Markets fall sharply

MarketWatch reports the US market action on Wednesday:

U.S. stocks were hammered Wednesday with no end in view to political sparring over raising the debt limit and economic data that only heightened uncertainty about the recovery...

Extending losses into a fourth session, the Dow Jones Industrial Average fell 198.75 points, or 1.6%, to 12,302.55. The rout is the worst for the blue-chip index since June 1...

The selloff extended beyond stocks, to almost every major asset class except the U.S. dollar.

While uncertainty over the debt limit was a major factor behind the weakness in markets, economic reports also contributed to the negativity. From Reuters:

Demand for long-lasting U.S. manufactured goods fell in June and economic activity across much of the nation slowed through mid-July, casting doubt over how quickly the economy might escape its soft patch.

The Federal Reserve said on Wednesday the recovery lost steam in eight of 12 regions it tracks in recent weeks, with hiring modest, wages soft and price pressures subdued.

"Economic activity continued to grow; however, the pace has moderated in many districts," the Fed said.

Separately, the Commerce Department said weak receipts for transportation equipment pushed down durable goods orders 2.1 percent last month after a 1.9 percent increase in May. A closely watched reading on business spending plans also fell.

Excluding transportation, orders edged up just 0.1 percent.

Elsewhere, the outlook for UK manufacturing is also looking poor. Again from Reuters:

British factory orders fell more sharply than expected in July, with price pressures at their weakest in a 1-1/2 years, a survey showed on Wednesday.

The Confederation of British Industry survey's total order book balance fell to -10 this month from +1 in June, well below forecasts for a reading of -2.

Despite the softening global economy, inflation remains a threat, at least in Germany. From Bloomberg:

Inflation in Germany, Europe’s largest economy, unexpectedly accelerated in July as energy costs increased.

The inflation rate, calculated using a harmonized European Union method, rose to 2.6 percent from 2.4 percent in June, the Federal Statistics Office in Wiesbaden said today in an initial estimate. Economists predicted the rate would hold steady, according to the median of 18 estimates in a Bloomberg News survey. Prices climbed 0.5 percent from the previous month.