A second day of bleak German data and expectations for a cut in the IMF’s fund growth forecasts scared European assets last week as the recent spell of global financial market still persists.
Wall Street futures prices resulted to a fifth day of meagre falls in six for U.S. markets well ahead of this week’s official start of the third quarter, likely to be dominated by the possible impact of the recent surge in the dollar.
A day following German industrial orders saw its largest monthly drop since the peak of the economic global financial crisis five years ago, its industrial output figures for the month of August plummeted by 4 % which was the worst decline since 2009.
Industrial production is presently going through a frail phase, wherein one should expect weaker production for the third quarter for its entirety.
The worrying outlook saw European bourses shake lower led by a 0.8 % drop on Germany’s Dax which was heavily depicted to global growth via firms such as Volkswagen and Siemens wherein both lost 7.5 % in the last three weeks.
Madrid, London, Milan and Paris all took very sharp tumbles while the French, Italian and Spanish government bonds yields rose despite doubts regarding what a slowing Germany would mean for their more delicate economies.
It likewise fits with global apprehensions apart from the U.S. indicators of global growth all have slid sharply over the past few months as political upheaval in the Middle East, Ukraine and parts of Asia all have taken its toll.
This can be likely inferred that over the summer, there has been quite an apparent divergence in the global growth story and what is being experienced is uneven economic recovery.
Growth in the Eurozone has been put to halt while in the U.S., the labour market continues to tighten much faster than what the Fed had earlier predicted.
MSCI’s broadest index of Asia-Pacific shares that were outside Japan landed 0.4 % following a quiver between the negative and positive territory, although the higher yen meant that Tokyo’s Nikkei ended the day within the red.
The dollar’s halt also boosted in minimising the effect of weaker global growth indications on recently slumping prices of commodity.
Brent oil was at the verge of a fraction in London at $92.50 a barrel alongside growth-attuned copper whereas gold was able to hold above $1,200 per ounce after sinking to a 15-month low last week.
The Reserve Bank of Australia had earlier held on to its cash rate at a steady pace at 2.5 % at its regular policy review with its remains high in terms of its historical standards.
The Australian dollar eradicated recent gains and slid approximately 0.3 % to $0.8738 moving back towards last week’s low of 0.86.42 which was its weakest level in more than four years.
Effects on the Yen
The IMF was so close in publishing its recent growth forecast with the last set in April predicted that a global growth would strengthen by 3.6 % this year and 3.9 % by 2015 but would still be reduced back again by the end of this year.
In contrast with the much broader weakness in stocks, the mining sector got a surprising boost as Rio Tinto shares were able to jump following a rejected merger approach from its rival, Glencore to manufacture a $160 billion industry tycoon.
The European FTSE Eurofirst was down nearly 1 % after it yielded insufficient German data, while the euro dipped back below $1,26 against the dollar.
It was once thought that it was not a one-way traffic for the U.S. currency which struggles against the yen after Japan’s prime minister flagged the positives and negatives status of a weaker yen.
The Bank of Japan was boosted by the government in order to hit its 2 % inflation goal without the need of additional stimulus which resulted in an irregular session after going as high as 109.25 yen in Asia, in which the dollar was cut back at 108.56 yen ahead of U.S. trading.