Stocks Tumble Around the World

June 29, 2010

Equities plunged 4.6% in China following a revision to the economy’s index of leading economic indicators to 0.3% from 1.7% reported originally.  This is a recently developed indicator of the Conference Board, which has been calculating a similar statistic for the United States and Europe.

The Chinese market’s steep losses spearheaded other sharp stock market declines in the Pac Rim including drops of 2.3% in Hong Kong, 1.4% in Singapore and India, 2.1% in Indonesia, 1.0% in Taiwan, 1.3% in South Korea, 0.9% in Australia and 0.6% in New Zealand.  Stocks in Europe have so far traded down 2.7% in France, 2.3% in Germany, 2.1% in Great Britain, and 3.2% in Spain.  European markets are additionally spooked by uncertainty over the impact of the maturity on July 1 of EUR 442 billion of a 1-year ECB repo tender.  Three-month funds will replace some of such.

Ten-year sovereign bond yields declined six basis points in Britain and five basis points in Germany and Japan.  The 10-year Treasury yield is indicated off by a similar amount and below 3.0% since April 2009.  In the NYT yesterday, columnist Paul Krugman warned that America may be headed for its third depression.

Commodity-sensitive currencies are very weak today.  Extreme risk aversion sent the U.S. dollar up 1.8%, 1.6% and 1.1% against its Australian, New Zealand, and Canadian counterparts.  The dollar also gained 0.7% against the euro, 0.3% relative to sterling and 0.1% versus the Swiss franc.  Group of Seven leader summits were established in the mid-1970s explicitly to promote information sharing and policy coordination in foreign exchange policy.  That function has apparently slipped through the cracks in the shift to a Group of Twenty format, and the chaos in global financial markets shows that this was ill-advised.

Oil prices fell 1.9% to $76.76 per barrel.  It now appears that Alex will intensify to a hurricane and interfere with efforts to contain the spread of leaking oil in the Gulf of Mexico. Gold is steady at $1238.80 per ounce.

Several Japanese indicators were released.

  • The jobless rate of 5.2% represented a third straight increase and was the highest so far of 2010.  Employment fell 0.7% in the year to May, which was between the on-year drops of 0.8% in April and 0.6% in March.  The job offers ratio of 0.50 was up from 0.48 in April and the best result since March 2009.
  • Real household spending recovered only 0.1% on month after April’s 6.2% drop and recorded an on-year decline of 0.7%.  Analysts had predicted a 1% rise.
  • Industrial production dipped 0.1% in May after gaining 1.3% in April.  The combined April-May level was 1.7% above the 1Q level.  Officials said production continues to show upward movement and projected gains of 0.4% in June and 1.0% in July.  The inventory ratio shot up 4.4% in May but was 22.9% lower than a year earlier.
  • The Shoko Chukin index of small business sentiment printed at 47.4 in June, best since October 2007 and up from 46.7 in May.  The average reading in 2Q10 was 47.0 after 43.1 in the first quarter.

Building permits in New Zealand fell 9.6% on month in May, reversing April’s 8.4% increase.

South Korea recorded a seasonally adjusted $3.35 billion current account surplus in May after a $2.34 billion surplus in April.  The unadjusted $3.83 billion surplus was the largest in six months.

The euro area’s economic sentiment index improved unexpectedly to 98.7 in June from 98.4 in May.  Such had been at 100.6 in April and bottomed at 70.6 in March 2009.  Among sub-categories, industrial sentiment remained at minus 6, consumer confidence improved a point to minus 17, construction worsened two points to minus 30, services edged a point higher to +4, and retail held steady at minus six.  The business climate index was also unchanged with a score of 0.37.  Such had bottomed in March 2009 at minus 3.65.

Euroland retail purchasing manager indices were also published.  The euro area reading was 49.7 in June after 47.4 in May, but analysts cautioned the improvement may merely reflect the temporary boost from the World Cup games.  While the German retail PMI rose 5.6 points to 54.1, the French index firmed just 0.2 points to 51.6, and Italy’s reading remained very low at 40.8 after 40.3 in May. 

According to Bank of England figures, mortgage approvals of 49,815 were little changed in May from April and less than anticipated.  Consumer credit of Gbp 0.331 billion and net mortgage loans of Gbp 1.184 billion were each greater than in April and above analyst forecasts.  Adjusted M4 growth accelerated to a 2-1/2 year high of 9.2% from 6.2% in the year to April, but overall M4 growth slowed to a measly 2.8%.

Swedish real retail sales increased 1.6% on month and 2.7% on year in May.  Such had respectively risen 0.2% but dropped 0.9% in April.

The Swiss consumption indicator of UBS edged up to 1.737 in May from 1.728 in April and 1.68 in March.

Greek producer prices fell 0.5% in May and to a 12-month increase of 7.9% from 9.8% in April.  Belgian consumer prices were flat in June and up 2.46% from a year earlier.  Spanish consumer prices firmed 0.2% in June but posted a smaller on-year rise of 1.5% after 1.8% in May.  Icelandic consumer prices slid 0.3% in June and to a 12-month pace of 5.7% from 7.5% in May.

French consumer confidence weakened another point to minus 39 in June from minus 38 in May, minus 37 in April and minus 34 in March.  Portuguese consumer confidence posted a score in June of minus 40.1 after minus 38.3 in May.

Austria’s manufacturing purchasing managers index rose to 59.0 in June from 58.2 in May.  Spanish housing permits in April were 15.3% lower than a year earlier.  Spanish retail sales in May were 1.8% lower than a year earlier.  Norwegian credit in May was 4.1% greater than a year earlier.

The U.S. Case-Shiller house price index is due today as are the Conference Board consumer confidence gauge and weekly chain store sales.  Canadian producer prices and raw material prices also get released.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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