Tuesday, 1 April 2008

Stocks finish down for first quarter

US stocks rose for the first time in four days yesterday, helped perhaps by the fact that the National Association of Purchasing Management-Chicago reported that its business barometer rose to 48.2 in March from 44.5 in February.

Nevertheless, the S&P 500 finished the first quarter down 9.9 percent, its worst quarterly performance since the third quarter of 2002, as first quarter earnings estimates are marked down to an 8.1 percent decline from 4.7 percent growth at the beginning of the quarter.

European stocks dipped yesterday, albeit slightly. However, they have also had a rough first quarter. Bloomberg reports

European stocks fell, capping the worst start to a year for the Dow Jones Stoxx 600 Index since at least 1987, as concern deepened an economic slowdown and credit- market losses will curb profit growth...

The Stoxx 600 declined 0.2 percent to 305.96, bringing the drop this quarter to 16 percent...

Like the US, a deteriorating earnings outlook has much to do with the market weakness.

Analysts have slashed profit-growth estimates for European companies. Earnings will rise only 1.9 percent on average for Stoxx 600 members this year, down from 11 percent predicted at the end of 2007, Bloomberg data show.

To make things worse, the flash estimate of inflation in March suggests that the ECB is unlikely to bail out investors soon. Again from Bloomberg yesterday:

Consumer-price inflation in the euro area accelerated to 3.5 percent this month, the highest rate since June 1992, the European Union's statistics office in Luxembourg said today...

M3 money-supply growth, which the ECB uses as a gauge of future inflation, slowed in February to 11.3 percent from a year earlier after a 11.5 percent gain in January, the Frankfurt- based ECB said today in a monthly report...

It remains to be seen how much an expected deceleration in the eurozone economy will help keep inflation in check.

Consumer and business confidence fell to 99.6 this month from 100.2 in February, led by the construction industry, the European Commission said today...

Today, we learn that confidence has also deteriorated in Japan, confirming the generally negative picture of the Japanese economy provided by yesterday's data. AFP/CNA:

Confidence among major manufacturers tumbled to 11 in March from 19 in December, according to the Bank of Japan's quarterly Tankan survey. Market forecasts, on average, had been for a figure of 12.

It was the second straight quarterly decline, pushing sentiment down to the worst level since the fourth quarter of 2003, according to the survey, which covers a total of more than 10,000 companies...

Large manufacturers and non-manufacturers plan to cut their capital spending by 1.6 per cent in the new fiscal year that began on Tuesday, while firms of all sizes and industries anticipate a reduction of 5.3 per cent, the survey showed.

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