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Stocks Falling Due to Eurozone Debt Crisis

Oct 3 • Between the lines • 10357 Views • Comments Off on Stocks Falling Due to Eurozone Debt Crisis

The same headline is constantly being regurgitated by the usual financial media outlets day after day, it repeats something like this; “US Stocks and the Euro fall as Greece concerns outweigh positive U.S. economic data..” Or we read something similar to the following most days of the week; “Large U.S. bank stocks fell sharply on concerns that lenders like Citigroup Inc and Morgan Stanley may face more earnings setbacks from the debt crisis in Europe.”

The constant inference appears to be that the SPX and the Dow Jones stock indices are falling due to the Eurozone debt crisis and not due to the mess the USA is in and has been since 2007-2008. “Oh look, our economic indicators are healthy, if only those pesky Europeans could get their act together.” Sure and..”If only that trinity and axis of unholy financial evil that was Northern Rock, Halifax Bank of Scotland and Cheltenham and Gloucester hadn’t invented the subprime mortgage securitisation business, causing Lehman to collapse, we’d all be living in €1 million houses with $300K mortgages.”

Perhaps it’s time for the headline writers in the USA mainstream media to join up the following words; houses, glass, in, people, living, bricks, throw, shouldn’t..

As America officially closes its books on the 2010-2011 fiscal year the final trading day of the year saw the settlement of all the outstanding and recently auctioned off debt. Like families splurging their last pay cheque of the year on an Xmas blow-out there was a final intoxicated surge of $95 billion in total government debt overnight, the result being a closing ‘balance’ of the USA being circa $14.8 trillion in debt. During the past fiscal year, the US has issued a total of $1.228 trillion in new debt. At a rate of $125 billion per month US debt to GDP will pass 100% inside a month. The US economy added over 3$ trillion in debt during the past two years and the stock market is almost back to 2009 levels. All that effort, all that money, all that fresh debt and dollar debasement (to be covertly dumped on the masses) and the end result? Zero growth, nada. Yep, it’s all the fault of those Europeans..or could it be the Chinese..?

The US Senate voted on Monday evening to push forward legislation designed to press China to let its yuan currency rise in value, creating a debate between lawmakers who say the bill will create jobs and critics who warn it could initiate a trade war. Over sixty senators voted to allow debate on the bipartisan Currency Exchange Rate Oversight Reform Act of 2011, which would allow the U.S. government to place countervailing duties on products from countries found to be (in the opinion of the USA) subsidising their exports by undervaluing their currencies. In short countries and economies who don’t do what the USA admin demands are wrong, period.

Manufacturing in the USA grew in September as production and hiring increased. Other data news for the struggling U.S. recovery indicated strong demand for new motor vehicles, construction spending unexpectedly rebounded in August. September marked a 26th straight month of expansion. The Institute for Supply Management said its index of national factory activity rose to 51.6 last month from 50.6 in August, boosted by a rebound in production and increased factory hiring. However, new orders fell for a third straight month suggesting that the underlying conditions are flat.


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Despite the USA optimism the Global Manufacturing PMI, compiled by JPMorgan with research and supply organisations, fell in September to 49.9 from 50.2 in August. This is the first time since June 2009 that the index has fallen below the 50 mark that divides growth from contraction. Markit’s Eurozone Manufacturing Purchasing Managers Index (PMI) which gauges changes in the activity of thousands of factories in the countries that share the euro, fell to a final reading of 48.5 in September from 49.0 in August. It is the second consecutive month the manufacturing PMI has been below the 50 mark that divides contraction from growth.

As it closed 2.36% down for the day the SPX turned a significant corner by finally moving into negative territory year on year now 1.61% down YoY. It has fallen circa twenty percent since early May, a crash in anybody’s language. European indices fared just as badly, the STOXX closed down 1.9%, the FTSE closed down 1.03%, the CAC closed down 1.85% and the DAX down 2.28%. Brent crude lost circa 1% and gold advanced by circa $4 an ounce. The UK FTSE future equity index is suggesting a sharp fall at London open, the daily future is currently down circa 90 points or 1.76%. Similarly the SPX future is down forty points. The Hang Seng and Nikkei are currently down by circa 1.6% and 1.75% respectively. Having stabilised earlier in the day the euro contented its slide and is currently flat.

Daily economic indicators for the London and European open to be aware of include the following;

09:30 UK – PMI Construction September
10:00 Eurozone – Producer Price Index August

Notwithstanding the macro events the UK construction figures for September could prove to be relevant. Economists polled by Bloomberg gave a median forecast of 51.6, compared with August’s figure of 52.6. The Euro producer price index may affect sentiment, A survey of analysts compiled by Bloomberg shows a predicted month-on-month change of -0.20%, compared with the 0.50% that was reported in last month’s release. The same survey gave a median forecast of 5.80% year-on-year (the previous month’s annualised rate was 6.10%).

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