European stocks were pummelled on Wednesday. Bloomberg reports:
European stocks sank the most in fourth months, extending an 11-month low, amid concern the U.S. recovery is faltering and the world’s largest economy may lose its top credit rating...
The benchmark Stoxx Europe 600 Index retreated 2 percent to 251.95 at the 4:30 p.m. close in London, the biggest drop since March 15. The gauge has declined 13 percent from this year’s high on Feb. 17 as the yield on Italian and Spanish bonds surged to records amid speculation the debt crisis won’t be contained.
US stocks, however, were saved by renewed talk of quantitative easing. From Bloomberg:
U.S. stocks advanced, preventing the longest Dow Jones Industrial Average slump since 1978, amid speculation the Federal Reserve may consider another economic stimulus program to prevent a recession...
The Dow rose 29.82 points, or 0.3 percent, to 11,896.44 at 4 p.m. in New York after posting a 166-point loss earlier, which was the ninth straight drop. The S&P 500 advanced 0.5 percent to 1,260.34, snapping a seven-day decline...
Stocks rebounded after the Wall Street Journal reported that three former top officials at the Fed said the central bank should consider a new round of securities purchases to bolster economic growth...
US economic reports on Wednesday certainly provided reasons for concern. From Bloomberg:
Service industries expanded in July at the slowest pace in 17 months as orders and employment cooled, indicating the biggest part of the U.S. economy had little spark to begin the second half of the year.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, dropped to 52.7 from 53.3 in June. Readings above 50 signal expansion, and the median projection in a Bloomberg News survey was for 53.5 in July...
Companies added 114,000 employees to their payrolls in July after a revised 145,000 gain the previous month that was less than initially projected, ADP said. A slowdown in hiring means consumers are unlikely to boost the spending that accounts for 70 percent of the economy...
Orders placed with manufacturers dropped 0.8 percent in June, reflecting decreases in demand for machinery and computers, the Commerce Department said today...
The euro area also saw a slowing of services activity. Bloomberg reports:
European services and manufacturing growth weakened in July to the slowest pace in almost two years, adding to signs the euro region’s recovery is losing momentum.
A composite index based on a survey of euro-area purchasing managers in both industries fell to 51.1 in July from 53.3 in June, London-based Markit Economics said today. That’s the lowest since September 2009, though it exceeds an initial estimate of 50.8. A reading above 50 indicates growth...
The euro-area services indicator fell to 51.6 last month from 53.7 in June, Markit said. The manufacturing gauge decreased to 50.4 from 52 in June.
Data on retail sales in the euro area in June showed growth though. Again from Bloomberg:
European retail sales rebounded in June from a drop in the previous month, led by Germany.
Sales in the 17-nation euro region grew 0.9 percent from May, when they fell 1.3 percent, the European Union’s statistics office in Luxembourg said today. Economists had projected a gain of 0.5 percent, the median of 22 estimates in a Bloomberg News survey showed. Sales fell 0.4 percent from a year ago.
And the UK even reported an acceleration in services activity in July. From Reuters:
Activity in the dominant services sector grew at its fastest pace in four months in July, raising hopes that the economy may be picking up for now although job losses and constrained consumer demand muddied the picture.
The Markit/CIPS services PMI headline activity index rose to 55.4 in July from 53.9 in June, confounding forecasts for a slowdown to 53.2.
Markit said that taken together with a manufacturing PMI contraction shown by a survey earlier this week, the data indicated the economy grew by 0.5 percent in the three months to July -- a marked improvement on the lacklustre 0.2 percent growth recorded from April to June.
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