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    Global Growth Worries Sink Equities, OIl, and US Yields

    While equity markets have gyrated for the last year completing two round trips across almost 15 percent of value, the global economic background has growth steadily worse.

    The European Commission announced today that it had reduced its 2016 estimate for growth in the European Monetary Union to 1.6 percent and for European Union to 1.8 percent.

    The estimates for each have fallen 0.3 percent in a year. In the spring of 2015 the commission was predicting 1.9 percent growth in the EMU and 2.1 percent in the EU.

    The commission has joined the U.S Federal Reserve and the International Monetary Fund indowngrading their own forecasts for economic growth this year. The outlook has turned steadily more pessimistic as the year has progressed.

    In China growth worries resurfaced with the release of government and private measures of the manufacturing sector.  The purchasing managers index  (PMI) from the China Federation of Logistics and Purchasing  fell to 50.1 in April from 50.2 in March, missing the 50.3 median forecast.  This index was below the 50 division between expansion and contractions from August last year until February.

    The Caixin China Manufacturing PMI from Markit Economics of London, came in at 49.4 in April, well under the 49.8 forecast and the March 49.7 reading.

    Stocks fell around the globe, except, oddly enough in China where government buying may have kept the Shanghai and Shenzhen exchanges above water.  

    In Japan the Nikkei 225 dropped 3.11 percent, 518.67 points to 16,146.38. The Topix lost 40.59 points, 3.03 percent to 1,299.96.  The Hang Seng in Hong Kong shed 1.85 percent to 20,676.94. The Kospi in Seoul Korea rose modestly 0.42 percent. 

    In Europe all the major exchanges lost ground. The London FTSE lost 0.90 percent to 6.185.59. The German Dax slipped 1.94 percent to 9,926.77, the French CAC 40 fell 1.59 percent and the IBEX in Spain lost 2.85 percent. 

    In the U.S. the losses were less severe but markets were uniformly negative.  The Dow lost 0.78 percent, 140.25 points to 17,750.91, the S&P 500 dropped 0.87 percent to 2,063.37 and the NASDAQ was off by 1.13 percent, 54.37 points closing at 4,763.22. 

    West Texas Intermediate the U.S crude standard plunged 2.52 percent to $43.65 as waning global economic growth anticipates less demand for crude oil. 

    Treasury yields in the U.S. dropped the most in three months with the 10-year Treasury losing 8 basis points to 1.7963 percent and the 2 year dropping 4 points to 0.7540. 

     

    Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

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