Prospects Daily: Global equity market are headed for their worst quarter since 2008
Important developments today:
1. Global equity market are headed for their worst quarter since 2008.
2. Economic sentiment in Europe on downward trend.
Global equity market are headed for their worst quarter since 2008. Stock markets worldwide extended losses on Friday as reports on Chinese manufacturing and German retail sales added to concern the economy is slowing. In addition Euro zone annual consumer prices unexpectedly rose in September to 3 percent, which could exclude an interest rate cut by the European Central Bank next week.
MSCI Asia Pacific Index fell 0.8 percent, totaling a 9.4 percent this month, extending a slump this quarter to 16 percent, the steepest drop since the three months ended December 2008. Similarly, European index Stoxx 600 fell 1.5 percent by mid-day Friday. The measure has rallied 4.2 percent this week as policy makers increased efforts to contain the region’s debt crisis and U.S. jobs and growth data exceeded forecasts. The gauge is still heading for the biggest quarterly decline since 2008, having plunged 17 percent since the end of June. The index has dropped 5.1 percent in September, a fifth straight month of losses. U.S. stocks fell in early trading. Standard & Poor’s 500 Index tumbled 13 percent this quarter, poised for the biggest three-month drop since December 2008. The index is down 8.5 percent for the year.
Economic sentiment in Europe on downward trend. Not suprising, with the escalation in the eurozone’s debt situation, both business and consumer confidence in Europe is on a downward spiral. The European Commission’s Economic Sentiment Indicator showed a sharp 5-point drop in economic sentiment to 97.3 in the EU for the month of August. Germany (-5.7) and the UK (-5.6) were among the large European Union member states to record the strongest declines, showing that the ongoing problems in Europe are not contained to the periphery. At the firm level, confidence dropped as business managers assessed that their stocks were too large and that their orders (including export orders) and production levels were low. Similarly, consumer confidence was lower on account of future general economic conditions and the fear of higher levels of unemployment. Last week’s release of September’s Purchasing Managers Index for the eurozone already pointed to a contraction in both services and manufacturing activity, all of which is expected to reflect in very weak Q3 GDP growth for the eurozone.