Soothing data about China’s economy provided some succour to investors on Wednesday although Europe’s debt crisis rolled on with Irish government bond yields hitting record highs after a downgrade to junk.
China’s GDP grew 9.5% in the second quarter of 2011, beating expectations, while retail sales grew 16.8% in the six months ended June, showing that domestic demand still held up well.
Moody’s also downgraded Ireland’s credit rating to junk status, sending its 10-year bond yield up to 14%. It warned that Ireland would need a second bailout.
The European Commission criticised the desicion as “incomprehensible” and its timing “questionable.” The Irish government also attacked the decision, saying that that the move was “frustrating and makes the government’s job more difficult.”
Meanwhile, the International Monetary Fund called for “decisive implementation” by Italy to cut its public debt, as the country’s central bank called for additional cuts in public spending to avoid tax increases. The Italian parliament will adopt a four-year austerity budget by Friday.