Friday, 1 October 2010

US stocks fall on better economic data

US economic data released on Thursday were quite positive. Bloomberg reports:

Business activity in the U.S. unexpectedly accelerated and fewer workers filed claims for jobless benefits, easing concern the world’s largest economy is retrenching further.

The Institute for Supply Management-Chicago Inc. said today its business barometer climbed to 60.4 in September, exceeding the highest estimate of economists surveyed by Bloomberg News...

Today’s report was at odds with other measures of manufacturing that showed a slowdown. Another report today showed factories in the Milwaukee region stagnated...

The number of applications for jobless benefits dropped by 16,000 to 453,000 in the week ended Sept. 25, Labor Department figures showed. The total number of people on benefit rolls and those getting extended payments also fell in the prior week, the report showed...

The economy grew at a 1.7 percent annual rate in the second quarter, revised figures from the Commerce Department also showed today. The increase in gross domestic product compares with a 1.6 percent estimate issued last month. GDP grew 3.7 percent in the first three months of the year and 5 percent at the end of 2009.

However, according to Bloomberg, US stocks fell on the better data.

U.S. stocks fell, trimming the biggest September gain since 1939 for the Standard & Poor’s 500 Index, as investors sold some of the month’s best-performing shares amid speculation that improving economic data will reduce the need for the Federal Reserve to stimulate growth...

The S&P 500 slipped 0.3 percent to 1,141.20 at 4 p.m. in New York, paring its monthly advance to 8.8 percent and its third-quarter gain to 11 percent. The Dow slid 47.23 points, or 0.4 percent, to 10,788.05.

No doubt, investors will keep a close eye on the action of central banks. On Thursday, rate action came from Taiwan. Bloomberg reports:

Taiwan increased its benchmark interest rate for the second time this year and said it will try to prevent real-estate speculation after a jump in home prices fueled concern the economic recovery may stoke a property bubble.

Central bank Governor Perng Fai-nan and his board raised the rate by 0.125 percentage point to 1.5 percent. Eleven of 14 economists in a Bloomberg News survey predicted yesterday’s decision. The rest forecast no change following a similar advance in June from a record-low 1.25 percent.

No rate hike is likely from the ECB soon, although eurozone inflation did accelerate in September. Again from Bloomberg:

European inflation accelerated to the fastest in almost two years in September, led by higher energy costs.

Euro-area consumer prices rose 1.8 percent from a year earlier after increasing 1.6 percent in August, the European Union statistics office in Luxembourg said today. That’s the fastest pace since November 2008 and in line with the median forecast of 33 economists surveyed by Bloomberg News.

Japan, though, remains in deflation, although data on Friday mostly showed improvements. AFP/CNA reports:

Japan's consumer prices continued to slide while the unemployment rate edged lower in August, as mixed data Friday illustrated the fragility of an economic recovery.

Japan's core consumer price index fell 1.0 per cent in August from a year earlier, the 18th straight month of decline with the economy still stuck in damaging cycle of deflation, government data showed Friday.

Prices slid 1.1 per cent in July and 1.0 per cent in June...

However, separate data Friday showed that the unemployment rate fell to 5.1 per cent in August, edging down by 0.1 per cent from the previous month, in line with market expectations.

Household spending was up 1.7 per cent on-year in August, beating market expectations of a 1.4 per cent rise.

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