Stocks rise, US and Japanese consumer spending fall

Stocks rose on Friday. The S&P 500 and the STOXX Europe 600 both climbed 0.3 percent, the former regaining the 2,000 level in the process and hitting a record high.

US stocks rose despite mixed US economic data on Friday.

Consumer spending fell 0.1 percent in July, the first drop in six months. Income rose 0.2 percent, the smallest increase since December.

However, the Thomson Reuters/University of Michigan consumer sentiment index rose to 82.5 in August from 81.8 in July and the Institute for Supply Management-Chicago’s business barometer rose to 64.3 this month from 52.6 in July.

Data released earlier on Friday showed that Japan's economy started the third quarter on a weak note.

Household spending fell 5.9 percent in July from a year earlier, worse than the 3.0 percent fall in June, while industrial production rose 0.2 percent in July, barely rebounding after falling 3.4 percent in June.

The jobless rate rose to 3.8 percent in July from 3.7 percent in June but the jobs-to-applicants ratio remained at a 22-year high of 1.10.

Inflation excluding fresh foods was 3.3 percent in July, unchanged from the previous month. Excluding the effect of the April sales tax hike, the inflation rate was 1.3 percent.

However, inflation in the euro area fell further in August to 0.3 percent from 0.4 in July, according to a report on Friday. Another report showed that the eurozone unemployment rate for July was 11.5 percent, unchanged from the previous month.

The euro area's largest economy, Germany, showed more signs of weakness on Friday, reporting that retail sales fell 1.4 percent in July.

The UK housing market, though, showed surprising strength in August. Nationwide reported on Friday that British house prices rose 0.8 percent this month, faster than the 0.2 percent rise in July.

US 2nd quarter growth revised up, eurozone economic confidence falls

US economic data on Thursday were positive.

Revised GDP data showed that the US economy grew at a 4.2 percent annualised rate in the second quarter, more than the initial estimate of 4.0 percent.

Another report on Thursday showed that US pending home sales rose 3.3 percent in June.

Economic data from Europe on Thursday were negative though.

The European Commission's economic sentiment indicator for the euro area fell to 100.6 in August from 102.1 in July.

German unemployment rose by 2,000 in August while the unemployment rate stayed unchanged at 6.7 percent.

Investors, though, were again distracted by rising tension in Europe on Thursday amid signs of a Russian invasion of Ukraine.

Stocks fell as the S&P 500 declined 0.2 percent to fall below the 2,000 level while the STOXX Europe 600 fell 0.7 percent.

US Treasuries rose, with the 30-year yield falling 3 basis points to 3.08 percent and the 10-year yield falling 2 basis points to 2.34 percent.

There were more signs on Wednesday that the economic recovery in the euro area is losing steam.

In Germany, GfK's consumer sentiment indicator fell to 8.6 going into September from 8.9 in August. It was the first fall in the index in more than 1-1/2 years.

In France, INSEE's manufacturing-sentiment index fell to 96 in August, the lowest since July 2013, from 97 in July.

S&P 500 closes above 2,000 as US durable goods orders urge

Stocks rose again on Tuesday. The STOXX Europe 600 gained 0.7 percent. The S&P 500 edged up 0.1 percent but that was enough to see it close above 2,000 for the first time ever.

US stocks were boosted by a report on Tuesday showing a 22.6 percent surge in durable goods orders in July. The surge was mainly due to a 318 percent jump in plane orders.

Orders for non-defense capital goods excluding aircraft fell 0.5 percent last month after a 5.4 percent jump in June that was the biggest since November.

Also on Tuesday, the Conference Board reported that its consumer confidence index rose to 92.4 in August, the highest since October 2007, from 90.3 in July.

Another report on Tuesday showed that the S&P/Case-Shiller index of home prices in 20 cities increased 8.1 percent in June from a year earlier, the smallest 12-month increase since January 2013.

S&P 500 touches 2,000 as US new home sales fall

Stocks rose on Monday. The S&P 500 rose 0.5 percent to 1,997.92, briefly holding above 2,000 for the first time ever. The STOXX Europe 600 jumped 1.1 percent.

