01 Aug 2008 | 15:51
U.S. Recession Fear Drags Asian Equity Markets Lower
Asian
markets declined, after disappointing U.S. economic data released
yesterday revived worries about the strength of the world's largest
economy showing some chanced of recession for the country. Oil prices
fell overnight on demand concerns to slightly above $124 a barrel. In
addition, the weak earnings performance from banks added to the selling
pressure in Japan. Chinese stocks in Hong Kong declined, but Shanghai
shares reversed direction in the afternoon, rebounding after three
straight sessions of declines, as bargain buyers snapped up financial
shares.
On Wall Street, the Dow Jones Industrial Average tumbled
1.8% to 11,378.02 and the S&P 500 index lost 1.3% to 1,267.38,
while the Nasdaq Composite gave up 0.2% to 2,325.55. The drop came as
in addition to the weak GDP, which grew 1.9% in the second quarter,
compared with expectations of 2.3%. Also, annual revisions showed the
economy contracted in the fourth quarter of 2007, falling 0.2% for the
first drop in real gross domestic product since the recession of 2001.
The economy grew at a revised 0.9% annual rate in the first quarter
Another government data showed the number of people seeking jobless
benefits rose to the highest level in five years. The figures released
by the Labor Department said the initial claims for unemployment
benefits jumped by 44,000 to 448,000 in the week ended July 26. The
U.S. investors await the release of July employment figures and the ISM
index later today.
In the oil market yesterday the oil prices
dropped on concern that global consumption is falling on slowing
economic growth. Oil closed down $2.69 at $124.08 a barrel on the New
York Mercantile Exchange. In Asian trade, the front-month contract
slipped 72 cents to $123.36 a barrel.
In the currency market,
the U.S. dollar traded in the mid 107-yen levels late Friday, down from
upper 107-yen levels in early trade and lower 108-yen levels late
Thursday. The dollar dropped fell against the yen in Asia due to
settlement orders from Japanese exporters. The U.S. dollar bought
107.77 yen recently, compared with 107.90 yen late Thursday.
The
Australian dollar hit seven-week lows, taking its losses for the week
to over 2%, on speculation that domestic interest rates could be cut as
early as September. The Aussie was quoted at US$0.9374-0.9375, down
from US$0.9453-0.9454 late Thursday.
The New Zealand dollar
skidded to 10-month lows amid deepening concerns over the local
financial sector. The kiwi was quoted at US$0.72720.7280 compared to
Thursday's close of US$0.7329-0.7335
The Japanese market closed
sharply lower after posting gains for the previous two sessions. The
market opened on a weak note, tracking disappointing U.S. economic
data, and extended its losses amid weakness throughout Asian equity
markets and poor Japanese corporate earnings.
The benchmark
Nikkei 225 index fell to its lowest level in two weeks. The key index
finished the session at 13,094.59, down 2.1%, its lowest level since
July 18 when it finished at 12,803.70. The broader Topix index dropped
30.69 points or 2.4% to finish at 1,272.93.
In economic news,
the Japan Automobile Dealers Association said that sales of new cars,
trucks and buses, excluding Mini vehicles, rose 5.4% to 302,568 units.
Sales rose for the first time in three months. Car sales rose 9.3% to
267,725 units, while sales of buses fell 14.7% to 1,228 units and truck
sales declined 17.6% to 33,615 units.
The Chinese market closed
higher, paring early losses, after President Hu Jintao reiterated the
government's intention to maintain steady and fast economic growth. In
other news, an anti-monopoly law became effective in China. The law is
the mainland's version of antitrust regulations already in force in the
developed countries, and comes at a time when Chinese firms are
increasing their global presence through overseas acquisitions and the
country was gaining in strategic importance for international companies.
On
the economic front the purchasing managers index in China fell to a
series low of 48.4 in July, a level indicating economic contraction,
according to news reports. The reading was 52.0 in June The benchmark
Shanghai Composite Index closed up 0.94% at 2,801.82 after three days
of losses.
In Hong Kong, the Hang Seng Index continued its
upward movement as it registered a gain of 0.6% at 22,862.60, while the
Hang Seng China Enterprises Index increased by 0.3% to 12,545.22.
