Economic data better, markets tumble

Following the news of Japan's economy returning to growth, US economic data were also relatively positive on Monday, as Bloomberg reports:

The Federal Reserve Bank of New York’s general economic index climbed to 12.1, higher than forecast and the first expansion since April 2008, the bank said today. Readings above zero for the Empire State index signal manufacturing is growing...

Other reports today showed foreign investors renewed purchases of U.S. financial assets in June, builder sentiment climbed this month to the highest level in more than a year, and banks tightened lending rules in the second quarter...

The National Association of Home Builders/Wells Fargo confidence index climbed to 18, matching the median forecast by economists and reaching the highest level since June 2008, the Washington-based group said. A reading below 50 means most respondents view conditions as poor.

Banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve report showed today. The report suggests that lenders and borrowers are wary of taking on more risk until the U.S. economy shows clear signs of growth.

However, the generally better economic data did not stop the US stock market from following the rest of the world down. Again from Bloomberg:

Stocks tumbled around the world, led by China, while the yen, dollar and Treasuries rose as investors speculated that a rally in riskier assets has outpaced prospects for economic growth. Energy and commodity prices also slid.

The MSCI World Index of 23 developed nations sank 2.8 percent at 4:12 p.m. in New York, the biggest retreat since April. The Standard & Poor’s 500 Index lost 2.4 percent to 979.3 after China’s Shanghai Composite Index slumped 5.8 percent, the most since November. The yen strengthened against all 16 of the most-traded currencies tracked by Bloomberg, while the dollar advanced against every one except the yen. The yield on the benchmark 10-year Treasury note dropped to its lowest level in almost a month.