Asian Stocks Snap Six-Day Win Streak (Source: Bloomberg)
Asian stocks snapped a six-day streak of advances ahead of reports expected to show the U.S. jobless rate remained above 9 percent, adding to signs growth in the world’s largest economy is weakening. Sony Corp., Japan’s biggest exporter of consumer electronics, declined 4.3 in Tokyo on speculation exports to the U.S. will fall. Honda Motor Co., which gets about 44 percent of its sales from North America, fell 1.8 percent. BHP Billiton Ltd., the world’s No. 1 mining company lost 1 percent in Sydney after a gauge of metal prices in London dropped. The MSCI Asia Pacific Index slipped 0.3 percent to 125.06 as of 10:02 a.m. in Tokyo, paring this week’s advance to 4 percent. About two stocks fell for each that rose on the gauge. The measure slumped 8.6 percent last month, the most since May 2010, amid concern global economic growth is slowing as Europe’s sovereign debt crisis spreads and after Standard & Poor’s cut the U.S. credit rating.
GLOBAL MARKETS - World stocks slide on poor Europe data
LONDON, Sept 1 (Reuters) - Financial markets kicked off September in a grim mood on Thursday with poor European economic data prompting a regional sell off that ended a four-day winning streak.
"The global economy is clearly going through a marked slow-down in economic activity and the market is trying to assess whether this will be just a soft patch or whether we are heading towards a recession," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.
U.S. Manufacturing Unexpectedly Expanded (Source: Bloomberg)
Manufacturing in the U.S. unexpectedly expanded in August, allaying concern the world’s largest economy is headed for another recession. The Institute for Supply Management’s factory index fell to 50.6 last month from 50.9 in July, the Tempe, Arizona-based group said today. Figures greater than 50 signal expansion. Economists projected the gauge would drop to 48.5, according to the median forecast in a Bloomberg News survey. Receding commodity prices and a recovery from setbacks related to Japan’s natural disaster have helped keep U.S. manufacturing from shrinking amid a global slowdown that’s curbing overseas demand. Another report today showed consumer sentiment declined to the second-lowest level in two years, posing a threat to the household spending that accounts for 70 percent of the economy.
U.S. Consumer Confidence Slumps With Economic Outlook in Bloomberg Index (Source: Bloomberg)
Consumer confidence declined last week as sentiment about the U.S. economy slumped to the second- lowest level in two years. The Bloomberg Consumer Comfort Index was minus 49.1 in the week to Aug. 27 compared with a minus 47 reading the previous period. The gauge dropped to a record low among the lowest- income Americans. Unemployment above 9 percent, limited wage growth and a volatile stock market are deflating consumers’ moods, posing a threat to the household spending that accounts for 70 percent of the world’s largest economy. The report showed confidence among homeowners was close to an all-time low as property values remain depressed.
“Since peaking in February earlier this year, consumer sentiment has steadily declined, mostly due to the lagged impact of rising gasoline and food prices, as well as flat wages,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The decline in consumer sentiment will likely curb the appetite of consumers to continue spending at levels observed in July.”
Goldman Cuts U.S. August Payroll Forecast to a Gain of 25,000 From 50,000 (Source: Bloomberg)
Economists at Goldman Sachs Group Inc. said the slow pace of hiring recently in the U.S. led them to cut their August payroll forecast to a 25,000 gain. The new estimate is down from a prior projection of a 50,000 increase, the economists said. Their forecast for the unemployment rate was unchanged at 9.1 percent. “The main reason is the accumulation of evidence of weak hiring in late July and August,” the economists, led by Jan Hatzius, wrote in a note to clients today. “The recent pickup in layoff announcements is a concern.”
Among the reports citing weak employment figures are the Conference Board’s consumer confidence survey and its separate gauge of online help-wanted advertising for August, yesterday’s ADP Employer Services report that measures private payroll data and today’s employment component in the Institute for Supply Management’s factory index, the New York-based economists wrote.
