Important developments today:
1. European stock markets retreat
2. U.S. industrial production posts modest growth
European stock markets retreat following German government’s debt comments. European shares dropped, falling from last week’s big gains, after German government signaled Europe’s debt crisis is unlikely to be resolved at the European Union’s meeting next week. The comment damped expectations for a quick ending to the region’s debt turmoil, which sent global stocks to their biggest week gains in two years last week. The region’s benchmark Stoxx 600 Index slumped 0.7%, after having gaining as much as 1.5% in earlier trading session. The gauged gained 2.8% last week. The euro also declined versus the dollar and yen, sliding from last week’s best performance since March 2009. Meanwhile, U.S. equities opened lower as well with the S&P 500 and Dow Jones Industrial Average sliding 1.2% and 1.3%, respectively.
U.S. industrial production posts modest growth. Industrial production grew marginally by 0.2% (m/m) in the U.S. in September, underscoring the economy’s lack of vigor in the second half of the year. Production for August was revised down for August to flat growth from 0.2% estimated previously [see chart]. Factory output was up 0.4% from August, with modest gains in production of automobiles, home appliances and business equipment, but with decreases in other consumer durables. Momentum growth (3m/3m, saar) appears to be turning upwards from 3.2% in August to 5.1% in September, indicating that the lackluster pace of growth may pick up in the last quarter. The PMI index for manufacturing in September had picked up to 51.6 (from 50.6 in August), signaling expanding activity in the industrial sector, in line with today’s report.
Among Emerging Markets...in Central and Eastern Europe, Russia's industrial output in September posted a marginal 0.8% (m/m) decline following a 1.1% (m/m) gain in August. Production activity decreased in the manufacturing sector with a 0.4% monthly drop, while output of utilities rose 4.5% over the same monthly period.