Friday, 1 August 2014

Markets fall as Argentina defaults

Stocks fell sharply on Thursday. The MSCI All-Country World Index fell 1.5 percent, weighed down by a 2.0 percent fall in the S&P 500.

In particular, Argentina's Merval Index plunged 8.4 percent on Thursday after the country defaulted for the second time in 12 years after the failure of last-ditch talks with holdout creditors. Argentina's bonds and currency also fell.

Economic data on Thursday had been mixed.

In the US, the Institute for Supply Management-Chicago business barometer fell to 52.6 in July from 62.6 in June.

However, in the euro area, inflation slowed to 0.4 percent in July from 0.5 percent in June even as the unemployment rate fell to 11.5 percent in June from 11.6 percent in May.

Germany in particular reported some positive data on Thursday. German unemployment fell by 12,000 in July while retail sales rose 1.3 percent in June.

However, in the UK, GfK NOP's consumer confidence index fell to -2 in July from 1 in June while Nationwide reported that house prices rose 0.1 percent in July, the smallest increase since April 2013.

Thursday, 31 July 2014

US economy rebounds, Fed monetary policy unchanged

US economic data on Wednesday were positive.

The economy rebounded in the second quarter, growing at a 4 percent annualised rate after having shrunk at a 2.1 percent rate in the first quarter.

And the third quarter appears to have started well, with an ADP report showing that companies added 218,000 workers in July, exceeding the average for the year.

The Federal Reserve left monetary policy unchanged at its policy meeting on Wednesday though.

"Labor market conditions improved, with the unemployment rate declining further," the Fed said in a statement. "However, a range of labor market indicators suggests that there remains significant underutilization of labor resources."

Also on Wednesday, the European Commission reported that its economic sentiment index for the euro area rose to 102.2 in July from 102.1 in June.

However, data from Japan on Wednesday showed that factory production there fell 3.3 percent in June, the worst monthly decline since March 2011 following the earthquake and tsunami disaster.

Wednesday, 30 July 2014

US home prices fall but consumer confidence highest since 2007

Economic data on Tuesday were mixed.

In the US, home prices fell in May, with the S&P/Case Shiller composite index of 20 cities declining 0.3 percent on a seasonally adjusted basis, its first fall since January 2012. However, the Conference Board's consumer confidence index rose to 90.9 in July, the highest level since October 2007, from 86.4 in June.

In Japan, the unemployment rate rose to 3.7 percent in June from 3.5 percent in May. However, the ratio of job offers to job seekers hit 1.10 in June, the highest since June 1992.

Japanese household spending fell 3.0 percent in June from the previous year. However, this was an improvement over the 8.0 percent and 4.6 percent declines in May and April respectively.

In the UK, mortgage approvals jumped 8 percent to 67,196 in June. However, lending to non-financial businesses fell by 3.4 billion pounds in June, its biggest fall since November last year, while unsecured lending to consumers rose by 418 million pounds, the smallest increase since January 2013.

Tuesday, 29 July 2014

US pending home sales fall, services PMI unchanged

US economic data on Monday were mixed.

The National Association of Realtors' pending home sales index fell 1.1 percent in June. However, this decline followed three consecutive months of increase, including a 6.0 percent rise in May.

Markit reported that its preliminary services PMI for July was 61.0, unchanged from June.

Monday, 28 July 2014

China's industrial profits grow, financial risk hits all-time high

China's industrial firms appear to be growing healthily.

Data on Sunday showed that profits at China’s largest industrial firms rose 17.9 percent in June from the previous year, well up from the 8.9 percent increase in May.

Of some concern, however, is the health of China's financial institutions.

James Hamilton at Econbrowser notes that data from the NYU Stern Volatility Laboratory show that the NYU measure of systemic financial risk for China reached an all-time high this year.

Saturday, 26 July 2014

Stocks fall, US durable goods orders rise

Stocks fell on Friday. The S&P 500 lost 0.5 percent after closing at a record for two consecutive days. The STOXX Europe 600 fell 0.7 percent.

Stocks fell despite a report on Friday showing that US durable goods orders rose 0.7 percent in June. Orders had fallen 1.0 percent in May.

Orders for non-defence capital goods excluding aircraft rose 1.4 percent in June after falling 1.2 percent in May.

Earlier on Friday, Japan had reported that its core inflation rate eased to 3.3 percent in June from 3.4 percent in May.

The latest figures "suggest that the impact of the sales tax hike has started to fade," Capital Economics said in a note after the data was released. "We expect core inflation excluding tax to fall below 1.0 per cent in coming months," it added.

In Germany, business confidence fell in July. The Ifo business climate index declined to 108.0 from 109.7 in June.