Mixed Data from the EU and Germany Cannot Help European Markets

A surprise came in the form of German unemployment today with four times the forecast amount, increasing by 21,000. This blew the prediction of 5,000 out of the water, bring the total unemployment numbers to 2.96 million individuals. This is the fourth straight monthly gain, hardly positive signs coming out of the banker of the European Union. The adjusted jobless rate maintained at 6.9%, just above the twenty year low of 6.8%. Other news from the area included an expected 0.1% GDP increase as well as gains in the German Consumer Price Inflation, accelerating at an annualized rate of 1.5% for May higher than the predicted 1.3%.   The month over month Consumer Price inflation also grew, at a more moderate 0.5%. 

The already good condition of the labor market makes it difficult for the numbers to improve, but economists still see a better future for the unemployment figures. “Germany’s economy is solid, and sooner or later the unemployment numbers will go down again,” said Alexander Koch, an economist at UniCredit Group in Munich. “I’m quite optimistic for the months to come.”
The immediate response in EUR/USD and USD/CHF were both evident, as EUR/USD added 0.73%, trading at 1.2948. European stock markets, however, were not able to break out of the slump, Germany's DAX tumbled 1.6%, the EURO STOXX 50 dropped 1.4%, France’s CAC 40 retreated 1.5%, while London’s FTSE 100 tumbled 1.6%.  

Inflation dropped as well for the EU bloc, down from 1.7% in March to 1.2% in April, concerning central bankers and possibly making the economic situation in Europe more difficult, as banks are no longer certain about maintaining the low margins. European central bank deputy Vitor Constancio said that financial stability in the euro has improved in recent months. A number of positive points had been observed, such as a reduction in stress in the financial sector, a fall in sovereign bond yields and spreads of distressed countries, increased bank deposits and capital and reserves, lower bank funding costs and reduced reliance of banks on the eurosystem of central banks for financing. "Nevertheless, the situation remains fragile," Constancio said.