Wednesday, June 30, 2010

Markets tumble on poor Chinese, US economic data

The index of 100 leading shares fell 3pc by early afternoon to 4905 points – the lowest since September. Markets in France , Germany and the US suffered similar declines after a larger-than-expected decline in US consumer confidence.

Frankfurt's DAX 30 slid 3.2pc and Paris's CAC 40 tumbled 3.7pc. In New York, the S&P 500 was off 2.8pc, with the Nasdaq down 3pc while the Dow Jones Industrial Average dropped more than 2pc, to below the 10,000 mark.

Michael Sheldon, chief market strategist at RDM Financial, said: "Investors are clearly nervous ...if we see consumers once again take on that bunker mentality that we saw during the prior recession, we could be entering a period of lower growth once again." (more)


Jay Taylor: Turning Hard Times Into Good Times

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O'Neill: It's a 'Perfect Storm' for Gold

Gold, which recently surged to a record high $1,265, still has plenty of room to rise, many experts say.

Concern about the explosion of sovereign debt worldwide, low interest rates, and anticipation of gold purchases by China have put the precious metal in a sweet spot. Low rates make gold attractive compared to fixed income investments.

“There is a perfect storm for gold,” Bill O’Neill, former head of commodity research at Merrill Lynch and now a partner at Logic Advisors, told CNBC.

“The metal has become the ultimate currency, as few want to commit to the euro, pound or yen. And while the U.S. dollar may be the best of a weak lot, it also holds little appeal.” (more)

Fear Returns for Quarter's Final Act

The second quarter's biggest worries took an unwelcome curtain call on Tuesday, hitting global markets.

The trifecta of trouble—European debt woes, China's slowing growth and the stagnating U.S. recovery—conspired to put the quarter on the cusp of being the worst for U.S. stocks in more than a year.

All three concerns flared anew in a grim highlight reel just ahead of the quarter's end. In response, the Dow Jones Industrial Average tumbled 268.22 points, or 2.65%, to 9870.30, its first close below 10000 since early June.

The blue-chip average is on pace to fall more than 9% in the quarter, which ends on Wednesday. This would be the Dow's first losing quarter since the first quarter of 2009, when a prolonged bull market began. The Dow Jones U.S. Total Stock Market Index has lost roughly $1.5 trillion in value in the quarter so far. (more)

Consumer confidence craters in June

A key measure of consumer confidence fell in June, reversing a three-month gain, as Americans remain nervous about the job market.

The Conference Board, a New York-based research group, said its Consumer Confidence Index dropped to 52.9 in June from 62.7 in May. It was the lowest level since March, when the index stood at 52.3.

Economists had expected the index to have fallen to 62 in June, according to consensus estimates from

"Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. (more)

Roubini says Greece needs orderly debt restructuring to avoid 'inevitable default'

He said the "draconian" austerity measures agreed as part of a €110bn (£90bn) EU-IMF bailout is prolonging the country's recession.

"It is time to recognised that Greece is not just suffering from a liquidity crisis; it is facing an insolvency crisis too," he writes in the Financial Times.

Greek debt is being downgraded to junk levels, making it harder and more costly for the government to borrow.

In return for the emergency loans, Greece has pledged to bring its fiscal shortfall under the EU's 3pc by 2014 from 13.6 percent last year and to implement structural reforms in its economy to make it more competitive. (more)

Britain 'might not cope with another bank emergency'

Britain's mountain of debt could leave the country powerless to launch another rescue bid in the wake of a fresh financial crisis, the world's central bankers warned yesterday. Their "club" - the Bank of International Settlements - presented in its annual report a frightening picture of the impact of a second banking emergency on heavily indebted nations such as Britain.

The Bank of England's Governor, Mervyn King, has estimated that the Government has pumped as much as £1trillion of taxpayers' money into the banking system. Billions of pounds were spent part-nationalising the Royal Bank of Scotland and Lloyds Banking Group, as well as fully nationalising Northern Rock, in an attempt to stave off collapse. Measures such as the "special liquidity" scheme propped up other lenders and prevented the system from freezing up. (more)

High Unemployment, Lower Stocks and Growing Worries. Is This 1930 All Over Again?

Yesterday, economist Paul Krugman said we're headed for another Depression. The world's new obsession with "austerity" will kill the global recovery, Krugman says, and plunge the economy into a double dip.

Could that really happen? Could we really be headed for a repeat of the 1930s?

Last year, Dan Alpert, managing principal with Westwood Capital, described the huge stock market rally that followed the March lows as the "greatest sucker's rally in history." He also produced a fascinating series of news clippings from early 1930, a few months after the historic market crash of 1929, that showed that market participants in those days had no idea of what was about to hit them.

Specifically, Dan assembled headlines and commentary from the New York Times, Wall Street, Journal and other papers that showed vigorous debate about how strong the recovery would be--with almost no suggestion that the market crash of the previous fall might only be the beginning. The market rallied strongly in the spring of 1930 amid booming optimism. Then it crashed to the horrific lows of early 1932. (more)

Chart of the Day