Euro-Zone's Confidence Rises Regardless Problems

Economy and consumer confidence in the euro zone improved for the third consequent month in June. However, the European Commission still fears problems in future. According to a survey by the European Commission, the overall economic-sentiment indicator for the euro zone inclined sharply to a high of 73.3, from 70.2 in May. In the U.K., the Commission's economic-sentiment index grew sharply for 30 percent straight month to 68.8 in June from May's 66.1.

The gains gave ground to think that the European downturn could begin bottoming out. Economic analysts say, the European Central Bank will not change its medium-term view that it should take additional steps to support growth in the euro zone. The ECB's governing council meets on Thursday and is expected to keep unchanged its key interest rate at the same level of 1.0% and also to announce no changes in policy measures to inflate money supply. Many economists warn that improving sentiment should result better performance in output of goods and services.

Five-Year High for Japan's Jobless Rate

Japan unemployment rate reached its five-year high in May, while household spending performed a rise as the government distributed cash to help the economy growth. According to the statistics bureau, the jobless rate gained 0.2 percent reaching a high 5.2 percent from 5 percent in April.

Japan`s household spending rose 0.3 percent, the first rise in a year and a half. Economists expected outlays to drop 1.5 percent. Takuji Aida, senior Japan analyst at UBS AG in Tokyo stated that the effects of the Japanese policy are already observed and the stimulus package will only have a large effect in the April-June quarter.

Forex Market Update. GBP/USD

In Asian trading GBP traded to 1.6660, and just under the high this month and for the year at 1.6662. The improvement in the GfK consumer confidence figures released earlier today seemed to support the sterling.
The Bank of England information on lending shows the banking system remains frozen, with net mortgage lending in May at record lows.
As for GBP, a rejection of the 1.6662 level risks a retreat in sterling, possibly back to the base of the 1.6200-1.6600 range that has held for much of the month. Pound rebound from USD1.6505 sees rate pressuring up against resistance level ahead of USD1.6530. Above here and rate can edge on USD1.6540/50 ahead of USD1.6560 and stronger interest placed toward USD1.6580.

Japan Inflation in Record Drop

Figures of Japan inflation rate are likely to show that inflation in Japan remained negative in May. The drop in prices for food and energy as well as with weak demand at home and abroad raised deflation in the first economy in Asia. Prices of goods also dropped for the third consequent month. Prices in Japan fell by the most on record last month, bringing fears of a new deflation, as official data from the Ministry of Finance shows .

Consumer prices fell 1.1% in May compared to same month a year ago, the most since records began in 1970. Japan was previously trapped in a deflationary spiral, where prices of goods kept falling, in the 1990s. To sum up the analyst`s forecasts, the say economy management should avoid collapse into deflationary spiral. Analysts consider deflation to be damaging to an economy because consumers delay purchasing until prices fall further. This factor drives down prices more.

Economic output and trading fall if there is little consumer spending. According to the latest data has the worst stage of recession for Japan may be over, the drop in consumer prices follows the worst recession in the economy of Japan.

Two More Years of Recession for Car Japanese Producers

Akio Toyoda the new boss at Toyota, vehicle producer number one in the world, has explained his future plans for returning it to profit. Akio Toyoda the grandson of Toyota's founder became a president at the most decisive moment for the company. The last year was the first one to end with losses for 14 years. He stated, everything possible would be done to avoid a third year of losses adding he would take a 30 percent pay cut for his first year in a new job. Mr. Toyoda stated: "We're looking at two more tough years ahead. But if we unite as one with all our staff from distribution to sales, we'll get over this tough period and Toyota will return to profit."
He announced a new management structure with vice presidents assigned to separate regions to speed up decision-making and make the company more responsive. Also the production of environmentally friendly cars is forecasted. Stock markets negatively responded for Toyoda`s speech.

Euro-Zone Orders

According to the EU statistical agency Eurostat new orders for manufacturers in 16 countries with the euro currency fell 35.5 percent in April from a year earlier. This decline is considered to be the toughest since previous year. The worst situation were orders for tools, parts and components sold on to other producers, down nearly 40 percent. Car and home appliance orders decreased by more than a 25 percent.
Orders in Germany economy dropped by 39.5 percent. Eurostat said euro-zone orders slipped 1 percent from level of March. The entire 27-nation EU orders in April fell 35 percent from the same month last year and 0.5 percent compared to March. In Europe, however, new industrial orders in the euro zone turned out to perform very poorly.

Wednesday Market Update

European shares finished the day sharply higher, up to 3 percent. Such a rise is explained to be boosted by the following factors: optimistic US information on orders for durable goods increased higher than predicted 1.8 percent, optimistic economic outlook from the OECD.

But the main factor spurring the market trades was the European Central Bank`s credit for banks almost half a trillion euros, the largest investment in its history. So banks turned to be the biggest gainers. Oil prices rose supported by fall in stockpiles of US crude and growing geopolitical conflicts in some OPEC member countries.