Stocks rose despite mixed economic data on Monday.

In the US, the Chicago Fed national activity index rose to +0.39 in July from +0.21 in June. The three-month moving average rose to +0.25 from +0.16.

However, Markit's preliminary US services PMI for August showed a fall to 58.5 from 60.8 in July. That pushed the composite PMI down to 58.8 from 60.6.

Also, new home sales in the US fell 2.4 percent in July to the lowest in four months.

In Germany, the Ifo institute’s business climate index fell to 106.3 in August from 108.0 in July, declining for the fourth consecutive month.

US wage growth lags as Fed pushes markets to bubble extremes

Improvement in the labour market will be a key factor in determining when central banks remove monetary stimulus.

In reporting some of the developments at the central banks conference at Jackson Hole, Wyoming, Bloomberg highlights the importance of the labour market in determining central banks' monetary policy decisions.

Global central bankers led by Federal Reserve Chair Janet Yellen said labor markets still have further to heal before their economies can weather higher interest rates.

Even as they signaled international monetary policies are set to diverge as economic recoveries increasingly differ, officials meeting over the weekend in Jackson Hole, Wyoming, placed jobs at the center of their decision making by saying stronger hiring and wages are still needed to drive demand.

Yellen in particular still sees slack in the US labour market.

Making her debut as Fed chief at the annual central bankers’ conclave in the shadow of the Teton mountains, Yellen said while U.S. hiring has improved and the debate at the Fed is shifting toward when “we should begin dialing back our extraordinary accommodation,” there is still a “significant” underuse of the workforce, and the labor market has yet to fully recover from the worst recession since the Great Depression.

However, in his latest article, John Hussman says that full recovery of the US labour market may prove difficult because of a winner-take-all economy.

In recent years, the U.S. has experienced a collapse in labor participation and weak growth in labor compensation, coupled with an increasingly lopsided distribution of whatever benefits the recent economic recovery has generated. This...is unlikely to be improved by endless monetary “stimulus” (the targets that clearly occupy the Fed’s thinking). While our economic challenges can be largely traced to more than a decade of persistent Fed-enabled misallocation of capital, most of the costs of this misallocation have fallen on labor because of a) shifting composition of labor demand that has resulted from an increasing share of international trade with countries with heavy populations of relatively unskilled labor; and b) economic features that increasingly create a “winner-take-all” distribution of economic gains.

The uneven distribution of gains is reflected in the fact that while non-farm productivity in the US has grown at a 1.3 percent annual rate over the past five years, “real wage growth has been trapped near zero”.

Furthermore, Hussman warns that “because general prices are the denominator of real wages, faster general price inflation tends to reduce real wages in the absence of a spiral in all nominal prices where wages take the lead”.

Finally, Hussman thinks that even as Fed monetary stimulus is failing to significantly boost the fortunes of the average US worker, it is creating “financial distortion, overvaluation, and speculation that is already baked in the cake and is progressively worsening, in a manner quite similar to the 2000 and 2007 extremes”.

S&P 500 makes new record high amid positive US economic data

The S&P 500 made a new record high on Thursday, rising 0.3 percent to 1,992.37.

Positive US economic data on Thursday helped boost stocks. Existing home sales rose 2.4 percent in July, initial claims for state unemployment benefits fell 14,000 to 298,000 last week, Markit's preliminary US manufacturing PMI rose to 58.0 in August from 55.8 in July and the Conference Board's leading economic index increased 0.9 percent last month.

There were also positive economic data from Japan on Thursday, where the preliminary reading of the Markit/JMMA manufacturing PMI showed a rise to 52.4 in August from 50.5 in July.

However, in the euro area, Markit's composite PMI fell to 52.8 in August from 53.8 in July based on a preliminary reading, and the European Commission's consumer confidence index for the region fell to minus 10.0 in August from minus 8.4 in July.

