Stocks Down Sharply in Asia and Europe

July 28, 2011

Persistent debt concerns in the U.S. and Europe continue to depress the euro and share prices.  Peripheral bond yield spread widened.

Equities fell by 1.5% in Japan and Pakistan, 1.6% in Australia, 1.2% in India, 0.9% in South Korea, 0.7% in Indonesia and 0.6% in Taiwan and China.

The German Dax and Paris Cac are 1.8% and 1.4% weaker.  The British Ftse has fallen 0.7%.

The euro dropped 0.5% against the dollar, which is otherwise unchanged against the Canadian, Swiss, Australian and Chinese currencies.  The dollar eased 0.2% against the kiwi and yen and firmed 0.2% versus sterling.

Oil eased 0.3% to $97.09 per barrel.  Gold is unchanged at $1617.60 per ounce.

Ten-year German bund, British gilt and Japanese JGB yields fell by four, three, and one basis points.  U.S., German, and British yields are each below 3.0%, and Japan’s 10-year is at 1.08%. 

Markets fear renewed recession in several advanced economies.

  • Yesterday’s Fed Beige Book revealed slower activity in many of the twelve regional districts.
  • The House of Representatives is supposed to vote today on Speaker Boehner’s debt plan. The result is in doubt.  The vote has already been moved from its original target date of Wednesday.
  • Today brought news that the euro area retail purchasing managers index slid 0.6 points to a 9-month low of 48.2, the third sub-50 score in a row.  Germany’s reading of 50.7 was 2.7 points lower.  The French and Italian readings of 49.7 and 42.5 each showed contraction.
  • Business sentiment in the euro area weakened more sharply than assumed in July, falling 2.2 points to 103.2, lowest since August 2010.  Consumer confidence dropped 1.5 points to minus 11.2, a three-month low.  Industrial confidence slid 2.4 points to +1.1, worst since October 2010.  Confidence in services was at 7.9, down from 10.1 in June, and retail confidence declined 0.9 points to minus 3.5.  Construction fell a full point to minus 23.5.
  • Euroland’s business climate index was halved to 0.45 in July from 0.95 in June and constituted the weakest score in 13 months.

The Reserve Bank of New Zealand retained a 2.5% Official Cash Rate but hinted that it may raise rates sooner than analysts had been expecting.

Analysts were surprised to see the Filipino central bank lift reserve requirements, which had been tightened at the previous policy meeting, by another whole percentage point.  Key interest rates were not changed, however.

Large-scale Japanese retail sales posted on-year declines of 0.5% in June and 1.6% in the second quarter.  Total retail sales were 1.1% higher than a year before in June but 1.7% lower in 2Q11 than in 2Q10.  Japanese stock and bond transactions generated a JPY 331 billion inflow last week, similar to an inflow of JPY 321 billion in the prior week to July 16.

Hong Kong’s trade deficit in June of HKD 40.3 billion was 13% greater than its May shortfall.  South Korea’s current account surplus widened to USD 2.99 billion last month from $2.18 billion in May.  Chinese Premier Wen has been hospitalized for nearly two weeks for an undisclosed reason. 

Germany’s seasonally adjusted jobless rate remained at 7.0% in July.  Joblessness fell by 11K, most since April, in seasonally adjusted terms but rose 46K not so adjusted.  Jobs in the second quarter were 0.3% greater than in 1Q and 1.2% above their year-earlier level.

Danish unemployment held steady at 5.9% in June.  Hungarian unemployment edged down two-tenths to 10.8% in 2Q.  The volume of Spanish retail sales was 7.4% lower in June than a year earlier. Irish retail sales were just 0.2% higher in June than a year before. Belgian consumer prices in June firmed 0.1% on month and 3.8% (most in 33 month) on year.  Italian wage earnings edged up 0.1% on month and 1.8% on year in June.

Swedish readings in June for consumer confidence (12) and manufacturing sentiment (zero) were lower than expected. Sweden’s jobless rate eased to 7.5% in June, and retail sales volume posted monthly and on-year gains of 3.1% and 3.4% in the same month.

Britain’s CBI conducts surveys each month of trends in industry and in retail.  Both indicated big deteriorations during July.  The industrial trends index reported yesterday printed eleven points lower at minus 10, and today’s distributive trades index had a reading of minus five versus expectations of +2.  Such had printed in June at minus 2 and in May at +18.

Scheduled U.S. data include jobless insurance claims, pending home sales, and the K.C. Fed index. Canada reports wage earnings. 

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

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