Global stock markets were barraged with worries from all sides yesterday.
From Asia it was that China’s economic slowdown continues. Although its PMI index ticked up in April it remained under 50 for the 6th straight month, indicating contraction.
Meanwhile 63% of Chinese companies that have reported 1st quarter earnings so far, have reported declining profits or outright losses as a result of slowing economic growth.
From Europe it was that the PMI Manufacturing Index of the 17-nation euro-zone contracted at a faster pace than forecasts in April, falling from 47.7 in March to 46.0 in April, its lowest level in 34 months, and versus the consensus forecast of an improvement to 48.1. The Services PMI fell from 49.2 in March to 47.9 in April, a five-month low, and defying the consensus forecast of an improvement to 49.3.
And the euro-zone debt crisis is facing new problems.
It was bad enough that the crisis seems to be spreading to Spain, but now the Dutch government has fallen, its Prime Minister becoming the latest to be forced to resign when he could not win enough support for austerity measures aimed at cutting the country’s budget deficit. It follows the collapse of the governments of Greece and Italy, and the resignations last winter of their Prime Ministers, over similar failures to win support for the German-led austerity measures demanded by the IMF and ECB.
And now worries are rising about the election this month in Greece to replace its interim government. Indications are that the election may be so divided that it will result in political instability that will put the latest bailout plan for Greece in jeopardy. Opposition leaders had already warned they may demand a re-negotiation of the terms of the bailout agreement if they win the election.
And the outlook for the presidential election in France is also raising concerns that France’s agreement to German-led austerity measures for the 17-nation eurozone may be in jeopardy.
The Short-term Pattern Continues to Work Out.
Three weeks ago the market reacted in its usual historical pattern to a surprise in the jobs report. That is for an initial one to two-day triple-digit move by the Dow in one direction or the other, that is usually followed by a reversal of the move over the subsequent day or two.
And the typical pattern around options expirations worked out, the week before the expirations week (two weeks ago) tending to be down, and then the week of the expirations, which was last week, tending to be positive.
And now we have the week after the expirations, which tends to be negative, down so far anyway.
Market charts & indicators are interesting, globally and in the U.S.
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Subscribers to Street Smart Report: There is a hotline from Friday night, and the new issue of the newsletter will be out tomorrow. There is also an in-depth ‘Global Markets’ update from last Tuesday in the subscribers’ area of the Street Smart Report website. , versus the consensus forecast that it would be up 0.3%.