Markets did not see a positive start to October. Bloomberg reports:
U.S. stocks fell the most in three months as Treasuries and the dollar rallied after a decline in a gauge of manufacturing and an increase in jobless claims spurred concern over the strength of a recovery from the recession...
The Standard & Poor’s 500 Index slid 2.6 percent to 1,029.85 at 5:22 p.m. in New York a day after capping its biggest back-to-back quarterly rally since 1975. The Dow sank 203 points, or 2.1 percent, to 9,509.28. Both gauges lost the most since July 2. About 18 stocks fell for each that rose on the New York Stock Exchange, the broadest sell-off since April.
And it was not just in the US. European and Asian stocks also started October on a negative note.
Economic reports on Thursday were actually mixed.
Bloomberg reports a slowing of US manufacturing and a rise in jobless claims.
Manufacturing in the U.S. expanded less than anticipated by economists and more Americans filed claims for unemployment benefits, pointing to a recovery that will be slow to generate jobs.
The Institute for Supply Management’s factory gauge decreased to 52.6 in September from 52.9 in August, the Tempe, Arizona-based group said today. Fifty is the dividing line between expansion and contraction. The number of jobless claims climbed to 551,000 last week, more than economists forecast, figures from the Labor Department showed.
However, there were also positive data.
Household purchases jumped 1.3 percent in August, the largest gain since October 2001, data from the Commerce Department also showed today. Incomes climbed 0.2 percent for a second month and inflation decelerated, the report also showed...
Lower home prices and mortgage rates combined with the first-time buyer credit have helped end the housing-market meltdown that sparked the financial crisis. The index of signed purchase agreements, or pending home sales, jumped 6.4 percent in August, a seventh consecutive increase, the National Association of Realtors said today in Washington.
The UK also saw a disappointing fall in its manufacturing index. Reuters reports:
The manufacturing sector continued to contract modestly last month after employers cut jobs for a 17th straight month and the pace of pick-up in new orders slowed, purchasing managers' data showed on Thursday.
The headline manufacturing purchasing managers' index (PMI) fell to 49.5 last month from 49.7 in August, surprising analysts who had forecast a rise to 50.3.
In contrast, manufacturing data from the euro area surprised on the upside. From Bloomberg:
The contraction in Europe’s manufacturing industry eased more than initially estimated in September, adding to signs the economy is recovering from the worst recession in six decades.
An index of euro-area manufacturing rose to 49.3 from 48.2 in August, compared with an initial estimate of 49 released on Sept. 23, Markit Economics said today. The September reading is the highest since May 2008, when the index was last above the 50 level that indicates expansion...
Still, the recovery may falter next year as rising unemployment damps consumer spending. The euro-area jobless rate rose to 9.6 percent in August from 9.5 percent in July, the highest since March 1999, according to a report today.Germany’s Federal Labor Agency said yesterday there is “no turnaround” in the job market.
Meanwhile, there was confirmation on Thursday that China's manufacturing sector continued to expand in September. From Bloomberg:
China’s manufacturing expanded at the fastest pace in 17 months in September on stimulus spending and this year’s record growth in new loans.
The Purchasing Managers’ Index rose to a seasonally adjusted 54.3 from 54.0 in August, the Federation of Logistics and Purchasing said today in an e-mailed statement in Beijing. The latest number was lower than the median estimate of 55 in a Bloomberg News survey of 13 economists. A reading above 50 indicates an expansion.
Japan also provided better data. From AFP/CNA:
Japanese business confidence has improved for a second straight quarter as the world's number two economy slowly emerges from its worst recession in decades, the Bank of Japan said Thursday.
Sentiment among major manufacturers improved to minus 33 in September from minus 48 in June, after hitting a record low of minus 58 in March, according to the central bank's closely watched Tankan survey of more than 10,000 firms...
The confidence index for major non-manufacturers rose to minus 24, from minus 29 three months earlier.
The Tankan found that big manufacturers expect sentiment to continue to improve, forecasting a sentiment rating of minus 21 for December.
However, the survey also provided negative signals.
But the profit outlook remains bleak. The major makers forecast a 38.9 per cent drop in pre-tax earnings for the current financial year to March, after a 61.9 per cent plunge last year...
Large manufacturers plan to slash their spending on plants and equipment by 25.6 per cent in the year through March 2010 compared with the previous year, according to the Tankan survey.
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