US housing starts and German investor confidence rise

Economic data on Tuesday were mostly positive.

In the US, housing starts rose 6.8 percent in May. A 10 percent slump in applications for multifamily homes pulled building permits down 3.1 percent but permits for one-family homes rose to the highest since May 2008.

Another report from the US showed that consumer prices rose 0.1 percent in May. As a result, the 12-month inflation rate climbed to 1.4 percent last month from 1.1 percent in April.

Inflation also accelerated in the UK in May. The inflation rate rose to 2.7 percent last month from 2.4 percent in April.

In Germany, the ZEW index of investor confidence rose to 38.5 in June from 36.4 in May.

Stock markets rise, housing markets improve

Stocks started the week positively, with markets in the US, Europe and Asia all rising. Japan's Nikkei 225 in particular jumped 2.7 percent.

Notwithstanding the recent volatility, stock markets have mostly been rising, as have housing markets.

Indeed, in the US, a report on Monday showed that confidence among homebuilders surged in June. The National Association of Home Builders/Wells Fargo housing market index rose to 52 this month from 44 in May, the biggest monthly increase since September 2002.

In the UK, home asking prices rose 1.2 percent in June, according to a report by Rightmove on Monday. It was the sixth consecutive monthly increase and pushed average values above 250,000 pounds for the first time.

And Reuters reports on Tuesday that new home prices in China rose 0.9 percent in May, based on data released by the government. The government data showed that prices rose in 69 of the 70 cities tracked by the government.

Fed meeting in focus after another week of market losses

Stocks around the world fell again last week as concerns persisted over the possibility of the Federal Reserve paring its bond purchases.

In the United States, the Standard & Poor's 500 Index fell 1.0 percent last week. It fell in four of the five trading days, only rising ironically on the day when US retail sales reportedly rose 0.6 percent, which should have raised tapering expectations.

In Europe, the STOXX Europe 600 Index fell 1.5 percent last week. It was its fourth consecutive weekly decline, the longest streak of losses since April 2012.

In Asia, the MSCI Asia Pacific excluding Japan Index fell 1.3 percent last week. It was its fifth consecutive decline, the longest streak of losses in two years.

Leading the falls was, as usual, Japan. The Nikkei 225 fell another 1.5 percent last week. On Thursday, it plunged 6.4 percent to extend its loss from its 22 May high to 20.3 percent -- thus putting it in a bear market -- before rebounding slightly on Friday.

Investors' nervousness last week was not helped by the absence of additional monetary stimulus from the Bank of Japan following its monetary policy meeting on Tuesday.

This week, it is the turn of the Federal Reserve to conduct its monetary policy meeting. No substantive change to prevailing monetary policy is expected but the Fed is expected to provide some hints on the likelihood and imminence of a tapering in its rate of bond purchases.

US economic data last week had been mixed. Retail sales rose 0.6 percent in May, its biggest rise in three months, but the Thomson Reuters/University of Michigan index of consumer sentiment fell from 84.5, the highest reading since July 2007, in May to 82.7 in June. Industrial production in May was unchanged from the previous month.

US stocks fall as industrial production stagnate and consumer sentiment declines

US stocks fell on Friday amid some relatively disappointing economic reports. The S&P 500 declined 0.6 percent to end the week down 1.0 percent.

Data from the Federal Reserve showed that US industrial production was unchanged in May. However, manufacturing output managed to increase by 0.1 percent.

Consumer confidence declined in June, with the preliminary Thomson Reuters/University of Michigan index of consumer sentiment falling to 82.7 from 84.5 in May. The May reading, though, had been the highest since July 2007.

Producer prices rose 0.5 percent in May. This was not enough to suggest inflationary pressure, especially after the 0.7 percent decline in April.

However, inflation in the euro area accelerated to 1.4 percent in May from 1.2 percent in April.

Japanese stocks in bear market but US stocks jump on retail sales

Asian stocks tumbled on Thursday. The MSCI Asia Pacific Index fell 2.2 percent, extending its drop since its 2013 high on May 20 to more than 10 percent.

As usual, Japan led the falls. The Nikkei 225 fell 6.4 percent. It is now more than 20 percent below its high last month, pushing it into bear market territory.

Jim Rogers thinks that Prime Minister Shinzo Abe has “ruined Japan”. He told Fusion MarketSite in an interview that with its “huge debt levels” and “horrible demographics”, Japan's attempt to force down its currency “is a disaster in the long term, and not guaranteed to work in the short term, either”.

Indeed, a report from Bloomberg suggests that Japanese consumer goods companies are “still planning for deflation”.

Felix Zulauf thinks that Japan may also ruin the rest of the world. He told Financial Sense that Japan “will be the root cause of the next big global crisis whenever it breaks out, probably some time over the next 12 to 18 months or so”.

However, Western markets were able to shrug off the decline in Japan on Thursday. The STOXX Europe 600 fell just 0.1 percent while in the US, the S&P 500 jumped 1.5 percent, its second biggest rise this year.

US stocks were boosted by better-than-expected retail sales data. US retail sales rose 0.6 percent in May, the biggest gain in three months.

Europe reports positive data but anxieities rising in emerging markets

Economic data on Wednesday were relatively positive.

In Europe, industrial production increased 0.4 percent in April in the euro area and 0.3 percent in the European Union as a whole. It was the third consecutive monthly increase for both regions.

In the UK, the job market improved in May. The number of people claiming jobless benefit dropped by 8,600 last month, its seventh consecutive fall.

However, the World Bank announced on Wednesday that it had lowered it growth forecast for the global economy in 2013. It now sees the global economy growing 2.2 percent this year, down from a January estimate of 2.4 percent. The euro area in particular saw a sharp downward revision, with its economy now expected to contract by 0.6 percent compared with the prior estimate of a 0.1 percent contraction.

In financial markets, stocks continued to fall on Wednesday. The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 0.2 percent.

US Treasuries also fell on Wednesday, pushing yields towards 14-month highs, after a US government sale of $21 billion of 10-year notes drew the weakest demand since August. The 10-year yield rose four basis points to 2.23 percent while the 30-year yield rose six basis points to 3.37 percent.

Bloomberg reports that anxieties are also surging in emerging markets.

The biggest drop in perceived creditworthiness for emerging-market borrowers since the credit crisis is deepening as speculation intensifies that central banks will scale back record stimulus.

Prices on the Markit CDX Emerging Markets index, a credit-default swaps benchmark for debtor nations from Latin America to the Middle East and Asia, have tumbled 4 cents in the two weeks through yesterday to 107 cents on the dollar. The decline is the biggest since the failure of Lehman Brothers Holdings Inc. reverberated across financial markets and caused the index to plunge 6.7 cents in the period ended Nov. 18, 2008.

Reuters adds that corporate bonds in emerging markets could be headed for a surge in defaults. The potential for financial turmoil in emerging markets could in turn give the Federal Reserve a “fresh headache” in deciding when to exit from quantitative easing.