Tuesday, 16 June 2009

Stocks fall, IMF raises forecast for US economy

The week hasn't started on a positive note.

Stocks and commodities fell sharply on Monday. Bloomberg reports:

The S&P 500, which had climbed 40 percent from a 12-year low on March 9, decreased 2.4 percent to 923.72 at 4:08 p.m. New York time. The Dow Jones Industrial Average, which last week erased its 2009 loss, tumbled 187.13 points, or 2.1 percent, to 8,612.13 as 28 of its 30 companies declined. Almost 13 stocks fell for each that rose on the New York Stock Exchange. The MSCI World Index of 23 developed nations plunged 2.6 percent, the most since April 20.

Europe’s Dow Jones Stoxx 600 Index lost 2.5 percent after Group of Eight finance ministers, who met in Italy over the weekend, began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation...

The dollar strengthened the most against the euro since April today after Russian Finance Minister Alexei Kudrin said the U.S. currency is in “good shape,” further affirming there’s no substitute for the world’s reserve currency...

Kudrin’s comments helped U.S. Treasuries climb for a third day, the longest streak in a month, even after international holdings of long-term U.S. financial assets rose at a slower pace in April as China, Japan and Russia trimmed holdings of bonds. Purchases of long-term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March, the Treasury said today in Washington...

Crude oil for July delivery slid 2.1 percent to $70.56 a barrel in New York Mercantile Exchange trading as the stronger dollar limited the appeal of commodities as a hedge against inflation.

Freeport-McMoRan, the world’s biggest publicly traded copper producer, slid 5.8 percent to $55.14 as gold declined to a three-week low. Copper futures fell 3.7 percent in New York, the most in eight weeks.

Markets received no boost from economic reports.

Bloomberg reports that employment in the euro area has been falling.

Europe’s economy lost a record 1.22 million jobs in the first quarter as companies cut spending to survive the worst global economic slump in more than six decades.

Employment payrolls in the 16-member euro region fell 0.8 percent from the fourth quarter, when they declined 0.4 percent, the European Union statistics office in Luxembourg said today. The first-quarter drop was the biggest decline since the data series started in 1995. From a year earlier, payrolls contracted 1.2 percent, the first annual decline on record.

And the recovery in the US economy may not materialise as quickly as some anticipate. Bloomberg reports that the nascent recovery in homebuilder confidence stalled this month.

The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 this month from 16 in May, the Washington-based NAHB said today. A reading below 50 means most respondents view conditions as poor.

And manufacturing continued to contract in the New York region this month.

The Federal Reserve Bank of New York’s June general economic index fell to minus 9.4, less than forecast, from minus 4.6 the prior month, the bank said today. Readings below zero for the Empire State index signal manufacturing is shrinking.

But it isn't all gloomy.

Factory executives in the New York Fed’s district, which encompasses New York state, northern New Jersey and one county in Connecticut, turned more optimistic about the future. The gauge measuring the manufacturing outlook climbed to 47.8, the highest level since July 2007, from 43.8.

And the IMF has raised its forecast for the US economy. Again from Bloomberg:

The International Monetary Fund, which has rescued economies from Pakistan to Iceland in the past year, raised its outlook for the U.S. and called for steps to reduce concern about rising public debt and inflation.

The IMF forecasts the world’s largest economy will contract 2.5 percent this year before expanding 0.75 percent in 2010, according to a statement today after an annual staff analysis of the U.S. In the IMF’s World Economic Outlook report released in April, the U.S. was forecast to contract 2.8 percent this year before stalling in 2010.

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