On
the economic front the purchasing managers' index for Hong Kong fell in
July, reflecting a simultaneous contraction in private-sector output
and new orders for the first time in 3- years, signaling overall
economic growth is slowing sharply.
The Hong Kong purchasing
managers' index (PMI), based on a survey of 300 private companies,
measured a seasonally adjusted 49.4 in July, falling below 50 -- the
dividing line between growth and contraction in the private sector --
for the first time since December 2004. It was down from 50.6 in June.
According
to the survey the orders were depressed by weaker demand at home and
internationally last month and because some customers refused to pay
higher prices. The drop in the PMI follows an unexpected decline in the
territory's exports in June. Consumer spending continues to drive
economic growth and remains solid but there are signs that rising
inflation and a weak stock market are making consumers more cautious.
The
Australian stock market closed lower, snapping a two-day winning
streak. Wall Street provided a weak lead, as the U.S. market posted
triple-digit losses overnight following worse-than-expected data for
both GDP and jobs. Further, Suncorp Metway's profit warning and weaker
commodity prices hurt investor sentiment.
The benchmark
S&P/ASX 200 index closed down 1.5% at 4,904.0, after gaining 0.8%
on Thursday. The broader All Ordinaries index lost 74.6 points or 1.5%
to finish at 4,978.0.
On the economic front, the Reserve Bank of
Australia's index of commodity prices rose further in July, adding to
already hefty gains driven by surging prices for coal and iron ore. The
central bank's index increased by 3.0% in special drawing rights or SDR
terms to a record 260.5. In Australian dollar terms, it rose by 2.8% to
another record of 182.5.
Australia's manufacturing sector
contracted for the second consecutive month in July, with the
Australian Industry Group-PricewaterhouseCoopers Australian Performance
of Manufacturing Index falling 0.1 point in July to 46.9 from June. The
slowing domestic and global economy, higher interest rates and stronger
Australian dollar contributed to the fall.
Meanwhile, the
monthly TD Securities/Melbourne Institute inflation survey showed that
consumer prices rose 0.4% in July, following a 0.5% hike in June.
Inflation in Australia eased slightly in July, but remained above the
Reserve Bank's target range.
The New Zealand market closed lower
Friday, ending a two-day winning streak. Wall Street's plunge overnight
amid disappointing U.S. GDP and jobs data dented investor sentiment.
The benchmark NZX 50 index closed down 33.1 points or 1.0% at 3,303.2
and the broader NZX All Capital Index fell 40.5 points or 1.2% to
finish at 3,339.0.
The South Korean market plunged after posting
gains for the previous two trading sessions. The benchmark Korea
Composite Stock Price Index or Kospi lost 1.31% to end at 1,573.7
On
the economic front, a government report showed that South Korea's trade
balance remained in the red for a second straight month in July, mainly
due to sharp hikes in global oil prices. The Ministry of Knowledge
Economy said that the trade deficit stood at US$1.62 billion in July.
Imports soared a record 47.3% on year to US$43.04 billion, while
exports rose 37.1% to $41.41 billion.
In Thailand, the annual
inflation rate rose to a new 10-year high of 9.2 % in July, slightly
lower than expectations, fuelled by sharply higher oil and food prices.
Inflation accelerated sharply from 8.9 percent in June and 7.6 percent
in May. Annual core inflation was 3.7 percent in July, up from 3.6 in
June. The Thailand the Thai Set 50 index increased by 0.3% to 475.57.
India's
Sensitive Index, or Sensex, was trading in positive territory,
recouping some of its early losses. The market opened sharply lower
following weak cues from the rest of the global markets. On the
earlier, the official data released showed India?s wholesale price
index-based inflation accelerated to 11.98% in the week ended 19 July
2008, higher than 11.89% recorded in for the previous week ended on 12
July 2008. The Sensex closed at 14656.69 i.e. 2.1% higher than
yesterday? closing.
Elsewhere in the region, Singapore's Straits Times index declined 0.8% while Taiwan's weighted index declined 0.3%.
