US Stocks Slide on Global Growth Worries
By Dave Shellock
Financial Times
Tuesday 21:10 BST.
Nagging concerns about the outlook for global growth and doubts about the effectiveness of central bank policy responses undermined risk appetite, driving global equity and industrial commodity prices lower but enhancing the appeal of US government bonds and the yen.
Fresh evidence of economic weakness in Germany was the chief catalyst for the market’s latest bout of anxiety, with the International Monetary Fund’s cut to its global growth forecasts adding to the downbeat mood.
“With an easing in geopolitical tensions, fundamentals have regained top billing – and we are seeing the market question non-US growth trends and whether there is enough central bank support to fill in the gap for lacklustre or stalled organic growth,” said Adrian Miller at GMP Securities.
The S&P 500 equity index fell 1.5 per cent to a two-month low of 1,935, leaving it 3.7 per cent down from September’s record closing high. The CBOE Vix “fear gauge” was up 11.1 per cent and back above the 17 level in late trade.
In Europe, the FTSE Eurofirst 300 fell 1.5 per cent to its lowest since mid-August – weighed down by a 3.3 per cent drop for the travel and leisure sector amid concerns about the spread of the Ebola virus beyond west Africa.
Hong Kong stocks gained ground for a third successive session – with the Hang Seng rising 0.5 per cent – as concerns over recent pro-democracy protests continued to fade.
But the Nikkei 225 in Tokyo fell 0.7 per cent as a lack of further easing action by the Bank of Japan after a two-day policy meeting supported a rally for the yen. The dollar was down 0.8 per cent against the yen at Y107.94, as the US currency continued to retreat from a recent four-year high against a weighted basket of its peers.
“Investors were disappointed that the BoJ did not signal more stimulus while others are increasingly questioning the European Central Bank’s ability to make a difference,” said Mr Miller at GMP.
Indeed, the pressure on the ECB to initiate further easing measures intensified after data showed that German industrial output tumbled 4 per cent in August, far more than expected and the biggest monthly drop in over five years.
Anna Stupnytska, a global economist at Fidelity Worldwide Investment, acknowledged that August’s decline was partly driven by seasonal factors but said the underlying trend continued to disappoint.
“Geopolitical uncertainty and a sharper than expected slowdown in China through the summer are partly to blame for this weakness in the German manufacturing sector,” she said.
“However, the recent euro depreciation is soon bound to start benefiting exporters and boosting domestic prices. In addition to this, stronger global demand driven by the US, as well as the ECB’s easing measures, should help Germany and the whole of the euro area to stage a modest rebound towards year-end and into 2015.”
Growth bulls were further unnerved by the IMF’s estimate that there was now a four in 10 chance that the eurozone would slide into its third recession since the financial crisis.
The IMF cut its forecast for global growth this year to 3.3 per cent, and lowered its prediction for the eurozone to 0.8 per cent. But it said it expected growth in the US to remain robust.
For most in the markets, the big question is whether the health of the US economy is approaching a level where the Federal Reserve would feel comfortable in raising interest rates.
Paul Dales at Capital Economics highlighted that the Job Opening and Labour Turnover survey for August showed the highest rate of US job openings since 2001 – helping to explain the bigger than expected rise in non-farm payroll employment in September.
“Overall, this is more evidence that we should expect further robust gains in employment over the next few months and, consequently, further declines in the unemployment rate,” he said.
“Under those circumstances, it is hard to see the Fed waiting much longer than March next year before beginning to normalise its policy rate, even if wage and price inflation remain muted.”
US government bond yields fell as buying was supported by the latest slide in stock prices. The yield on the 10-year Treasury was down 8 basis points at a five-week low of 2.35 per cent. But, in spite of the weak German data, the Bund yield held steady at 0.91 per cent.
Gold continued to benefit – albeit modestly – from the dollar’s softer tone, rising $3 at $1,210 an ounce.
But industrial commodities were pressured by uncertainty about demand, with copper falling 0.6 per cent to $6,670 a tonne and Brent oil settling 68 cents down at a two-year low of $92.11 a barrel.
 |
| The citadel of Wall Street in New York City. |
Financial Times
Tuesday 21:10 BST.
