Panic-Stricken Markets Greet Labor Day 2011

September 5, 2011

U.S. markets are closed for Labor Day, but elsewhere the mood is grim.

Ten-year sovereign debt yields tumbled 15 basis points in Britain, 14 bps in Germany and five bps in Japan.

Gold catapulted above $1900, gaining 1.3% to $1902.10 per ounce. 

Oil slumped 2.7% to $84.08 per ounce.

Share prices have plunged 5.6% in Germany, 5.0% in France, 2.5% in Britain, 1.9% in Japan, 2.1% in China, 3.0% in Hong Kong, 2.4% in Australia, 2.5% in Singapore, and 4.4% in South Korea.

The Swiss franc has risen 0.6% against the dollar, which otherwise appreciated by 2.0% against the kiwi, 1.3% versus the Aussie dollar, 0.9% relative to the loonie, 0.8% against the euro and sterling, 0.2% versus the yen and 0.1% against the yuan.

Investors have several concerns this Labor Day.

  • U.S. labor statistics released September 2 were shockingly bad with no redeeming silver linings.
  • The political system in America is broken.  Candidate Obama ran for president in 2008 constantly reminding voters to the neglectful policies of the Hoover administration.  Ironically, he is likely to share that legacy.
  • German Chancellor Merkel’s Christian Democratic Party lost its sixth regional election in seven tries yesterday.
  • The debt problems of Italy and Greece have seemingly become more intractable.  ECB President Trichet made critical remarks about Italian fiscal policy.
  • Many poor indicators were released today from both advanced and emerging economies.

Retail sales in the euro area ticked up 0.2% in July but were still 0.2% weaker in volume terms than a year earlier.  Retail sales were unchanged on month in Germany and down 1.9% in Finland.

Brazil’s composite purchasing managers index dropped below the 50 no-change line for the first time since July 2009, printing at 49.9.  Manufacturing hit a 28-month low, and services weakened to 52.2 from 48.8.

India’s service-sector PMI dropped 4.9 points to 53.8 in August.  Jobs contracted for the first time in 28 months.  India’s composite PMI fell by 3.5 points to 54.5.

The British PMI-services index recorded its largest month-to-month deterioration in over ten years, printing at 51.1 after 55.4.  The level was the lowest in nine months.  U.K. riots were a negative factor.

China’s service-sector PMI recorded an all-time low of 50.6, down from 53.5 in July and 54.1 in June.

Japan’s PMI index in services relapsed to a three-month low of 44.3.  The composite Japanese PMI of 46.7 was also at a three-month low.

Hong Kong’s 47.8 composite PMI score constituted a 26-month low.

Euroland’s service-sector PMI of 51.5 was the same as the preliminary estimate and down from 51.6 in July.  The composite euro zone PMI was at 50.7, lowest since August 2009.

Within Euroland, the German services index was revised from a flash indication of 50.4 to 51.1, which nonetheless was the lowest since September 2009.  Germany’s composite score has softened to 51.3.  The French indices of 56.8 for services and 53.7 on the composite reading were at 3- and 2-month highs.  But the Irish service PMI dropped 0.6 to 51.1, a 3-month low.  The Italian and Spanish service-sector PMIs were under 50 at 48.4 and 45.2, respectively, in August.

Euroland’s Sentix barometer, a gauge of investor sentiment, sank 28.8 points to minus 15.37.

Mexican consumer confidence fell 2.1 points to 93.4 in August.

Turkish CPI and PPI inflation accelerate to 6.7% and 11.0% in August from 6.3% and 10.3% in July.  Core CPI inflation rose 0.8 percentage points to 6.2%.

On-year GDP growth in Finland slowed to 2.9% last quarter from 5.5% in 1Q.

Australia’s PSI-services index improved to 52.2 from 53.7 in July, but the pace of wage inflation accelerated. 

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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