Tuesday’s Resilience in U.S. Stocks Doesn’t Prevent More Weakness in Asian and European Share Prices Today

September 5, 2018

Global investors are nervous for several reasons:

  • Emerging market economies squeezed by trade tensions and Fed tightening.
  • The possibility of a U.S. government shutdown over Trump’s insistence on funding for a Mexican border wall.
  • A new book depicting the Trump Administration on the verge of a nervous breakdown.
  • Unresolved geopolitical hot spots.
  • Seasonal concerns. In 1929, the Dow peaked September 3rd at 381.17, and the slide that preceded the single-day 22.6% crash of October 1987 began in late August.

Share prices dropped today by 3.8% in Indonesia, 2.6% in Hong Kong, 1.7% in China and Singapore, 1.0% in Australia, South Korea and New Zealand, and 0.5% in Japan. European markets are currently down 0.9% in France, 0.8% in Greece, 0.6% in Germany, and 0.4% in the U.K. and Switzerland.

The dollar has appreciated 1.1% against the South African rand and 0.8% versus the Mexican peso but otherwise shows insignificant movement today.

Ten-year sovereign debt yields are likewise generally steady.

Gold is little changed and hovering close to $1,200 per ounce, but WTI oil fell back 1.3% to $68.96 per barrel.

Retail sales volume in the euro area slipped 0.2% in July, lowering the 12-month rate of increase to 1.1% from 1.5% in June and 1.7% in May.

Australian real GDP growth of 0.9% on quarter in 2Q exceeded expectations and bumped up the on-year pace to 3.4%.

Japan’s service sector and composite purchasing managers indices improved to 4- and 2-month highs of 51.5 and 52.0 in August.

China’s service sector PMI declined 1.3 points to a 10-month low of 51.5, which in turn depressed its composite purchasing managers index to a 5-month low of 52.0.

India’s economy also grew more slowly in August, as attested by a 3-month low of its composite PMI at 51.9 and an 8-month low in the service sector PMI to 51.5 following a 21-month high hit in July.

Euroland’s composite purchasing managers index of 54.5, a 2-month high after 54.3 in July, suggests the real GDP will expand 0.4% this quarter and perhaps a tad above that. The service sector PMI was also at a 2-month high. Growth in the euro area has not been evenly distributed, however. Italy lags with a composite PMI at a 22-month low of 51.7, while Ireland (a 7-month high of 58.4) and Germany (a 6-month high of 55.6) lead the pack.

The British service sector and composite PMI readings of 54.3 and 54.1 were each at 2-month highs in August, but business optimism about the future softened.

Standard Bank reported a 28-month low in South Africa’s private purchasing managers index.

The Russian service-sector and composite PMI scores showed improvement in August at the fastest pace since May.

Although at a 3-month low, Sweden’s comparatively elevated service sector PMI of 57.1 indicates pretty robust activity.

Both Australian measures of service sector operating conditions showed lessening rates of improvement. The CBA index dropped 0.5 points to a 20-month low of 51.8, while the AIG’s PMI score of 52.2 constitutes an 8-month low.

Singapore’s private PMI dropped back 1.9 points to a 14-month low in August of 51.1. Readings below 50 indicated outright deterioration in these diffusion indices.

Hong Kong’s private PMI was at a 4-month high but still below the 50 threshold at 48.5.

Reflecting regulatory changes, new car registrations in the U.K. last month were 23.1% higher than a year earlier. That compares with a 1.2% on-year uptick in July and a 3.5% decline in June.

Malaysia’s MYR 8.3 billion trade surplus was larger than expected and exceeded the June surplus of MYR 6.0 billion and the year-earlier surplus of MYR 8.0 billion.

Central bank policy announcements today will be made in Canada, Malaysia, and Poland.

U.S. and Canadian trade data get reported today. So will the New York regional PMI, the so-called NAPM index.

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


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