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US
Last weekend we saw another 2 US banks fold. Although they are small, there were fears that their problems are not contained to just these two banks, First Nation Bank and First Heritage Bank but other financial institutions as well.
2nd quarter GDP numbers showed a gain of 1.9% which is up 0.9% from the previous year. The number was weaker than expected. The most disappointing part of the numbers was the revisions. The 4th quarter 2007 GDP numbers were revised from 0.6% growth to a -0.2% reading. This is the first negative reading since 2001.
The big numbers will be the US non-farm payroll numbers out tonight. Expectations are for a drop of 75000 jobs.
Asia
With China’s stockmarket down 47% this year, there are reports that regulators are going to limit share sales. China’s stockmarket is the worst performing this year so far.
Australian banks were sold down heavily after ANZ was the latest Australian bank to announce an increase in provisions due to the ongoing problems in global credit markets.
In Australia, we saw a shocking retail sales report for the month of June. The market was expecting to see a flat result but instead, retail sales dropped 1%. Department store sales were down by 5.2% while clothing dropped 5%.
In New Zealand, business confidence fell to -38.7 which is the first fall in 4 months. The numbers support a case for more interest rate cuts after the NZ central bank cut interest rates last week to 8%.
It looks like the global slowdown has taken its toll on industrial production in Japan. The industrial production numbers for June were worse than expected with a fall of 2% compared to the previous month. But vehicle production rose 4.5% in June with strong demand for Japan’s smaller cars.
UK
HSBC which is Europe’s largest bank said that it may report its biggest drop in profit since 2001 due to the amount of bad US loans increasing. Meanwhile, Deutsche Bank had writedowns of 2.3 billion euros which was more than expected.
Eurozone retail PMI saw a rise in July to 38.2 from 36.3 due to stronger activity in Germany and Italy. The numbers still remain historically low.
Germany’s jobs report was in line with expectations with unemployed fell by 20000. But German consumer confidence is now at a 5 year low.
The estimates for Eurozone CPI are at 4.1% which is at a 16 year high. While inflation is a problem, there is not much that the European Central Bank can do with growth also slowing in the Eurozone.
UK housing data showed that home prices dropped 8.1% in July compared to a year earlier. This is the biggest decline since 1991.
End note
Economic indicators show that not only is the world grappling with inflation with consumers struggling with high energy costs, rising cost of food and living costs but on the other side of the equation, growth is also faltering. This week showed that it’s not just US banks that are struggling but financial institutions all over the world. Until the global economy starts showing signs of life, there will continue to be big moves in stockmarkets around the world.
Happy Investing
Julia Lee
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