economy, leaving it more vulnerable to shocks from the European crisis. Federal Reserve policy makers gather next week to decide whether further stimulus will be needed to maintain growth in the economy.
Meanwhile, in the United Kingdom, manufacturing fell more than market expectations in April, pointing to continued weakness in the economy at the start of the second quarter. Factory output dropped 0.7% from March, led by pharmaceuticals, aircraft maintenance and food production. Similarly, industrial production was unchanged following a drop of 0.2% in the previous month.
The British government and BoE (Bank of England) said that they are preparing a scheme to channel cheap loans to British businesses as part of a range of measures designed to defend the country's financial system from market turmoil. Mervyn King, BoE's governor, said that the BoE and UK Treasury were working on a "funding for lending" scheme that would provide multi-year loans at below-market rates "linked to the performance of banks in sustaining or expanding their lending to the UK non-financial sector during the present period of heightened uncertainty."
Treasury officials said that the government plan could support an estimated 80 billion pounds in new loans, while the central bank's separate scheme will provide monthly 5 billion pound tranches of six-month liquidity to banks.
Back to Japan, where the Bank of Japan kept the size of its asset-purchase fund unchanged and said it will pay "particular" attention to global markets, referring to the highly anticipated Greek elections. The central bank kept its asset-purchase fund at 40 trillion yen and a credit-lending program at 30 trillion yen. Additionally the central bank kept its key lending rate unchanged at the range of zero to 0.1%.
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