Global Equity Correction Extended

February 5, 2018

The unprecedentedly harsh Federal Reserve sanctions announced Friday against Wells Fargo Bank injected fresh impetus to last week’s global correction in share prices. So did a further basis point rise in the 10-year Treasury yield.

Equities fell today by 2.6% in Japan, 1.6% in Australia and Taiwan, 2.1% in New Zealand, 0.9% in India and 1.3% in Singapore and South Korea. New losses in European markets amount to 1.0% in the U.K., France and Spain, 1.1% in Italy, and 0.9% in Switzerland.

The value of a bitcoin remains in retreat and fell under $7,500. West Texas Intermediate crude oil slid 0.9% to $64.85 per barrel. Gold is marginally firmer, and copper has jumped over 2%.

The dollar rose 0.7% against sterling, 0.6% versus the Swiss franc and 0.3% relative to the euro but is steady vis-a-vis the yen and kiwi and 0.1% softer against the yuan.

Mexico’s market is closed, observing the 101st anniversary of that country’s present constitution.

The results of January service-sector purchasing managers’ surveys have been reported, as well as the findings of a number of other PMIs.

The Institute of Supply Management reported a whopping 3.9-point leap in the U.S. non-manufacturing PMI index to 59.9 last month, exceeding all monthly readings from 2017. The new business component shot up 8.2 points, and jobs were 5.3 points higher.

Euroland’s services PMI went up 1.4 points to 58.0, lifting that economy’s composite manufacturing and non-manufacturing PMI score to a 139-month peak of 58.8. The Italian, German, and Spanish composite PMIs set 139-, 81- and 6-month highes of 59.0, 59.0, and 56.7. France had an even higher composite PMI of 59.6, which matched the December level, and Ireland’s composite PMI was also 59.0, a 2-month low. Collectively, the data suggest that GDP growth will be revised upward.

The British services and composite PMI readings, in contrast, dropped 1.4 and 1.2 points to 53.5 and 53.0 in January,  suggesting slower quarterly growth of around 0.3%.

Back on a brighter note, China’s composite and services PMI scores climbed 0.7 and 0.8 points respectively, to a 7-year and 68-month high. Japan’s services PMI rose 0.8 points to 51.9 and embodied the most optimistic business sentiment in 56 months. Australia’s Performance of Services index was at a robust 54.9, best in six months.

Middle-Eastern PMIs were not as vibrant as hoped. The Saudi PMI dropped 4.3 points to 53.0, indicating the weakest rate of improvement since at least August 2009. Egypt’s non-oil PMI rose but at 49.9 merely signaled a stabilization of activity. Lebanon’s PMI reading was the highest in nine months but at 47.1 still well below the 50 line of demarcation between improvement and deterioration. The U.A.E. non-oil PMI fell back 0.9 points to 56.8.

India’s services PMI score, 51.7, was the best in 3 months, but its composite reading was 0.5 points lower than in December.

South Africa’s private PMI rose 0.6 points to 49.0. It’s been below 50 since last August.

Russia’s composite PMI dropped 1.2 points to 54.8.

The Brazilian services and composite PMI readings of 50.0 and 50.7, though at 4-month highs, connote a weak pulse.

Hong Kong’s privatre PMI slipped 0.4 points to 51.1 but was accompanied by greater business optimism.

Singapore’s manufacturing PMI arebounded 1.5 points to a 2-month high of 53.6.

Retail sales volume in Euroland ended 2017 on a weakening note, falling 1.1% on month and rising just 1.9% on year. Sales had posted a 3.9% 12-month rate of increase in November and advanced 2.6% on average in 2017.

The Sentix investor sentiment index for the euro area slipped 1.0 points to a 2-month low of 31.9.

Indonesian consumer confidence, which touched a record high in December, eased back 0.3 points to a reading of 126.1 in January.

Between January 2017 and January 2018, consumer and producer prices in inflation-prone Turkey soared by 10.35% and 12.14%.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without expressed permission.

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