Nagging concerns about the outlook for global growth and doubts about the effectiveness of central bank policy responses undermined risk appetite, driving global equity and industrial commodity prices lower but enhancing the appeal of US government bonds and the yen.
Fresh evidence of economic weakness in Germany was the chief catalyst for the market’s latest bout of anxiety, with the International Monetary Fund’s cut to its global growth forecasts adding to the downbeat mood.
“With an easing in geopolitical tensions, fundamentals have regained top billing – and we are seeing the market question non-US growth trends and whether there is enough central bank support to fill in the gap for lacklustre or stalled organic growth,” said Adrian Miller at GMP Securities.
The S&P 500 equity index fell 1.5 per cent to a two-month low of 1,935, leaving it 3.7 per cent down from September’s record closing high. The CBOE Vix “fear gauge” was up 11.1 per cent and back above the 17 level in late trade.
In Europe, the FTSE Eurofirst 300 fell 1.5 per cent to its lowest since mid-August – weighed down by a 3.3 per cent drop for the travel and leisure sector amid concerns about the spread of the Ebola virus beyond west Africa.
Hong Kong stocks gained ground for a third successive session – with the Hang Seng rising 0.5 per cent – as concerns over recent pro-democracy protests continued to fade.
But the Nikkei 225 in Tokyo fell 0.7 per cent as a lack of further easing action by the Bank of Japan after a two-day policy meeting supported a rally for the yen. The dollar was down 0.8 per cent against the yen at Y107.94, as the US currency continued to retreat from a recent four-year high against a weighted basket of its peers.
“Investors were disappointed that the BoJ did not signal more stimulus while others are increasingly questioning the European Central Bank’s ability to make a difference,” said Mr Miller at GMP.
Indeed, the pressure on the ECB to initiate further easing measures intensified after data showed that German industrial output tumbled 4 per cent in August, far more than expected and the biggest monthly drop in over five years.
Anna Stupnytska, a global economist at Fidelity Worldwide Investment, acknowledged that August’s decline was partly driven by seasonal factors but said the underlying trend continued to disappoint.
“Geopolitical uncertainty and a sharper than expected slowdown in China through the summer are partly to blame for this weakness in the German manufacturing sector,” she said.
“However, the recent euro depreciation is soon bound to start benefiting exporters and boosting domestic prices. In addition to this, stronger global demand driven by the US, as well as the ECB’s easing measures, should help Germany and the whole of the euro area to stage a modest rebound towards year-end and into 2015.”
Growth bulls were further unnerved by the IMF’s estimate that there was now a four in 10 chance that the eurozone would slide into its third recession since the financial crisis.
The IMF cut its forecast for global growth this year to 3.3 per cent, and lowered its prediction for the eurozone to 0.8 per cent. But it said it expected growth in the US to remain robust.
For most in the markets, the big question is whether the health of the US economy is approaching a level where the Federal Reserve would feel comfortable in raising interest rates.
Paul Dales at Capital Economics highlighted that the Job Opening and Labour Turnover survey for August showed the highest rate of US job openings since 2001 – helping to explain the bigger than expected rise in non-farm payroll employment in September.
“Overall, this is more evidence that we should expect further robust gains in employment over the next few months and, consequently, further declines in the unemployment rate,” he said.
“Under those circumstances, it is hard to see the Fed waiting much longer than March next year before beginning to normalise its policy rate, even if wage and price inflation remain muted.”
US government bond yields fell as buying was supported by the latest slide in stock prices. The yield on the 10-year Treasury was down 8 basis points at a five-week low of 2.35 per cent. But, in spite of the weak German data, the Bund yield held steady at 0.91 per cent.
Gold continued to benefit – albeit modestly – from the dollar’s softer tone, rising $3 at $1,210 an ounce.
But industrial commodities were pressured by uncertainty about demand, with copper falling 0.6 per cent to $6,670 a tonne and Brent oil settling 68 cents down at a two-year low of $92.11 a barrel.
No comments:
Post a Comment