Ugly Day for Stocks

September 22, 2015

Equities in Europe have plunged 3.1% in France, 2.8% in Germany, Italy, Spain and Switzerland and 2.1% in Britain.  U.S. futures point to a debacle here, too.  VW shares continued to implode.

Stocks in Asia had been more mixed, with Japan still closed for the second of three straight days in a bridge between Respect for the Aged Day and the Autumn Equinox.  Share prices rose 0.9% in China and South Korea and 0.7% in Australia but fell 2.1% in India, 0.7% in Indonesia and 0.5% in Singapore.

The trigger for drop in European stocks has come from slumping commodities, including oil (down 2.3%) but extending to metals, agriculture and a whole spectrum of other resources.  Gold is down 0.3%.  Fear is solidifying about weakening global growth, and views on the potential for inflation keep getting revised downward.  Last week’s Yellen press conference, which underscored the big role of global weakness in the Fed’s decision not to commence rate normalization, has acquired an element of self-prophesy.  Subsequent more hawkish remarks by Lockhart (Atlanta Fed), Williams (San Francisco), Bullard (St. Louis), and Lacker (Richmond Fed) are being ignored as a rearguard action by disgruntled, publicly vocal fringe minority of the Federal Open Market Committee.  The more they try to assure that rate hikes later this year are in the cards, the more volatile markets get and the less likely a rate increase becomes.

The ten-year British gilt yield fell four basis points.  The 30-year Treasury slipped below the key 3.00% level.

The dollar rose 0.8% against the Aussie dollar, 0.4% versus sterling, 09.3% relative to the euro and Swiss franc, and 0.2% vis-a-vis the kiwi.  The dollar is up 0.1% against the yuan, flat relative to the loonie and down 0.5% against the yen.

It’s been another light day from a data release standpoint.

China’s index of leading economic indicators rose 1.0% in August according to the Conference Board, improving upon gains of 0.5% in June and 0.9% in July.  The index of Chinese coincident economic indicators went up 0.8% after increases of 1.1% in July and 0.2% in June.

Australian on-year house price inflation accelerated more rapidly than forecast to 9.8% in the second quarter, most in a year, from 6.9% in the first quarter and 6.7% in the final quarter of 2014.

Britain’s core public-sector borrowing requirement of GBP 12.1 billion last month was the largest August imbalance since 2012.  Debt rose to 80.6% of GDP.

The Swiss trade surplus of CHF 2.87 billion in August was 20% narrower than July’s.  Export volume fell 2.4% on month, similar to July’s decline of 2.3%, and was 2.1% lower than in August 2014.

The Conference of British Industries released its September survey of industrial trends, showing a 6-point deterioration to -7.  Only July’s result during the whole past 12 months showed a weaker outcome.

South Africa’s index of leading economic indicators dropped 1.6% to a 67-month low in July.

Danish consumer confidence fell 4.2 points in August to and 18-month low.  Danish retail sales that month edged down 0.1% but posted a 0.8% increase in the three months to August.

Icelandic wage inflation slowed to a 4-month low of 7.7% in August.  Irish PPI inflation excluding VAT of 5.4% in August was 1.4 percentage points lower than the month before and at a six-month low.

Turkey’s central bank again left its key interest rates, including a 7.5% one-week repo, a 10.75% overnight lending rate and a 7.25% overnight borrowing rate, unchanged.  CPI inflation of 7.1% in August was higher than in August, and the statement of officials highlighted Turkey’s vulnerability against the backdrop of generalized high global capital market volatility.  Back in February, the repo and overnight borrowing rates were each cut by 25 basis points, and the overnight lending rate was reduced by 50 bps to their current levels.

Hungary also has a central bank policy meeting today.

Scheduled U.S. data releases include the FHFA house price index, the Richmond Fed monthly manufacturing index and the weekly Johnson-Redbook estimate of chain store sales.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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