Saturday, 13 November 2010

China leads global stocks down, european debt worries ease

China helped drag down global stock markets on Friday. From Bloomberg:

Stocks slid, extending the biggest weekly slump in three months for U.S. benchmark indexes, and commodities tumbled amid speculation China will lift interest rates...

The Standard & Poor’s 500 Index fell 1.2 percent to 1,199.21 at 4 p.m. in New York...

The Shanghai Composite Index sank 5.2 percent, its biggest decline since August 2009...

The MSCI Emerging Markets Index fell 1.7 percent, the most since August...

Commodities were not spared.

The CRB index of 19 raw materials lost 3.6 percent, the most since April 2009. Crude oil tumbled 3.3 percent to $84.88 a barrel in New York, while copper slid 3.3 percent to $3.898 a pound.

But worries over European sovereign debt eased a little.

The euro rose from a six-week low against the dollar, climbing 0.2 percent to $1.3694, amid speculation European leaders will support Ireland and the currency region’s other most-indebted nations.

The yield on the Irish 10-year bond fell 76 basis points 8.14 percent, and the extra yield investors demand to hold 10- year Irish bonds instead of benchmark German bunds narrowed 83 basis points to 563 basis points. The yield on similar-maturity Portuguese bonds decreased 29 basis points to 6.73 percent.

This comes despite a Bloomberg poll showing that a majority of global investors predict that Ireland will default on its sovereign debt.

It also comes despite slower growth reported for the euro area in the third quarter. From Bloomberg:

Europe’s economic growth weakened in the third quarter from the fastest pace in four years as governments’ austerity measures to cut record budget deficits dented the recovery.

Gross domestic product in the 16-nation euro area rose 0.4 percent from the second quarter, when it increased 1 percent, the European Union’s statistics office in Luxembourg said today. Economists expected a gain of 0.5 percent, the median of 35 estimates in a Bloomberg News survey showed. Industrial output fell 0.9 percent in September from the previous month, the largest drop in 18 months, separate data showed.

In the US, the recent generally positive dataflow continued on Friday, with consumer confidence reportedly rising in November. Bloomberg reports:

Consumers in the U.S. gained confidence in November for the first time in three months, raising the odds that an improving job market and increasing wages and stock prices will lift spending.

The Thomson Reuters/University of Michigan preliminary sentiment index rose to 69.3, in line with the median forecast of economists surveyed by Bloomberg News and the highest level since June, from 67.7 in October. The measure averaged 88.9 in the five years to December 2007, when the last recession began.

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