Thursday, 5 March 2009

Stocks rise amid gloomy economic data

Chinese stocks surged on Wednesday, Bloomberg reports.

China’s stocks rose, driving the benchmark index to its biggest gain in four months, on speculation the government will announce new stimulus measures to revive the world’s third-largest economy...

The benchmark Shanghai Composite Index jumped 6.1 percent to 2,198.11 at the 3 p.m. local-time close. That’s the biggest gain since Nov. 10, when it climbed 7.2 percent after the government announced its 4 trillion yuan ($585 billion) spending plan. Only one stock dropped on the 896-member measure today.

The CSI 300 Index, which tracks shares on both the Shanghai and Shenzhen exchanges, rose 6.7 percent.

It was a good day for stocks around the rest of the world as well, although the economic data remained gloomy. Bloomberg reports Wednesday's economic reports from the US.

Service industries shrank further in February and companies stepped up staff cuts in the U.S., offering no sign the pace of the economy’s decline is abating.

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, fell to 41.6 from 42.9 in January. Readings below 50 signal contraction. The ADP Employer Services survey showed employers cut a larger-than-projected 697,000 jobs last month...

The economy “deteriorated further” in almost all parts of the country over the last two months as consumer spending and manufacturing declined, the Federal Reserve said today in its regional economic survey. Lending fell across the entire country and credit “remained tight,” the report, known as the Beige Book, said.

The government, however, isn't standing idly by.

The Treasury today issued eligibility guidelines for homeowners seeking federal aid that will allow troubled borrowers to lower mortgage rates to as low as 2 percent. The rules require applicants to fully document their income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” the Treasury said.

Europe also saw weakness in its service industries. Bloomberg reports:

Europe’s services industries contracted at a record pace in February, pushing the economy deeper into its worst recession in more than a decade.

A gauge of activity fell to 39.2 from 42.2 in January. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction...

But the pace of decline in services eased in the UK. From Reuters:

The headline PMI activity index rose to 43.2 in February from 42.5 in January, better than analysts' expectations of a fall to 41.8 and above November's 40.1, the weakest result ever recorded in the series' 12-year history.

Meanwhile, central banks around the world continue to ease monetary policy, the latest being in Indonesia, where the key interest rate was cut by half a percentage point to 7.75 percent, and in India, where the repurchase rate was cut to a record low of 5 percent from 5.5 percent.

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