China's manufacturing growth also slowed in August, HSBC's preliminary PMI showing a decline to 50.3 this month from 51.7 in July.

Also slowing was UK retail sales growth, which increased just 0.1 percent in July, down from 0.2 percent in June.

Japanese exports rise

A report on Wednesday showed that Japan's exports rose 3.9 percent in July from the previous year, the first increase in three months.

With imports rising 2.3 percent over the same period, the trade deficit narrowed 6.6 percent from the previous year.

Investors were unimpressed though. The Japanese stock market was essentially flat on Wednesday as the Nikkei 225 eked out a 0.03 percent rise.

Nevertheless, that enabled the index to extend its rally to eight days, its longest since last December.

Stocks rise as US housing starts rebound, inflation slows

Stocks rose on Tuesday. The S&P 500 climbed 0.5 percent while the STOXX Europe 600 gained 0.6 percent.

The US dollar rose 0.3 percent against the euro as well as the yen.

Markets were boosted by better US economic data on Tuesday.

US housing starts rebounded in July, surging by 15.7 percent after falling in the previous two months. Building permits jumped 8.1 percent last month.

Meanwhile, US inflation slowed in July. Consumer prices rose 0.1 percent last month, down from 0.3 percent in June.

Data from the UK on Tuesday showed that inflation there fell even more sharply in July. The inflation rate fell to 1.6 percent last month from 1.9 percent in June after consumer prices fell 0.3 percent in July.

Annual house price inflation also slowed to 10.2 percent in June from 10.4 percent in May. Nevertheless, for the second quarter as a whole, the annual increase of 10.2 percent was the biggest since the third quarter of 2007.

Stocks rise with US homebuilder sentiment

Stocks rose on Monday. The S&P 500 gained 0.8 percent while the STOXX Europe 600 added 1.2 percent.

US Treasuries fell however, the 10-year yield rising five basis points to 2.39 percent. Brent crude fell 1.9 percent to a 14-month low and gold fell 0.5 percent for a second day of decline.

Helping to boost stocks on Monday was a report in the US showing that the National Association of Home Builders/Wells Fargo housing market index rose to 55 in August from 53 in July.

However, the UK housing market may finally have cracked. A report by Rightmove showed that asking house prices fell 2.9 percent in August, the sharpest pace of decline on record for the month of August.

Are central banks falling behind the curve?

The Federal Reserve places a great deal of emphasis on employment in determining when to remove monetary stimulus. And yet, despite considerable improvement in the United States labour market of late, there has been no move to actually remove stimulus.

A Bloomberg report last week pointed out the ambiguous employment situation that is complicating the Fed's policy outlook.

The U.S. labor market is looking a little surreal these days.

Take the number of workers filing claims for unemployment benefits. As a share of the population, it’s the lowest since at least 1967... Yet the ranks of the long-term unemployed remain larger than at any time before the 2007-2009 recession.

That leads to two starkly different views of the U.S. economy. In one, job growth is increasing along with inflation, leaving Yellen, now at the helm of the U.S. central bank, behind the curve with recession-era monetary policy still in place. The other view portrays a fragile recovery that owes its modest gains to the Fed’s near-zero interest rates. The job-market contrasts are dividing economy-watchers on when the Fed should start raising rates, which it hasn’t done since 2006.

While most of the economists cited by the report supported continued monetary stimulus, there is at least one dissenting view.

By pressing on with easy money policies in the face of such data, the Fed is playing “a very dangerous game,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “What are you waiting for? Everything to get back to the cyclical peak to take rates off of zero?”

If the Fed is behind the curve, it would probably not be the only central bank to be so.

Another Bloomberg report points out that the People’s Bank of China has historically cut interest rates only after the economy has weakened enough to drag down stock prices.

Indeed, even as investors await possible interest rate cuts from the PBC, China's property market already appears to be cooling. Average new home prices in China's 70 major cities fell 0.9 percent in July, according to Reuters calculations from official data published on Monday. This was the third consecutive monthly decline.

