Global stocks were sharply lower in Easter-shortened trading as fresh concerns arose about the health of eurozone economies. A disappointing auction of Spanish debt and the release of worrisome regional indicators, including gauges of manufacturing and retail sales reigmited concerns about the eurozone.
Qualms about the future of US monetary policy remained a weight on the movement of markets throughout the week as investors speculated the US Federal Reserve Board might be nearing the end of its quantitative easing measures. The price of gold, silver, and copper all fell sharply throughout the week. That drop came as traders responded to the Fed’s indication, in the release of its monthly meetings, that it would not add further monetary stimulus and could raise interest rates before 2014 should the US economic recovery warrant it.
Amid this environment the DJIA was down -1.2%, the S&P 500 was down -0.7%, the Russell 2000 was down -1.5%, the Global Dow ex-US was down -2.3%, while crude oil rose 0.3%.
The weak Spanish government bond auction on Wednesday, in which only €2.59 billion in bonds with maturities between 2015 and 2020 were sold, far below the target of €3.5 billion, contributed to concerns regarding the eurozone’s new weak-link focal point. The 10-year bond yielded 5.66%, up from 5.45% a day earlier. Spain, which already has 23% unemployment and forecasts a 1.7% economic contraction in 2012, recently announced a budget with sharp spending cuts and tax increases that could plunge it into deeper recession. Earlier demand for Spanish bonds had come largely from the country’s banks, which had borrowed inexpensively from the European Central Bank and used that liquidity to purchase Spanish government debt.
The United States and China both reported expanded manufacturing activity for March. The US Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) rose to 53.4 from 52.4 in February, the thirty-second consecutive month of US factory sector expansion. Chinese manufacturing activity also rose, for the fourth-straight month, with the Chinese government’s official PMI reading rising to 53.1 from 51.0 in February and 50.5 in January.
The US labor market continued to expand in March, with a gain of 209,000 workers. With a third consecutive gain of 200,000-plus jobs in March, the US labor market extended its longest streak of robust growth since early 2000. Further reinforcing the picture of a recovering labor market, the Labor Department reported a decline of 6,000 in first-time unemployment claims for the week ended March 31. The total of 357,000 initial claims was the lowest since April 2008.
Eurozone unemployment rose to 10.8% in March, while European retail sales fell 0.1% in February.
Markit Economics reported that the eurozone’s purchasing managers’ index for manufacturing fell to 47.7 in March, from 49.0 in February. German factory orders rose just 0.3% in February, but the country’s unemployment rate dropped to 6.7% and business confidence in Germany rose to an eight-month high in March.
Upbeat reports from the United Kingdom earlier in the week, including those of the strongest service-sector expansion in two years and a rise in optimism among business owners, were offset Thursday by a report from the Office for National Statistics that UK manufacturing activity fell by 1% in February.
Canada added 82,300 jobs in March, as its jobless rate fell to 7.2% from 7.4%.
US auto sales continue to rise. New vehicle sales rose 13% in March from a year earlier on demand for small, fuel-efficient cars. Chrysler Group reported a 34% jump in sales from a year earlier, while General Motors, Ford Motor, Toyota Motor, Nissan Motor, and Hyundai Motor all registered robust increases. Volkswagen’s year-to-date US sales are 41% ahead of last year’s figures. One reason demand is high is that, with the average car on the road now 10 years old, many consumers are ready to replace or upgrade their vehicle.
Yahoo said it would cut 2,000 jobs, 14% of its work force, in an effort to radically reshape the Internet portal and be smaller, nimbler, more profitable, and innovative.
Moody’s Investors Service lowered its credit ratings on General Electric and GE’s financing unit. Moody’s downgraded GE’s senior unsecured debt rating by one level to Aa3, the credit rating agency’s fourth-highest rating. Moody’s lowered its rating on GE Capital Corporation by two levels to A1, a notch below GE’s rating. Moody’s said the risk profiles of market-funded financial institutions such as GE Capital are higher than had been reflected.
Seed producer Monsanto reported 19% growth in its second-quarter profit, as it benefited from an early start to the US planting season and strong sales of corn seeds. The US government forecasts that farmers will plant more corn this spring than in any year since 1937.