Chinese manufacturing data adds to ongoing global concerns, commodity investors flee, and Italy tweaks its bailout laws. Here are the big stories that people in markets are talking about today.
China factory slump fans global growth fears
The weakest Chinese manufacturing data since the global financial crisis compounded losses among a range of asset classes — Australia’s dollar neared a six-year low while an index of emerging-market currencies slumped to a record. Hong Kong and Taiwan stocks entered a bear market, Indonesian equities are on the cusp of one, and developing nation stocks headed for their worst week in three years. S&P 500 futures are near flat, but that’s after the benchmark’s steepest drop in 18 months yesterday. Says one fund manager: “The whole world’s looking a little bit sad.”
Commodity investors flee
Hit hard by the commodity rout — prices are now at 13-year lows — investors are bailing in search of higher returns elsewhere. “Anything but commodities at this point,” says one BlackRock strategist. Oil was set for its longest weekly losing streak since 1986 and copper extended a rout that has sent it to the lowest price in more than six years. Aluminum, lead, nickel and zinc also dropped.
Italy takes German cue on bailout laws
Following Germany’s lead, Italy is set to put senior unsecured bank bonds in line for losses with a law that facilitates writedowns to prevent taxpayer bailouts. The move comes after the European Union introduced rules requiring that bank creditors share the losses of failing banks instead of taxpayers. Germany and Italy are among those who have to tweak their laws to remove some of the obstacles to making creditors take the hit. After the European debt crisis turned German taxpayers into bailout masters, the country tried to make sure more parties are on the hook for losses at failing institutions.
Markit’s Eurozone Manufacturing PMI came in at 52.4 today, beating expectations of 52.2. German manufacturing was the big hero, as it rose from 51.8 last month to 53.2 in this reading. That was well ahead of the 51.6 that economists expected. France, on the other hand, was weaker, with its manufacturing reading falling from 49.6 to 48.6. Anything below 50 is considered contraction.
The U.S. data docket is light today, with only the Markit U.S. Manufacturing PMI on the calendar. Economists are looking for a reading of 53.8, which would be unchanged from last month. Looking ahead a little bit: next week we get Case-Shiller home prices, new home sales, durable goods, Consumer Confidence, the Richmond Fed Manufacturing Index, and a reading of Q2 GDP.