US factory output jumps but consumer sentiment falls

US economic data on Friday were mixed.

Factory production jumped 1.0 percent in July, helping to push total industrial production up 0.4 percent.

However, the New York Federal Reserve's general business conditions index fell to 14.69 in August from 25.60 in July.

The producer price index for final demand rose 0.1 percent in July as the cost of energy products fell, offsetting an increase in food prices.

However, the Thomson Reuters/University of Michigan's consumer sentiment index fell to 79.2 in August from 81.8 in July.

The UK economy continued to show strong growth though. A report on Friday showed that its economy grew 0.8 percent in the second quarter from the previous quarter and 3.2 percent from the previous year, the fastest yearly growth since the end of 2007.

Investors were in no mood to celebrate that achievement though as escalating tension in Ukraine sent stocks down on Friday. The S&P 500, though, managed to recover most of its early losses to end less than 0.1 percent down.

US Treasuries rose, with the yield on the 10-year note falling 6 basis points to 2.34 percent. However, gold fell 0.7 percent.

Markets rise as eurozone economy stalls

Markets rose again on Thursday, the MSCI All-Country World Index and the S&P 500 each adding 0.4 percent.

European stocks also rose on Thursday. The STOXX Europe 600 gained 0.3 percent despite a report on Thursday showing that the eurozone economy stalled in the second quarter.

Germany's economy shrank 0.2 percent while France's stagnated.

Earlier, a report showed that Japanese core machinery orders rose 8.8 percent in June. While positive, this was just a partial recovery of the record 19.5 percent fall in May.

For the April-June quarter as a whole, core machinery orders fell 10.4 percent. Companies surveyed by the Cabinet Office forecast that core orders would rise 2.9 percent in July-September.

Elsewhere in Asia, the Bank of Korea cut its benchmark overnight inter-bank loan rate by 25 basis points to 2.25 per cent on Thursday. It was the first rate cut since May 2013 and comes after Finance Minister Choi Kyung-hwan warned last month that the national economy stood at a crossroads between "making a leap forward and falling into a recession".

Markets rise amid weak economic data

Markets rose on Wednesday. The S&P 500 rose 0.7 percent while the STOXX Europe 600 rose 0.4 percent.

US Treasuries also rose, pushing the 10-year yield down 4 basis points to 2.42 percent.

Economic data on Wednesday had been mostly weak.

In the US, retail sales were flat in July, the weakest performance in six months, after a 0.2 percent rise in June.

In the euro area, industrial production fell 0.3 percent in June after falling 1.1 percent in May.

In China, bank lending plunged to 385.2 billion yuan in July from 1.08 trillion yuan in June. Industrial production rose 9.0 percent in July from the previous year, down from 9.2 percent in June, while retail sales growth slowed to 12.2 percent from 12.4 percent. Fixed asset investment rose 17.0 percent in the first seven months from the previous year compared to 17.3 percent for the first six months.

Japan's economy shrank 1.7 percent in the second quarter, its biggest contraction since the March 2011 earthquake.

And in the UK, average weekly earnings fell 0.2 percent in the April-June period compared to the previous year although the unemployment rate did ease to 6.4 percent in the three months to June from 6.5 percent a month earlier.

Japan's economy contracts sharply

A report from the Cabinet Office on Wednesday showed that Japan's economy shrank 1.7 percent in the second quarter, its biggest economic contraction since the March 2011 earthquake.

The contraction followed the sales tax hike in April and is not expected to persist.

"Looking at monthly data during April-June, sales of electronics goods and those at department stores are picking up after falling sharply in April," Economics Minister Akira Amari said in a statement. "The job market is also improving steadily. Taking these into account, Japan's economy continues to recover moderately as a trend and the effect of the sales tax hike is subsiding."

Private consumption was hit hard by the sales tax hike, falling 5.0 percent in the second quarter.

However, external demand contributed positively, adding 1.1 percentage points to growth after subtracting 0.2 percentage point in the first quarter.