In
the other part of the world, growing pessimism about the world economy
dragged the European stocks lower. In the opening trade, the U.K. FTSE
100 fell 0.5% to 5,384.20, the German DAX 30 lost 0.8% to 6,425.31 and
the French CAC 40 fell 0.9% to 4,354.65
There was slew of
economic data released today showing much gloomier picture for the
region. In Germany, the retail sales plunged 3.9% on the year in June,
the sharpest drop since March, while sales on the month were weaker
than expected. Retail sales fell a seasonally adjusted 1.4% on the
month in June In separate data Friday, which includes vehicle and gas
station sales, the Deutsche Bundesbank said retail sales fell 2.8% on
the month and 3.7% on the year, reflecting higher fuel costs.
In
another data release, final purchasing managers' index for
manufacturing was at 50.9 points in July, down from 52.6 points in June.
In
U.K. the manufacturing sector contracted sharply in July, as activity
levels wilted to their lowest levels since December 1998. According to
the data the Purchasing Managers Index dropped to a reading of 44.3 in
July from a downwardly revised 45.9 in June.
In Euro Zone the
manufacturing activity sunk to a five-year low in July, as pressures
from the strong euro, soaring commodity prices and higher interest
rates took their toll on the currency bloc's factory sector.
The
Purchasing Managers Index for the euro zone's factory sector fell to
47.4 in July from 49.2 in June. That's slightly below a previously
released estimate of 47.5 and indicates that activity contracted for
the second month in a row.
The ahead features some of the most
explosive events for the week as it will release average hourly earning
for U.S, which will be followed by data on construction spending, and
ISM manufacturing index. However the focus of the market will be on Non
Farm Payrolls scheduled to release in the evening, which will be
accompanied by the unemployment rate for the July.
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U.S. Recession Fear Drags Asian Equity Markets Lower
Asian
markets declined, after disappointing U.S. economic data released
yesterday revived worries about the strength of the world's largest
economy showing some chanced of recession for the country. Oil prices
fell overnight on demand concerns to slightly above $124 a barrel. In
addition, the weak earnings performance from banks added to the selling
pressure in Japan. Chinese stocks in Hong Kong declined, but Shanghai
shares reversed direction in the afternoon, rebounding after three
straight sessions of declines, as bargain buyers snapped up financial
shares.
On Wall Street, the Dow Jones Industrial Average tumbled
1.8% to 11,378.02 and the S&P 500 index lost 1.3% to 1,267.38,
while the Nasdaq Composite gave up 0.2% to 2,325.55. The drop came as
in addition to the weak GDP, which grew 1.9% in the second quarter,
compared with expectations of 2.3%. Also, annual revisions showed the
economy contracted in the fourth quarter of 2007, falling 0.2% for the
first drop in real gross domestic product since the recession of 2001.
The economy grew at a revised 0.9% annual rate in the first quarter
Another government data showed the number of people seeking jobless
benefits rose to the highest level in five years. The figures released
by the Labor Department said the initial claims for unemployment
benefits jumped by 44,000 to 448,000 in the week ended July 26. The
U.S. investors await the release of July employment figures and the ISM
index later today.
In the oil market yesterday the oil prices
dropped on concern that global consumption is falling on slowing
economic growth. Oil closed down $2.69 at $124.08 a barrel on the New
York Mercantile Exchange. In Asian trade, the front-month contract
slipped 72 cents to $123.36 a barrel.
In the currency market,
the U.S. dollar traded in the mid 107-yen levels late Friday, down from
upper 107-yen levels in early trade and lower 108-yen levels late
Thursday. The dollar dropped fell against the yen in Asia due to
settlement orders from Japanese exporters. The U.S. dollar bought
107.77 yen recently, compared with 107.90 yen late Thursday.
The
Australian dollar hit seven-week lows, taking its losses for the week
to over 2%, on speculation that domestic interest rates could be cut as
early as September. The Aussie was quoted at US$0.9374-0.9375, down
from US$0.9453-0.9454 late Thursday.
