90 seconds at 9 am: Markets spooked

90 seconds at 9 am: Global stocks tumble, starting in Japan; China's factory output shrinks; US jobless claims fall, car sales rise; AU car makers in trouble; NZ$1 = US$0.814 TWI = 76.7

24th May 13, 8:48am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news global stock markets fell overnight after weak Chinese economic data and concerns that the US Federal Reserve may scale back monetary stimulus efforts, as we reported yesterday

But Japan spooked the markets first, with rising concerns about its new monetary and fiscal policy directions.

China’s manufacturing contracted in May for the first time in seven months, adding to signs that Chinese economic growth is losing steam for a second straight quarter.

But the number of Americans who filed new claims for unemployment benefits fell last week, pointing to resilience in the US labour market.

The improving employment picture is helping to prop up housing, with rising home prices, and raising car sales, keeping domestic consumption supported, and limiting the drag from tighter US fiscal policy .

US stocks are bucking the international trend, holding on to their recent highs in mid-day trade, buoyed somewhat by the unexpectedly good results out of Hewlett Packard.

From Australia, yesterday's announcement by Ford of a shutdown in car manufacturing there has pressed both political parties to restate their commitment to local car manufacturing, something neither has done yet due to the high levels of subsidies required by the taxpayer.

Holden may be next without it, making Toyota's position unsustainable.

From Hong Kong there are reports this morning of Australian skimmed milk being withdrawn due to alleged contamination or spoilage.

The manufacturer denies any issues, but it highlights the food safety concerns Asian consumers have especially around milk.

The NZ dollar starts today higher at 81.4 USc, 83.6 AUc, and our TWI now stands at 76.7.

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14 Comments

by Wolly | 24th May 13, 8:54am 1369342486

First Cyprus...soon pain in Spain...

http://globaleconomicanalysis.blogspot.com/2013/05/another-warning-call-for-depositors.html

by powerdownkiwi | 24th May 13, 9:31am 1369344714

Why spooked?

There was plenty of warning if you listened to the right messages.

http://www.peakprosperity.com/

http://www.zerohedge.com/news/chris-martenson-trouble-money

by Christov | 24th May 13, 9:53am 1369345984

Hamdi Ulukaya of Pura Milk may be experiencing some competetitive potholes, being fairly new to the Market there....just how to get things done ,or undone can be quite the learning curve.

by waymad | 24th May 13, 9:53am 1369346013

Chinese "data", folks. Nothing that the Central Committee can't iron out for next month's PMI.

by Andy Rodgers | 24th May 13, 10:06am 1369346791

"US Federal Reserve may scale back monetary stimulus efforts"

They say this every month and do nothing. So far in the four stages of QE, the stimulus has been increased every time. Why does any sane person think that the Fed is going to reduce their stimulus policies anytime soon. Einstein quote on insanity still applies. IMHO there is no way that Bernanke is going to cut prior to his departure in 2014. He knows that as soon as he cuts the economy will tank again.

by Stephen Hulme | 24th May 13, 11:08am 1369350521

Just in case there was any misunderstanding, the US Federal Reserve pumped in USD 40.937 billion of freshly printed credit to assuage the nerves of non believers - for the week ending 22 May 2013 - slightly more than the USD 39.116 billion sum last week - Bernanke's pedal is firmly pressed to the metal.

by Roger Witherspoon | 24th May 13, 11:22am 1369351329

This struck me as important. I thought you might like it, my ability to follow the details is a bit stretched

http://www.zerohedge.com/news/2013-05-23/bronze-swan-arrives-end-copper…

I can follow some of the details but the article seems to miss out the explanation of how money is actually made by each circuit. Fascinating though.

by Stephen Hulme | 24th May 13, 12:35pm 1369355741

Thanks Roger I had seen it.

The concept of money creation is that each rehypothecation party is able to finance position buy presenting the certificate of copper ownership in return for finance which can be used for yield enhancement - the money normally arrives from institutional money market funds - they run up to $trillions in value.

Read this article entitled: The Fed Squeezes the Shadow-Banking System - you may have to cut and paste the title into Google to read the whole thing. It gives a clearer explanation of the concept.

Thereafter click this link to view a number of background articles.

by Christov | 24th May 13, 11:42am 1369352523

Extremely inconvenient, Stephen H , when Ben aspires to exit strategies while the off ramps are barricaded by those needy Markets......and every overbridge has the Marketeers screaming with every pass ....go baby go...!

there's kicking the can, there's dead cat bounce,then there's sweet Benjamin scooping up the fataly wounded feline and taking it for another spin.

by Wolly | 24th May 13, 10:14am 1369347263

Fabulous cartoon in the Herald...so much for the housing policy.

by waymad | 24th May 13, 10:38am 1369348722

Interesting interactive graphic in Granny Herald: showing MM's across NZ 1998 to the present.

Note the sudden change in 2004. What happened?

DC/DH/BH - would be Interesting to correlate this to the usual suspects:

Interest rates on first mortgages
first-house offers from Gubmint (the $100K springs readily to mind...)
average residential DC's from say Auckland TLA's
District Scheme changes (broad-brush).

Inquiring minds and a'that.....

by powerdownkiwi | 24th May 13, 12:42pm 1369356130

http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp

Add in the average size of build. A touch of greed. Spirited bidding for 'renters' pulling first-buyer options out of the mix. Stir.

by waymad | 24th May 13, 11:40am 1369352434

AEP in the Torygraph with a typically ursine piece.

Also contains this luvverly corroboration of my 'Chinese "data" ' tag....

"Morgan Stanley has stopped relying on Chinese growth data to assess growth, using proxies such as Korean exports and Taiwan bonds.

“China is slowing hard. We are concerned that leverage is higher than reported, and banks have a huge maturity mismatch,” said Hans Redeker, the bank’s currency chief."

by Mike B | 24th May 13, 2:40pm 1369363228

Markets will be back up again next week. Just going thru volatility so the 1% can profit take. If DOW hits 16k by end of September then i will expect a crash in October (the favoured month for crashes).