The equity markets were pulled and pushed between positive and negative territory as positive news in the US in the form of the ISM Manufacturing numbers and construction spending where offset by European debt issues and a slightly weaker Chinese PMI. In the last hour of trading, the markets fell precipitously. The S&P 500 finished the trading session down 18 to settle at 1070.
The jobless rate in the euro zone rose to its highest level for almost 12 years in April as firms laid off more staff even though the currency bloc is recovering from recession, according to the European Union’s Eurostat agency. The unemployment rate increased to 10.1% in April from 10% in March, matching a level last seen in June 1998. Economists were expecting the rate to remain atr 10. Eurostat said 25,000 people joined unemployment lines across the euro zone in April, bringing the total number of jobless to 15.9 million. Although the increase in the number of jobless people is smaller than the rise seen in March, it doesn’t bode well for the outlook for consumer spending and suggests the recovery will be gradual at best. The euro-zone economy grew just 0.2% on a quarterly basis in the first three months of the year after stalling in the final quarter of 2009.
China’s manufacturing expanded at a slower pace than estimated in May, prompting stock declines across Asia on concern growth in the world’s third-largest economy may slow. The Purchasing Managers’ Index fell to 53.9 from 55.7 in April, the Federation of Logistics and Purchasing said in an e- mailed statement today, less than the median 54.5 estimate in a Bloomberg News survey of 18 economists. A separate index released by HSBC Holdings Plc and Markit Economics fell to 52.7, the lowest level in a year.
Australia’s central bank left its benchmark interest rate unchanged and signaled it may keep borrowing costs steady in coming months as it assesses the impact of the most aggressive rate increases in the Group of 20. Governor Glenn Stevens and his policy-setting board kept the overnight cash rate target at 4.5 percent, the Reserve Bank of Australia said in a statement in Sydney today.
The BOC raised interested rates in Canada by 25 basis points to .50%. The statement was neutral which lead investors to take profit on long CAD positions.
The US manufacturing ISM held up better than expected and better than the euro zone. The US ISM slipped to 59.7 from 60.4. Orders were steady at the lofty 65.7 while production slipped slightly (66.6 from 66.9). Employment rose to 59.8 from 58.5 and this will likely encourage some economists to revise higher forecasts for the employment data due at the end of the week. Construction spending jumped 2.7% in April, the biggest rise in a decade. This time series, like other housing sector reports, have been flattered by tax incentives that are winding down. Residential outlays rose 4.5% on the month and nonresidential rose 2%. Public works outlays rose 2.4%.