Euro tied to fate of Italy's bond markets
ROME, July 12 (UPI) -- The fate of the Italian bond market is key to the survival of the euro and avoiding a global panic, economists say.
In a double-whammy, Italian lawmakers are under pressure to pass a four-year, $55.6 billion austerity program and EU policymakers must finalize a second rescue plan for Greece while assuring financial markets the eurozone's debt crisis can be contained, MarketWatch.com reported.
While Italy's economic woes have been around for years, analysts say anything can trigger investor panic.
"There is now a very real risk that contagion will engulf Italy and Spain," James Nixon, a European economist at Societe Generale, said in a research note.
During a meeting Monday, eurozone finance ministers pledged to provide details "soon" of a plan to give more aid to Greece and prevent the debt crisis from spreading.
Ministers didn't specifically discuss Italy, where 10-year bond yields raced toward 6 percent, but ministers know Italy is at the heart of investors' concerns, Luxembourg Prime Minister Jean-Claude Juncker told reporters Monday.
Greece, Portugal and Ireland all received bailouts, but they represent a small portion of the eurozone economy. Economists said they fear Spain and Italy would be too big to rescue, MarketWatch.com said.
Italian Finance Minister Giulio Tremonti left Brussels Tuesday to return to Rome to help shepherd the austerity proposal through Parliament.
Because of recent market turmoil, the austerity plan could be approved within two weeks instead of by early August as initially expected, said Fabio Fois, an economist at Barclays Capital.
"Overall, we think that the acceleration of parliamentary approval is likely to be welcomed by markets," Fois told MarketWatch.com. "At the same time, however, we think that the government should also consider accelerating some of the fiscal measures scheduled for 2013 and 2014."
OPEC report: Crude production growing
VIENNA, July 12 (UPI) -- OPEC's crude oil production rose by 500,000 barrels a day in June but was short of expected demand later in the summer, the group said Tuesday in Vienna.
The Organization of Petroleum Exporting Countries also said in its report medium-term oil demand appeared more delicate and its growth rate probably would slow slightly next year, MarketWatch.com reported.
The OPEC ministers' report warned widespread economic uncertainty, particularly U.S. oil demand, makes predictions difficult.
OPEC reiterated its belief a big seasonal upswing in demand would come later this summer, MarketWatch.com said. Even after the production increase from Gulf countries, the world still would need an extra 1.4 million barrels a day from the group in the third quarter to fully meet this demand, the report said.
OPEC lowered its forecast for demand growth this year to 1.36 million barrels a day from 1.4 million barrels a day. It also warned demand growth could fall by another 200,000 million barrels a day this year if developed economies continue to weaken.
The report also warned a drop in demand could be experienced if oil prices climb further.
U.S. trade deficit widens in May
WASHINGTON, July 12 (UPI) -- The U.S. international trade deficit rose to $50.2 billion in May, up from a revised $34.6 billion in April, the U.S. Census Bureau reported Tuesday.
Exports fell to $174.9 billion in May from $175.8 billion in April, the Census Bureau said in a release.
Goods were $125.1 billion in May, down from $126.5 billion the month before, while services were $49.7 billion in May, up from $49.3 billion in April.
Imports rose to $225.1 billion in May from $219.4 billion in April, the bureau said. Goods were $190 billion in May, an increase from $184.7 billion in April, while services were $35.1 billion in May, up from $34.7 billion in April.
The deficit was $64.9 billion for goods in May, up from $58.2 billion in April, the Commerce Department agency said. The surplus for services was $14.7 billion in May, up from $14.5 billion in April.
U.S. stock indexes dip into red at midday
NEW YORK, July 12 (UPI) -- U.S. stock indexes slipped into the red at the New York Stock Exchange Tuesday after floating around the break-even point in morning trading.
The Dow Jones industrial average was down in early afternoon trading, off 9.80 points or 0.08 percent to 12,496.00.
The Nasdaq was off 10.57 points or 0.38 percent to 2,792.05
The Standard & Poor's 500 dipped 0.37 points or 0.03 percent to 1,319.12
Investors were keeping an eye on Europe and its own economic crisis threatening to spread from Greece to countries such as Italy and Spain.
"The market is skittish," Ed Cowart, managing director and co-portfolio manager of the Eagle Growth and Income Fund, told The Wall Street Journal. "The thing that's keeping it capped on the upside is these big European macro problems that no one can really get their arms around."
On the domestic front, the Commerce Department also said the U.S. trade gap for goods and services grew by $50 billion in May.
The 10-year treasury note was 2.91 percent.
The euro fell to $1.4003 from Monday's $1.4047. Against the yen, the dollar was 79.4955 yen from Monday's 80.2850 yen.
In Tokyo, the Nikkei Average finished trading at 9,926.54, down 144.99 points.
In London, the FTSE closed at 5,868.96, off 60.20.