The New Zealand dollar
skidded to 10-month lows amid deepening concerns over the local
financial sector. The kiwi was quoted at US$0.72720.7280 compared to
Thursday's close of US$0.7329-0.7335
The Japanese market closed
sharply lower after posting gains for the previous two sessions. The
market opened on a weak note, tracking disappointing U.S. economic
data, and extended its losses amid weakness throughout Asian equity
markets and poor Japanese corporate earnings.
The benchmark
Nikkei 225 index fell to its lowest level in two weeks. The key index
finished the session at 13,094.59, down 2.1%, its lowest level since
July 18 when it finished at 12,803.70. The broader Topix index dropped
30.69 points or 2.4% to finish at 1,272.93.
In economic news,
the Japan Automobile Dealers Association said that sales of new cars,
trucks and buses, excluding Mini vehicles, rose 5.4% to 302,568 units.
Sales rose for the first time in three months. Car sales rose 9.3% to
267,725 units, while sales of buses fell 14.7% to 1,228 units and truck
sales declined 17.6% to 33,615 units.
The Chinese market closed
higher, paring early losses, after President Hu Jintao reiterated the
government's intention to maintain steady and fast economic growth. In
other news, an anti-monopoly law became effective in China. The law is
the mainland's version of antitrust regulations already in force in the
developed countries, and comes at a time when Chinese firms are
increasing their global presence through overseas acquisitions and the
country was gaining in strategic importance for international companies.
On
the economic front the purchasing managers index in China fell to a
series low of 48.4 in July, a level indicating economic contraction,
according to news reports. The reading was 52.0 in June The benchmark
Shanghai Composite Index closed up 0.94% at 2,801.82 after three days
of losses.
In Hong Kong, the Hang Seng Index continued its
upward movement as it registered a gain of 0.6% at 22,862.60, while the
Hang Seng China Enterprises Index increased by 0.3% to 12,545.22.
On
the economic front the purchasing managers' index for Hong Kong fell in
July, reflecting a simultaneous contraction in private-sector output
and new orders for the first time in 3- years, signaling overall
economic growth is slowing sharply.
The Hong Kong purchasing
managers' index (PMI), based on a survey of 300 private companies,
measured a seasonally adjusted 49.4 in July, falling below 50 -- the
dividing line between growth and contraction in the private sector --
for the first time since December 2004. It was down from 50.6 in June.
According
to the survey the orders were depressed by weaker demand at home and
internationally last month and because some customers refused to pay
higher prices. The drop in the PMI follows an unexpected decline in the
territory's exports in June. Consumer spending continues to drive
economic growth and remains solid but there are signs that rising
inflation and a weak stock market are making consumers more cautious.
The
Australian stock market closed lower, snapping a two-day winning
streak. Wall Street provided a weak lead, as the U.S. market posted
triple-digit losses overnight following worse-than-expected data for
both GDP and jobs. Further, Suncorp Metway's profit warning and weaker
commodity prices hurt investor sentiment.
The benchmark
S&P/ASX 200 index closed down 1.5% at 4,904.0, after gaining 0.8%
on Thursday. The broader All Ordinaries index lost 74.6 points or 1.5%
to finish at 4,978.0.
On the economic front, the Reserve Bank of
Australia's index of commodity prices rose further in July, adding to
already hefty gains driven by surging prices for coal and iron ore. The
central bank's index increased by 3.0% in special drawing rights or SDR
terms to a record 260.5. In Australian dollar terms, it rose by 2.8% to
another record of 182.5.
Australia's manufacturing sector
contracted for the second consecutive month in July, with the
Australian Industry Group-PricewaterhouseCoopers Australian Performance
of Manufacturing Index falling 0.1 point in July to 46.9 from June. The
slowing domestic and global economy, higher interest rates and stronger
Australian dollar contributed to the fall.
Meanwhile, the
monthly TD Securities/Melbourne Institute inflation survey showed that
consumer prices rose 0.4% in July, following a 0.5% hike in June.
Inflation in Australia eased slightly in July, but remained above the
Reserve Bank's target range.
The New Zealand market closed lower
Friday, ending a two-day winning streak. Wall Street's plunge overnight
amid disappointing U.S. GDP and jobs data dented investor sentiment.
