Tuesday Morning Cheat Sheet: 3 Stories Moving Markets
The markets closed lower in Asia on Tuesday. Japan’s Nikkei index slid for a third consecutive day. The yen traded as high as 95.67 to the dollar, but weakened to 97.7950 ahead of New York’s opening bell. In Hong Kong, the Hang Seng index declined 0.46 percent, while in Australia the S&P/ASX 200 declined 0.34 percent.
The bad mojo made its way to Europe and by mid-day trading major markets were mired in negative territory. Germany’s DAX was off 0.37 percent, London’s FTSE was off 0.49 percent, while the STOXX 50 index was off 0.51 percent.
U.S. futures at 8:55 a.m.: DJIA: +0.99%, S&P 500: +0.88%, NASDAQ: +0.94%.
Here are three stories to keep an eye on:
1) Expect Slower Growth in China: Slow growth is a relative term for the Chinese economy, but recent economic indicators, analyst commentary, and official guidance suggest that the pace of growth in the world’s second-largest economy is finding a new normal. The nation’s new government has targeted an annual GDP growth rate of 7.5 percent, which it intends to maintain through 2020 as it seeks to double per-capita income over the course of the decade.
Data released on Monday morning by the Chinese government suggests that the nation’s economy didn’t grow as fast in the first quarter of 2013 as analysts were expecting. First-quarter gross domestic product increased 1.6 percent on the quarter and 7.7 percent on the year. This compares against expectations for 8.0 percent year-over-year growth. This downside surprise is likely the result of lower-than-expected industrial production, which grew 8.9 percent year over year instead of the 10 percent anticipated.
As a result of these data, many analysts are downwardly-revising their 2013 forecasts for the country.
2) Gold and Silver Reach New Multi-Year Lows: On Monday, gold futures for June delivery, the most active contract, plunged $140.30 to close at $1,361.10 per ounce, while silver futures for May dropped $2.97 to finish at $23.36. Gold futures suffered their biggest one-day percentage drop since early 1980, and the largest fall in dollar terms on record. It was gold’s lowest close since February 2011, while silver reached levels not seen since October 2010. Over the past two days, gold has declined 13 percent, while silver is down almost 16 percent.
Many reasons are being blamed for the sell-off, but panic selling appears to be the most likely. Once the waterfall of liquidation begins, it takes time to play out and find true support. Margins being increased on accounts as volatility rises is also adding to the liquidation process.
Gold rebounded slightly on Tuesday morning, climbing to $1,386.00 per ounce.
3) The U.K.’s Inflation Rate Could Hit 3 Percent This Year: The U.K.’s Office for National Statistics reported on Tuesday that the Consumer Prices Index increased by 2.8 percent in March. This is in line with February’s rate, and just 0.1 points above the average annual rate of 2.7 percent over the past six months.
The contributions to change in the CPI rate from the various detailed categories were small compared with most months. The largest upward contribution came from the recreation & culture sector where there were price rises for audio-visual equipment and books, newspapers & stationery. The largest downward contributions came from furniture & furnishings, motor fuels, and meat.
CPIH, the new measure of consumer price inflation including owner occupiers’ housing costs, grew by 2.6 percent in the year to March, unchanged from February.
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