Thursday, 2 June 2011

Thailand raises rates, US stocks fall, global manufacturing slows

Thailand raised interest rates on Wednesday. AFP/CNA reports:

Thailand raised its key interest rate on Wednesday for the seventh time in under a year to tackle inflation - the latest effort by a fast-growing Asian economy to prevent overheating.

The Bank of Thailand's Monetary Policy Committee voted unanimously to increase the cost of borrowing to 3.0 percent, up from 2.75 percent previously.

US stocks fell sharply. From MarketWatch:

U.S. stocks dropped on Wednesday, with bank issues taking the brunt of the pressure, as Wall Street scaled back its economic growth outlook following another round of dour data...

Tallying its worst single-day point drop since June 2010, the Dow Jones Industrial Average fell 279.65 points, or 2.2%, to 12,290.14...

The Standard & Poor’s 500 Index declined 30.65 points, or 2.3%, to 1,314.55 — its sharpest decline since Aug. 11, 2010.

And no, the falls had nothing to do with Thailand's rate hike.

Stocks fell after the day’s U.S. economic reports added to fears the economic recovery was stalling.

American companies added 38,000 employees to their payrolls in the past month, according to data from ADP Employer Services. Economists had been expecting an increase of 175,000. Read more about ADP payrolls report.

The Institute for Supply Management reported that growth in the U.S. manufacturing sector slowed, with its closely watched gauge dropping to 53.5% in May from 60.4% in April. See details of largest one-month drop since 1984.

Stocks reached their lows of the day after Moody’s Investors Service cut Greece’s credit rating, citing the increased risk “Greece will fail to stabilize its debt position” without restructuring its debt. Read more on Greece.

Indeed, Treasury yields fell, as did oil prices.

Treasury prices rallied, pushing the benchmark 10-year note yield below 3% for the first time since early December, while the dollar softened and oil prices fell. Read more about bonds.

The manufacturing slowdown was not just a US matter. From Bloomberg:

Manufacturing growth from China to the euro region and the U.S. slowed in May, adding to signs that momentum is weakening in a global economy facing headwinds from rising commodity costs and regional shocks...

China’s purchasing managers’ index was at 52, compared with 52.9 in April, the China Federation of Logistics and Purchasing said in an e-mailed statement today. The number was higher than the median forecast of 51.6 in a Bloomberg News survey of 16 economists...

In the 17-nation euro region, a gauge of manufacturing slipped to 54.6 from 58 in April, London-based Markit Economics said today. That’s below an initial estimate of 54.8 released on May 23 with countries from Germany to Spain showing declines...

A U.K. factory gauge based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply declined to 52.1, the lowest since September 2009, from a revised 54.4 in April. Output and new orders fell for the first time since the middle of 2009...

In Russia, the Purchasing Managers’ Index fell to 50.7, from 52.1 in April, HSBC Holdings Plc (HSBA) said in a report today, citing data compiled by Markit. It “signaled a near-stagnation of Russian manufacturing growth in May and a sharp easing in cost inflationary pressure,” HSBC said in the report.

A report from AFP/CNA also showed a slowdown in manufacturing throughout much of the rest of Asia.

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