Chinese stocks dive again

Monday saw another steep fall in the Chinese stock market. AFP/CNA reports:

Shanghai dived 6.74 per cent – its biggest loss in 14 months – after state media said new loans in China may fall below 300 billion yuan (43.9 billion dollars) in August, from 355.9 billion in July and 1.53 trillion yuan in June.

The problem was exacerbated by a number of upcoming initial public offerings that many fear will create a share glut.

Stocks elsewhere were affected by the fall, but to a limited extent. Bloomberg reports:

The S&P 500 lost 0.8 percent to 1,020.62 at 4:07 p.m. in New York. The Dow Jones Industrial Average retreated 47.92 points, or 0.5 percent, to 9,496.28. The MSCI World Index of 23 developed nations slid 0.8 percent. Five stocks fell for each that rose on the New York Stock Exchange, the broadest sell-off in two weeks.

Economic news on Monday were mixed.

Canada reported a worse-than-expected fall in GDP for the second quarter. From Bloomberg:

Canada’s economy shrank faster than expected in the second quarter and the country’s first recession since 1991 is proving deeper than thought, even as growth in June indicates the contraction is nearing an end.

Gross domestic product shrank at a 3.4 percent annualized rate in the April-through-June period, Statistics Canada said today in Ottawa, compared with economists’ prediction of a 3 percent annualized contraction. The first-quarter decrease, initially reported at 5.4 percent, was revised to a 6.1 percent annualized drop -- the biggest in records dating to 1961.

However, India's economy expanded rapidly in the second quarter. AFP/CNA reports:

India's economy expanded by 6.1 per cent in the three months to June, picking up pace from the previous quarter, official data showed on Monday, helped by government stimulus.

The quarterly growth was up from the 5.8 per cent posted in the January-March quarter, but analysts said a widespread drought could weaken momentum in coming months.

Meanwhile, in the US, regional surveys are pointing to an improving economy. Reuters reports:

The Institute for Supply Management-Chicago's business barometer rose to 50.0 in August, the dividing line between growth and contraction, from 43.4 in July. Wall Street economists had expected a rise to only 48.0...

A similar index covering the heavily industrialized Milwaukee region rose to 56 in August from 45 in July, while the Dallas Federal Reserve Bank said factory activity in Texas declined in August but at a slower pace than in July...

The National Association of Purchasing Management-New York index of business conditions rose to 55.3 from 48.3 in July. Improvements in purchasing volume and employment conditions signaled the worst of the city's downturn might be ending, the group said.

And in the euro area, inflation appears to be heading back into positive territory. From Bloomberg:

European consumer prices dropped less than economists forecast in August as the economy recovered from the deepest slump in six decades.

Prices in the 16-member euro region fell 0.2 percent from the year-earlier month after declining a record 0.7 percent in July, the European Union statistics office in Luxembourg said today. Economists predicted a 0.3 percent decrease, according to the median of 36 estimates in a Bloomberg News survey.