Friday 23 September 2011

Stocks in bear market as recession threat rises

The news was mostly negative on Thursday.

Bloomberg reports that global stocks have entered a bear market.

Stocks fell, pushing the MSCI All- Country World Index of 45 nations into a bear market for the first time in more than two years, after the worsening European debt crisis and threat of a U.S. recession erased more than $10 trillion from equities since May.

The MSCI index has lost more than 20 percent since peaking on May 2, meeting the common definition of a bear market, after slipping 4.5 percent to a 13-month low of 277.38. The MSCI World Index of shares in developed nations also fell into a bear market yesterday, plunging 4.2 percent. The MSCI Emerging Markets Index reached the 20 percent threshold on Sept. 13.

Oil and other commodities also fell sharply on Thursday while Treasuries rallied.

Economic data on Thursday highlighted the real risk of a global recession.

In China, manufacturing activity is probably contracting. A flash estimate of HSBC's manufacturing purchasing managers' index fell to 49.4 in September from 49.9 in August.

Reports from the euro area on Thursday were also negative. The flash estimate of the eurozone composite purchasing managers index from Markit Economics fell to 49.2 in September from 50.7 in August, with the services PMI falling to 49.1 from 51.5 and the manufacturing PMI falling to 48.4 from 49.0. In addition, data on eurozone industrial orders for July showed a drop of 2.1 percent, the biggest drop since September 2010, while eurozone consumer confidence fell to the lowest in two years in September.

US economic data were more positive. Home prices rose 0.8 percent in July, according to the Federal Housing Finance Agency. In addition, the Conference Board's leading economic index climbed 0.3 percent in August after a 0.6 percent gain in July and applications for jobless benefits decreased 9,000 in the week ended 17 September. However, Bloomberg's Consumer Comfort Index fell to minus 52.1 in the week to 18 September from minus 49.3 the prior week.

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