Friday, 19 August 2011

Markets back in turmoil

Bloomberg reports the market action on Thursday:

Stocks plunged while Treasuries rallied, pushing yields to record lows, amid growing signs the economy is slowing and speculation that European banks lack sufficient capital. Gold climbed to a record, while oil led commodities lower.

The Standard & Poor’s 500 Index tumbled 4.5 percent to 1,140.74 at 4 p.m. in New York. The Stoxx Europe 600 Index lost 4.8 percent in its worst plunge since March 2009 and Germany’s DAX Index slid 5.8 percent, the most since 2008. Ten-year Treasury yields fell as much as 19 basis points to 1.97 percent as rates on similar-maturity Canadian and British debt also reached all-time lows. The dollar gained versus 15 of 16 major peers, strengthening 0.6 percent to $1.4336 per euro. Gold futures rallied as much as 2.1 percent to $1,832 an ounce, while oil slid 5.9 percent.

Banks led losses a day after the European Central Bank said a lender will borrow dollars for the first time in six months. Lars Frisell, chief economist at Sweden’s financial regulator, said it won’t take much for interbank lending to freeze and the Wall Street Journal reported regulators were scrutinizing the U.S. operations of Europe’s largest lenders to assess their vulnerability...

A jump in the Conference Board's US leading index failed to boost markets. From Bloomberg:

The index of U.S. leading economic indicators climbed more than economists expected in July, boosted by an increase in money supply that may reflect a flight to safety.

The Conference Board’s gauge of the outlook for the next three to six months climbed 0.5 percent after a 0.3 percent gain in June, the New York-based research group said today. Economists projected a 0.2 percent rise in July, according to the median forecast in a Bloomberg News survey.

Other data on the US economy were weak. The Philadelphia Fed reported weak manufacturing activity in its region.

Responses to the Business Outlook Survey this month suggest that regional manufacturing activity has dipped significantly...

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009.

And the US housing market continues to struggle. From MarketWatch:

Sales of existing homes fell 3.5% in July to an eight-month low, with a high cancellation rate again taking its toll on an already troubled market, according to data released Thursday.

The National Association of Realtors said sales fell to a seasonally adjusted annual rate of 4.67 million. June’s data were upwardly revised to 4.84 million from an initially reported 4.77 million.

Meanwhile, further Fed moves to help the economy could be hampered by lingering inflation concerns. The Labor Department reported on Thursday that the CPI increased 0.5 percent in July after having fallen 0.2 percent in June. The 12-month change in the CPI remained at 3.6 percent for the third month in a row.

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