The benchmark NZX 50 index closed down 33.1 points or 1.0% at 3,303.2
and the broader NZX All Capital Index fell 40.5 points or 1.2% to
finish at 3,339.0.
The South Korean market plunged after posting
gains for the previous two trading sessions. The benchmark Korea
Composite Stock Price Index or Kospi lost 1.31% to end at 1,573.7
On
the economic front, a government report showed that South Korea's trade
balance remained in the red for a second straight month in July, mainly
due to sharp hikes in global oil prices. The Ministry of Knowledge
Economy said that the trade deficit stood at US$1.62 billion in July.
Imports soared a record 47.3% on year to US$43.04 billion, while
exports rose 37.1% to $41.41 billion.
In Thailand, the annual
inflation rate rose to a new 10-year high of 9.2 % in July, slightly
lower than expectations, fuelled by sharply higher oil and food prices.
Inflation accelerated sharply from 8.9 percent in June and 7.6 percent
in May. Annual core inflation was 3.7 percent in July, up from 3.6 in
June. The Thailand the Thai Set 50 index increased by 0.3% to 475.57.
India's
Sensitive Index, or Sensex, was trading in positive territory,
recouping some of its early losses. The market opened sharply lower
following weak cues from the rest of the global markets. On the
earlier, the official data released showed India?s wholesale price
index-based inflation accelerated to 11.98% in the week ended 19 July
2008, higher than 11.89% recorded in for the previous week ended on 12
July 2008. The Sensex closed at 14656.69 i.e. 2.1% higher than
yesterday? closing.
Elsewhere in the region, Singapore's Straits Times index declined 0.8% while Taiwan's weighted index declined 0.3%.
In
the other part of the world, growing pessimism about the world economy
dragged the European stocks lower. In the opening trade, the U.K. FTSE
100 fell 0.5% to 5,384.20, the German DAX 30 lost 0.8% to 6,425.31 and
the French CAC 40 fell 0.9% to 4,354.65
There was slew of
economic data released today showing much gloomier picture for the
region. In Germany, the retail sales plunged 3.9% on the year in June,
the sharpest drop since March, while sales on the month were weaker
than expected. Retail sales fell a seasonally adjusted 1.4% on the
month in June In separate data Friday, which includes vehicle and gas
station sales, the Deutsche Bundesbank said retail sales fell 2.8% on
the month and 3.7% on the year, reflecting higher fuel costs.
In
another data release, final purchasing managers' index for
manufacturing was at 50.9 points in July, down from 52.6 points in June.
In
U.K. the manufacturing sector contracted sharply in July, as activity
levels wilted to their lowest levels since December 1998. According to
the data the Purchasing Managers Index dropped to a reading of 44.3 in
July from a downwardly revised 45.9 in June.
In Euro Zone the
manufacturing activity sunk to a five-year low in July, as pressures
from the strong euro, soaring commodity prices and higher interest
rates took their toll on the currency bloc's factory sector.
The
Purchasing Managers Index for the euro zone's factory sector fell to
47.4 in July from 49.2 in June. That's slightly below a previously
released estimate of 47.5 and indicates that activity contracted for
the second month in a row.
The ahead features some of the most
explosive events for the week as it will release average hourly earning
for U.S, which will be followed by data on construction spending, and
ISM manufacturing index. However the focus of the market will be on Non
Farm Payrolls scheduled to release in the evening, which will be
accompanied by the unemployment rate for the July.
Visit our site at – http://investorline.co.in/
Newsromm - http://newsroom.investorline.co.in/
Learning Center- http://learning.investorline.co.in/
Mutual funds - http://mutualfunds.investorline.co.in/
Life Insurance - http://insurance.investorline.co.in/
Investor Journal - http://research.investorline.co.in/
Latest News - http://investorline.co.in/blogger/?q=aggregator/categories/1
News Resources - http://investorline.co.in/blogger/?q=aggregator/sources
Newscatcher- http://catcher.investorline.co.in/
Newsgroups- http://groups.google.com/group/india-investor
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