Financial Market Review August 27, 2012

Today, all the Asian markets are trading in the red except Nikkei, which is up 0.3%. Shanghai is trading lower by 1.1% while Kospi is down 0.3%. Taiwan, Strait Times and Hang Seng are down by 0.1% each

China’s stocks fell, dragging down the benchmark index to the lowest level since March 2009, after companies from Maanshan Iron & Steel Co. to Shanxi Coal International Energy Group Co. reported weaker earnings. China manufacturing PMI for August fell to a nine-month low of 47.8 dropping from July’s final print of 49.3. This morning, a regional report in China showed a drop in profits and income for manufacturing also.

China’s Premier Wen Jiabao urged extra measures to support exports and help meet economic targets as a decline in industrial companies’ profits added to evidence that the nation’s slowdown is deepening.

South Korean consumer confidence dropped to the lowest level in seven months as Europe’s debt crisis and a slowdown in China dragged on exports.  Chinese industrial companies’ profits fell 5.4 percent in July from a year earlier to 366.8 billion yuan, the National Bureau of Statistics said in a report on its website today, compared with a 1.7 percent decline in June.

Singapore will need to raise taxes in the next two decades as the government boosts social spending to support an aging population, Prime Minister Lee Hsien Loong said as he proposed measures to boost the country’s birth rate.

Australia’s dollar declined, touching the lowest level this month, after Reserve Bank of Australia Governor Glenn Stevens said the currency would probably fall if the nation’s mining boom were to collapse. The so-called Aussie slid to a six-week low against its New Zealand counterpart as Asian stocks declined, sapping demand for higher-yielding assets.

Wall Street ended the week on a high note, as investors hope that the central bank will step in with stimulus measures to fuel growth. The Dow added 0.8%, S&P 500 gained 0.7% and Nasdaq rose 0.5% on Friday. Analysts said investors were reacting to a letter sent by Federal Reserve Chairman Ben Bernanke to the chairman of the House oversight committee, Rep. Darrell Issa that said the central bank has more room to support the economy.

In the United States, trading volume has been light for weeks, which is typical in August. Most expect that trend to continue through Labor Day. 

Spending by U.S. consumers probably climbed in July by the most in five months, easing concern the biggest part of the economy is backsliding, economists said before a report this week.

European shares rose on Thursday, with upgraded Dutch brewer Heineken among the top performers, as hints of new stimulus measures from the U.S. Federal Reserve outweighed worries over the euro zone debt crisis. Britain’s FTSE 100 closed slightly higher, while DAX in Germany ticked down almost 1% and France’s CAC 40 slid 0.8%.

The Euro snapped four days of gains against the US Dollar after the European Central Bank’s plan to buy government bonds was said to be held up until a German court rules on Europe’s permanent bailout fund.

Chancellor Angela Merkel told officials in her coalition calling for a Greek exit from the euro to “weigh their words,” as she signaled a renewed determination to keep the single currency intact. Spanish Prime Minister Mariano Rajoy’s austerity drive will intensify this week as a sales-tax increase tightens the squeeze on consumers whose spending is already plummeting.



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