Stocks rise on easing tension, yen falls

Stocks rose on Monday, with the MSCI All-Country World Index climbing 0.8 percent. The STOXX Europe 600 in particular jumped 1.4 percent on optimism that tension between Russia and Ukraine will ease while the S&P 500 rose 0.3 percent.

The yen dropped from a three-week high against the US dollar, with mixed economic data from Japan not helping. The Cabinet Office's consumer confidence index for Japan rose to 41.5 in July from 41.1 in June but the Ministry of Economy, Trade and Industry's tertiary index fell 0.1 percent in June after having risen 0.9 percent in May.

BoJ keeps policy unchanged as Japan's current account falls into deficit

The Bank of Japan left monetary policy unchanged at its meeting on Friday.

The BoJ refrained from injecting new monetary stimulus despite weak economic data on Friday.

Japan's current account balance fell back into deficit in June, the first in five months.

The economy watchers survey showed that the current conditions index rose to 51.3 in July from 47.7 in June but the future conditions index fell to 51.5 from 53.3, the second consecutive decline.

Meanwhile, though, China's trade surplus rose in July as exports increased 14.5 percent from the previous year, well up from the 7.2 percent increase in June. Imports fell 1.6 percent after increasing 5.5 percent in June.

Germany saw both exports and imports rise in June by 0.9 percent and 4.5 percent respectively. Nevertheless, weak industrial data earlier in the week suggest that "German GDP is likely to have contracted slightly in the second quarter", according to Christian Schulz, senior economist at Berenberg Bank.

Elsewhere in Europe, a 0.4 billion pound fall in exports pushed the UK trade deficit up in June but construction output rose 1.2 percent.

ECB ready to buy bonds amid weak recovery and Ukraine risk

The European Central Bank left monetary policy unchanged at its meeting on Thursday.

However, ECB president Mario Draghi said after the meeting that the euro area's economic recovery was "weak, fragile and uneven", and that the central bank was ready to print money and buy bonds if the region slides towards deflation.

Indeed, a report on Thursday showed that the euro area's biggest economy, Germany, saw its industrial production rise just 0.3 percent in June after having fallen 1.7 percent in May.

Draghi also warned that the conflict in Ukraine poses a serious risk to the region's economy.

The Bank of England also left monetary policy unchanged at its policy meeting on Thursday.

Italy back in recession, Japan's leading index rises

The euro area's economic recovery is looking uncertain again after some weak data on Wednesday.

Italy reported that its economy shrank 0.2 percent in the second quarter after contracting 0.1 percent in the previous quarter, putting it back in recession.

Germany reported that factory orders there fell 3.2 percent in June.

Outside the euro area, UK industrial production rose 0.3 percent in June.

In the US, a report on Wednesday showed that the trade deficit shrank in June as imports fell 1.2 percent while exports rose 0.1 percent.

Earlier on Wednesday, Japan reported that its leading index rose in June for the first time in five months, climbing to 105.5 from 104.8 in May.

Its coincident index, though, fell to 109.4 in June from 111.2 in the previous month.

S&P 500 falls despite growth in US services and factory orders

Stocks fell on Tuesday, with the S&P 500 declining 1.0 percent amid concern that tension in Ukraine may escalate.

Good economic data on Tuesday were unable to ensure a positive performance for markets.

In the US, Markit's services PMI dipped to 60.8 in July, slightly down from the 61.0 reading in June, which had been the highest reading for any month since the survey began in October 2009. Markit's composite PMI dipped to 60.6 in July from 61.0 in June but was still the second-highest reading on record.

Confirming the expansion in the US services sector activity, the Institute for Supply Management's services index rose to 58.7 last month from 56.0 in June.

Another report from the US on Tuesday showed that factory orders rose 1.1 percent in June, more than reversing the 0.6 percent decline in May.

In the euro area, Markit's services PMI rose to 54.2 in July from 52.8 in June. That helped push the composite index to 53.8 from 52.8.

Another report from the euro area showed that retail sales rose 0.4 percent in June. That brought the year-on-year gain to 2.4 percent, the strongest growth since March 2007.