Jobless Claims in U.S. Decline by 12,000 as Impact of Verizon Strike Wanes (Source: Bloomberg)
Applications for U.S. unemployment benefits fell last week as the influence of the strike at Verizon Communications Inc. waned. Jobless claims fell by 12,000 to 409,000 in the week ended Aug. 27, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop to 410,000, according to the median forecast. The figure remains higher than it was three weeks earlier, before the labor dispute at Verizon pushed the numbers up. Companies like American Superconductor Corp. (AMSC) are stepping up job cuts, which may prompt consumers to pull back on the spending that accounts for about 70 percent of the economy. A report tomorrow may show employers added 70,000 workers to payrolls in August, down from 117,000 the prior month, and the jobless rate held at 9.1 percent, according to the median forecast in a Bloomberg survey.
Treasuries Hold Advance Before Reports on Nonfarm Payrolls, Unemployment (Source: Bloomberg)
Treasuries held onto gains before government reports today forecast to show U.S. companies created fewer jobs in August and the unemployment rate exceeded 9 percent for a fourth month, adding to signs of economic slowdown. U.S. government bonds are set for a weekly gain as Asian stocks followed U.S. shares lower, bolstering demand for the relative safety of debt. Two-year notes yielded 0.18 percent, or seven basis points below the upper range of the Federal Reserve’s target rate, as the central bank last month pledged to keep borrowing costs low until mid-2013. “The U.S. economy is certainly still weak,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “That means U.S. yields will stay low.”
U.S. Stocks Retreat Ahead of Tomorrow’s Report on Employment for August (Source: Bloomberg)
U.S. stocks retreated, snapping a four-day advance for the Standard & Poor’s 500 Index, as banks fell and investors speculated that tomorrow’s jobs report will show the world’s largest economy continues to struggle. Financial stocks dropped the most within 10 groups in the S&P 500, sliding 2.4 percent. Goldman Sachs Group Inc. (GS) slumped 3.5 percent after agreeing to pay future Federal Reserve penalties and write down $53 million of mortgage loans in New York to gain approval for its sale of Litton Loan Servicing LP. Caterpillar Inc. (CAT) and Alcoa Inc. (AA) fell at least 2.4 percent, pacing losses among companies most-tied to economic growth. The S&P 500 declined 1.2 percent to 1,204.42 at 4 p.m. in New York. The benchmark gauge rallied 5.1 percent during a four- day streak through yesterday. The Dow Jones Industrial Average lost 119.96 points, or 1 percent, to 11,493.57.
Japanese Stocks Fall, Snap 6-Day Rally, Before U.S. Employment Report (Source: Bloomberg)
Japanese stocks fell, snapping a six-day rally, ahead of a report forecast to show the U.S. added fewer jobs in August as the world’s largest economy continued to struggle. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, slid 4.2 percent, falling the most in the Nikkei 225 (NKY) Stock Average. Mizuho Financial Group Inc. (8411), Japan’s third-largest lender by market value, dropped 2.6 percent after bank shares dropped in the U.S. Mitsubishi Corp. (8058), Japan’s biggest trading company, slid 1.5 percent after commodity prices declined. KDDI Corp. (9433), which sells mobile devices, gained 2.1 percent after its stock rating was raised to “buy” from “hold” by Deutsche Bank Ag. The Nikkei 225 Stock Average fell 0.8 percent to 8,987.03 as of 10:02 a.m. in Tokyo. The broader Topix index declined 0.8 percent to 772.02. For the week, the Nikkei has risen 2.1 percent, set for a second weekly gain, while the Topix is up 2.1 percent.
Shadow Council Urges ECB to Cut Interest Rates to Avoid Another Recession (Source: Bloomberg)
The European Central Bank should reverse this year’s rate increases to prevent the euro-area economy from slipping back into recession, members of the so- called shadow ECB council said. A contraction in European manufacturing and plunging business and consumer confidence suggest the sharp slowdown in economic growth in the second quarter may continue in the third, they said. The ECB shadow council is a group of 15 economists and portfolio managers who watch economic developments and monetary policy in the euro region and issue recommendations each month. The Frankfurt-based ECB has raised its benchmark rate twice in 2011, taking it to 1.5 percent from 1 percent. “My recommendation is for the ECB to lower the policy rate by 50 basis points as insurance to lower the risk of outright recession re-emerging,” said Julian Callow, chief European economist at Barclays Capital in London. “The economic deterioration has become sufficiently rapid and alarming to warrant an immediate unwinding of the ECB’s rate hikes.”
