Flight to safety in markets as US data disappoint

Bloomberg reports the market action yesterday.

Stocks tumbled around the world and U.S. Treasuries rallied on concern higher borrowing costs will slow takeovers, spur debt defaults and curb earnings, prompting investors to flee riskier assets.

The Dow Jones Industrial Average and Standard & Poor's 500 Index fell the most since February, while the FTSE 100's biggest drop in four years led declines across Europe. Benchmark stock indexes in Argentina, Brazil, Mexico, Turkey and Sweden sank more than 3 percent.

Considering yesterday's economic data, there is probably some justification for the market action.

Reuters reports that the data from the US were unexpectedly weak.

Orders for U.S.-made durable goods rose 1.4 percent in June, the Commerce Department reported, but they were below Wall Street expectations for a 1.8 percent gain, and a measure of business spending in the data fell unexpectedly.

Separate Commerce Department data showed continued weakness in the housing sector, with new single-family homes sales falling 6.6 percent in June to a lower-than-expected level leaving a bloated inventory of unsold homes.

There are also increasing signs of a slowdown in the UK housing market. From Bloomberg:

U.K. house prices rose at the slowest pace in 15 months in July after five interest-rate increases in a year squeezed Britons' finances, Nationwide Building Society said.

The cost of a home climbed 0.1 percent from June to an average 184,270 pounds ($378,000), the smallest gain since April 2006 and down from last month's 1.1 percent increase...

The Nationwide report adds to evidence of a cooling property market. The number of loans granted for home purchase fell in June by 2.7 percent on the month and 11 percent from a year earlier, to 75,318, the British Bankers Association said today.

In Germany, Bloomberg reports that business confidence fell in July.

The Munich-based Ifo research institute said its sentiment index, based on responses from 7,000 executives, fell to 106.4 from 107 in June.

But Europe is still looking relatively buoyant on the whole.

In France, business confidence held near a six-year high this month, Paris-based national statistics office Insee said yesterday...

European money-supply growth unexpectedly accelerated in June, the ECB said today. M3 money supply, which the bank uses as a gauge of future inflation, rose 10.9 percent from a year earlier after increasing 10.6 percent in May.

That acceleration in M3, however, also means that ECB tightening will probably continue, and that could put further pressure on credit markets.