Stocks fall, manufacturing contracts

Stock markets around the world took a beating on Monday. Bloomberg reports:

Stocks slid worldwide, sending the Dow Jones Industrial Average below 7,000 for the first time since 1997, and Treasuries rose after Warren Buffett said the economy is in “shambles” and American International Group Inc. posted the largest corporate loss in U.S. history...

The Dow decreased 299.64 points, or 4.2 percent, to 6,763.29. The Standard & Poor’s 500 Index dropped 4.7 percent to 700.82, the lowest close since October 1996. Europe’s Dow Jones Stoxx 600 Index tumbled 5 percent, its steepest loss in three months. Nineteen stocks fell for each that gained on the New York Stock Exchange, making it the broadest decline in almost three weeks...

The MSCI World Index of stocks in 23 developed nations fell 4.9 percent to 713.94, the lowest closing level since the Iraq War began in March 2003. The MSCI Emerging Markets Index slid 5 percent, while Hungary’s forint dropped after European Union banks spurned aid pleas for eastern Europe.

Ironically, some of the economic data released on Monday were not as bad as expected. From Bloomberg:

The Institute for Supply Management’s factory index was 35.8, compared with 35.6 in January...

The median estimate of 67 economists surveyed by Bloomberg was for an ISM reading of 33.8...

The Commerce Department also reported consumer spending rose 0.6 percent in January after declining for a record six consecutive months.

Economists had forecast a 0.4 percent increase in spending, according to the median of 62 estimates in a Bloomberg News survey. The report showed the Fed’s preferred measure of inflation cooled in the 12 months ended January.

There were disappointments too, though.

Spending on construction projects fell 3.3 percent in January after a revised 2.4 percent drop the prior month that was larger than previously reported, Commerce also reported today. Private commercial projects slumped 4.3 percent, the most since January 1994.

And gloomy economic news pervaded the globe. From Bloomberg:

Canada’s economy contracted at the fastest pace since 1991 in the fourth quarter...

Gross domestic product fell at a 3.4 percent annualized rate to C$1.32 trillion ($1.02 trillion) in the October to December quarter, after 0.9 percent growth in the previous quarter...

Meanwhile, manufacturing in Europe continues to deteriorate. The BBC reports:

Manufacturing activity in the eurozone fell to its lowest level in 12 years in February, according to new figures.

The purchasing managers index (PMI), compiled by research group Markit, fell from 34.4 in the previous month to 33.5 - its lowest level on record...

Manufacturing activity in the UK fell to 34.7, down from 35.8 in January.

But Asia reported improved PMI numbers. From Bloomberg:

China’s manufacturing shrank for a seventh month in February as the global financial crisis cut exports and growth across Asia.

The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 45.1 from 42.2 in January, CLSA Asia-Pacific Markets said today in an e-mailed statement...

And last week, Japan reported that its manufacturing PMI rose for the first time in seven months to 31.6 in February from 29.6 in January.