In the UK, the Markit/CIPS services PMI rose to 59.1 in July from 57.7 in June. The composite PMI rose to a three-month high of 59.1 from 58.4 in June.

China's services sector slows, Japan's accelerates

China's services sector slowed in July, recent reports showed.

A report on Tuesday showed that the services PMI compiled by HSBC and Markit fell to 50.0 last month from June's 15-month high of 53.1.

On Sunday, the National Bureau of Statistics had reported that its non-manufacturing PMI fell to 54.2 in July from 55.0 in June.

Elsewhere in Asia on Tuesday, Markit reported that its services PMI for Japan rose to 50.4 in July from 49.0 in June.

As a result, the composite index climbed to 50.2 from 50.0.

Warning signs flashing for stock market

The Standard & Poor's 500 index fell 2.7 percent last week, its worst weekly drop since June 2012. The STOXX Europe 600 index fell 2.9 percent.

Mark Hulbert at MarketWatch wrote over the weekend that according to Hayes Martin, president of Market Extremes, an investment consulting firm, there are signs in the market that show that the stock market is likely to fall even further.

Over the past 45 years, the stock market has lost more than 20% each time three warning signs flashed simultaneously.

After a selloff this past week dragged the Dow Jones Industrial Average into negative territory for the year, it’s worth noting that all three are flashing today.

The signals are excessive levels of bullish enthusiasm; significant overvaluation, based on measures like price/earnings ratios; and extreme divergences in the performances of different market sectors.

US employment rises, global manufacturing maintains growth

US economic data on Friday were mixed.

Nonfarm payrolls rose 209,000 in July after jumping by 298,000 in June. However, the unemployment rate rose to 6.2 percent from 6.1 percent as more people joined the labour force.

For the manufacturing sector, the Institute for Supply Management's PMI rose to 57.1 in July, the highest since April 2011, from 55.3 in June, but Markit's manufacturing PMI fell to 55.8 in July from 57.3 in June.

Consumer confidence also fell in July. The Thomson Reuters/University of Michigan's final July reading on the consumer sentiment index came in at 81.8, down from the final June reading of 82.5.

Among US June data released on Friday, consumer spending rose 0.4 percent in June, the fifth consecutive increase, after rising by 0.3 percent in May. Income also rose 0.4 percent in June while the price index for consumer spending rose 0.2 percent.

Construction spending fell by 1.8 percent in June though after rising by 0.8 percent in May.

In the rest of the world, reports on Friday showed that manufacturing activity continued to expand in July.

China's official manufacturing PMI rose to 51.7 in July, the highest since April 2012, from 51.0 in June. The HSBC/Markit PMI also rose to 51.7, an 18-month peak.

However, the manufacturing PMI for the euro area was unchanged at 51.8 in July, the CIPS/Markit PMI for the UK fell to 55.4 in July from 57.2 in June, and the Markit/JMMA Japan manufacturing PMI fell to 50.5 in July from 51.5 in June.

Markets fall as Argentina defaults

Stocks fell sharply on Thursday. The MSCI All-Country World Index fell 1.5 percent, weighed down by a 2.0 percent fall in the S&P 500.

In particular, Argentina's Merval Index plunged 8.4 percent on Thursday after the country defaulted for the second time in 12 years after the failure of last-ditch talks with holdout creditors. Argentina's bonds and currency also fell.

Economic data on Thursday had been mixed.

In the US, the Institute for Supply Management-Chicago business barometer fell to 52.6 in July from 62.6 in June.

However, in the euro area, inflation slowed to 0.4 percent in July from 0.5 percent in June even as the unemployment rate fell to 11.5 percent in June from 11.6 percent in May.

Germany in particular reported some positive data on Thursday. German unemployment fell by 12,000 in July while retail sales rose 1.3 percent in June.

However, in the UK, GfK NOP's consumer confidence index fell to -2 in July from 1 in June while Nationwide reported that house prices rose 0.1 percent in July, the smallest increase since April 2013.