German Dax Lower Following Sharp Asian Equity Sell-Off

June 4, 2012

Stocks plunged 3.8% overnight in Indonesia, 3.4% in The Philippines, 3.0% in Taiwan, 2.8% in South Korea, Vietnam and China, 2.0% in Hong Kong, 1.9% in Australia 1.7% in Japan, and 1.0% in New Zealand.  The merry-go-round of selling pressure continued in Germany where the Dax has so far dropped 1.4%.  The Spanish IBEX, in contrast, has climbed 2.3%, and the Paris Cac is 0.2% firmer.

British markets are closed for a spring bank holiday and in continuing celebration of the Queen’s diamond jubilee.

The dollar has fallen 0.3% against the kiwi and sterling and is 0.1% softer versus the euro, Swissie, Australian dollar, loonie, and yuan.

The German 10-year bund yield is three basis points firmer at 1.20%, while the Japanese 10-year JGB slid a basis point to 0.82%.

Oil slumped another 2.2% to $81.40 per barrel.  Gold edged down 0.1% to $1621.20 per ounce.

Evidence mounts of a global economic slowdown, and investors are talking about the possibility that one or more central banks may respond soon to the threat.  There are central bank meetings this week in Australia, Canada, Poland, Euroland, Britain, Peru and Mexico.

The Sentix gauge of investor sentiment toward the euro area fell 4.4 points in June to a 37-month low of minus 28.9 following a 32-month low of negative 24.5 in May and readings of minus 14.7 in April and minus 8.2 in March.  The expectations sub-index dropped 5.2 points to minus 22.5, and current conditions worsened 3.5 points to minus 35.0.  Attitudes toward Germany took a particularly big hit in June.

Euroland producer prices were unchanged on month in April, cutting their 12-month rate of increase to 2.6% from 3.5% in March and 5.4% in November.  Non-energy PPI inflation slowed to a mere 1.3%, and energy producer prices were 6.8% higher than a year before down from an on-year advance in March of 9.0%.

China’s government-authorized service-sector purchasing managers index weakened 0.9 points in May to a three-month low of 55.2.  It was revealed before the weekend that the manufacturing PMI had worsened 2.9 points to a five-month low of 50.4.  The governor of China’s central bank spoke publicly but did not unveil or hint of specific growth-promoting actions in his remarks.

The policy debate in Japan is focused on taxes.  Prime Minister Noda wants to boost the national sales tax but is being resisted by opposition parties.  A reshuffle of his cabinet is planned this week.  The Bank of Japan reported a 2.4% on-year increase in Japan’s monetary base last month after a 0.3% dip in April.  The base had risen 8.4% between 1Q11 and 1Q12 and by 15.3% in calendar 2011.

Turkish CPI inflation slowed to 8.3% in May from 11.1% in April, whereas PPI inflation picked up to 8.1% from 7.6%.

Australian Job ads sank by 2.4% on month and 4.3% on year in May following a 0.8% monthly drop in April.  Australian corporate profits fell 4.0% between 4Q11 and 1Q12 and were 0.5% weaker than in the first quarter of last year.  The TD-MI gauge of expected Aussie CPI inflation was unchanged on month and dipped to a 12-month increase of 1.8% in May from 1.9% in April.  Expected inflation is at a 6-month low.  Analysts had been split over whether the Reserve Bank of Australia will cut its Official Cash Rate tomorrow.  These data support such a move.

A 20.7% on-year rise in South African auto sales last month was twice as much as in April.

The release of data on U.S. factory orders is scheduled today.  Mexico reports on consumer confidence.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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