Equity markets where hammered as disappointing macro economic data in the US trumped positive UK data, strong earnings and Intel’s bid for MacAfee. The equity markets began to slide early in the session after the US Jobless Claims, and continued to deteriorate throughout the trading day. The S&P 500 Index closed down 18 points to 1075.
Initial unemployment claims rose by 12,000 to 500,000 in the week ended Aug. 14, the Labor Department said in its weekly report Thursday. It was the highest level since Nov. 14, when claims stood at 509,000. The four-week moving average, which aims to smooth volatility in the data, rose by 8,000 to 482,500. It was the highest level since December 2009. The number of continuing claims—those drawn by workers for more than one week—fell by 13,000 to 4.5 million in the week ended Aug. 7. Additionally, The Federal Reserve Bank of Philadelphia’s regional business survey plummeted and an index of leading indicators increased a slight 0.1% last month after falling a revised 0.3% in June, according to the Conference Board. The Philadelphia Fed manufacturing index fell to -7.7 in August compared with 5.1 in July. Signs of weakness in manufacturing are concerning because it’s one of the few sectors of the economy that has continued to show strength—and to add jobs.
Meanwhile, the Bundesbank, which in its monthly bulletin announced a higher German growth forecast for 2010 of 3% vs. 1.9% previously. This shouldn’t be too surprising in the wake of strong Q2 GDP report, and many in the market believe that the German economy has already seen its best days this year. Indeed, the Bundesbank noted that while positive external factors behind stellar Q2 growth may “moderate” in H2, it expects domestic demand to improve and pick up some of the slack. The Bundesbank also said that it expects “a continuation of moderate upward price developments.”
The Sankei newspaper reported that the BOJ would increase the amount of its corporate loan program. The yen dip was also reinforced by figures showing Japanese investors bought more foreign bonds last week than at any time since the Ministry of Finance began collecting the data in 2002. Japan newswire quotes a senior Japan official saying the administration should not intervene in FX markets now, but that it remains an option if the yen strengthens further.
The Office for National Statistics said the volume of retail sales rose 1.1% from June and was 1.3% higher than in July last year—the strongest monthly gain since February. Although food sales were weak, sales overall were boosted by spending related to the World Cup soccer tournament and sales of sports equipment, games, watches and jewelry, according to the ONS.