U.K. Manufacturing Shrinks Most in More Than Two Years as Orders Decline (Source: Bloomberg)
U.K. manufacturing shrank the most in more than two years in August as demand from domestic and overseas customers weakened. A gauge by Markit Economics and the Chartered Institute of Purchasing and Supply fell to 49, the lowest in 26 months, from 49.4 in July, according to an e-mailed report in London today. That matched the median forecast of 27 economists in a Bloomberg News survey. A level below 50 indicates contraction. New orders fell the most in almost 2 1/2 years and employment declined for the first time in 17 months. Manufacturers said the drop in demand was due to weaker domestic and export sales and “rising global economic uncertainty.” While data today showed U.S. manufacturing unexpectedly expanded in August, figures from Europe and Asia showed a broader factory slowdown may be unfolding.
U.K. House Prices Decline Most in 10 Months Amid Slowdown, Nationwide Says (Source: Bloomberg)
U.K. house prices fell the most in 10 months in August as a slowing economic recovery threatens to undermine demand, Nationwide Building Society said. The average cost of a home dropped 0.6 percent to 165,914 pounds ($269,800) from July, the Swindon, England-based customer-owned lender said in an e-mailed report today. From a year earlier, values were down 0.4 percent. While a shortage in the supply of homes for sale and record-low Bank of England interest rates have supported prices, the housing market is struggling to gain momentum as banks restrict lending and Britons’ spending power is eroded by inflation. The British Chambers of Commerce cut its economic growth forecast today as the U.S. recovery slows, Europe’s debt crisis escalates and Britain’s government implements the biggest fiscal squeeze since World War II.
Bank of England Keeps Record-Low Rates Until August 2012 in BCC Forecast (Source: Bloomberg)
The British Chambers of Commerce cut its U.K. economic growth outlook and said the Bank of England will keep interest rates on hold until the second half of next year. The central bank will leave the rate at a record-low 0.5 percent until August 2012, when it will raise it by a quarter point, BCC Chief Economist David Kern said in an e-mailed statement today. The London-based lobby group said in May that the bank would increase the benchmark this year. The Bank of England’s Monetary Policy Committee is holding off raising interest rates as a faltering economic recovery outweighs the risk of inflation that is more than double its target. The BCC sees gross domestic product rising 1.1 percent this year and 2.1 percent in 2012, cutting a June projection for 1.3 percent and 2.2 percent respectively.
Euro Set for Biggest Weekly Slump Since July Before German Factory Orders (Source: Bloomberg)
The euro was set for the biggest weekly drop against the dollar in almost two months before a German report next week that economists say will show factory orders fell for the first time in four months. The 17-nation currency slid versus most of its 16 major counterparts in the past five days before the European Central Bank holds a policy meeting on Sept. 8. The dollar was poised for the biggest gain against the yen in a month before President Barack Obama speaks on jobs and the economy next week. “The outlook for the euro is pretty bad,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s third-biggest bank by market value. “For the past six months, there’s been no good news for it. Probably there’ll be none going forward either.”
Swiss Economy Grows at Weakest Pace Since ’09 as Strong Franc Cuts Exports (Source: Bloomberg)
The Swiss economy expanded in the second quarter at the weakest pace since emerging from a 2009 slump as the franc’s appreciation sparked a drop in exports and companies cut spending. Gross domestic product rose 0.4 percent from the first quarter, when it increased 0.6 percent, the State Secretariat for Economic Affairs in Bern said today. That’s in line with the median forecast of 18 economists in a Bloomberg News survey and the worst performance since the economy returned to growth in the third quarter of 2009. Foreign sales slumped 1.3 percent from the first quarter, when they rose 3.4 percent, and investment dropped 2 percent, down from a 1.1 percent gain. Switzerland’s economy is cooling as the franc’s 8 percent ascent against the euro this year undermines exports just as global growth weakens. Manufacturing growth slowed last month, the KOF economic barometer fell and the central bank said that the economic outlook “deteriorated substantially.”
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