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U.S. Weekly Financial Notes: Soft Patch Or Quicksand?

Publication date: 05-Aug-2011 15:31:17 EST

Despite agreeing to raise the U.S. debt ceiling by at least $2.1 trillion during the next decade and cut spending by at least the same amount, politicians could not satisfy markets spooked by poor economic data. After panic fueled a global market sell-off, not even the better-than-expected Bureau of Labor Statistics (BLS) employment data, showing nonfarm payrolls rising 117,000 in July with upward revisions to May and June figures and the unemployment rate falling to 9.1%, could calm markets suspecting a snowballing crisis. Other economic releases this week include:

  • The Institute for Supply Management (ISM) manufacturing index fell to its lowest point in two years to 50.9 in July after rising to 55.3 in June.
  • The ISM nonmanufacturing index fell to 52.7 in July from 53.3 in June.
  • U.S. construction spending increased 0.2% in June, while May was upwardly revised to a 0.3% gain and April was revised to a 0.7% increase after both were previously down 0.6%.
  • Personal income rose 0.1% in June, while consumer spending fell 0.2%. The saving rate rose to 5.4% in June from 5.0% in May.
  • The Automatic Data Processing private payrolls survey reported 114,000 new jobs in July after revising June's jobs gains to 145,000 from 157,000 previously reported.
  • Vehicle sales in the U.S. rose 16% over last year to 12.2 million annualized units in July.
  • U.S. factory orders fell 0.8% over May after a downwardly revised 0.6% increase in May from the previously reported 0.7% gain.
  • Initial jobless claims fell 1,000 to 400,000 in the week ended July 30, after the prior week was revised to 401,000 from 398,000. Continuing claims rose 10,000 to 3.73 million in the week ended July 23 after the prior week was revised to 3.72 million from 3.703 million.
  • U.S. consumer credit surged $15.5 billion in June.
  • Oil prices sank to under $86/barrel on Friday afternoon from the prior week's $96/barrel.

Not Good Enough

Trying to get the nonfarm payrolls report off the BLS web site felt like the time I tried to get tickets to a Rolling Stones in 2006. Both events had huge demand. At least the BLS report didn't disappoint this time. The 117,000-job gain in July came just as people started falling into despair that the double-dip is around the corner. The reading was stronger than the 90,000 the markets expected, and followed an upward revision in June to 46,000 jobs gained (was up 18,000). The May gain was also upwardly revised to 53,000 new jobs from 25,000, before bringing it back near the BLS's original figure of 54,000 gains. The unemployment rate fell to 9.1% from 9.2% in June, though it remains stubbornly high. Total nonfarm payroll employment is now up 1.35 million during the past 12 months, and private employment is up 1.81 million --about 151,000 new jobs per month. While the news is positive, the overall weight of the bad economic data in recent weeks has made me push the risk of the double-dip up to 35% from the 30% rate I expected in June. Markets also remained worried, with wild stock markets on Friday, despite the stronger-than-expected jobs report.

The major negative factor continues to be government jobs, with a 16,000 drop in local employment, including a loss of 12,200 education jobs and a 23,000 drop in state employment, as states and municipalities continued to downsize as they tried to balance their budgets. We expect job losses in this sector to continue. The big impact is likely to come in the fall with the start of a new school year. Federal employment, excluding postal jobs, rose 2,000, while postal jobs lost only 400 jobs. The improvement in the private sector was the highlight in the report. Businesses added 154,000 new jobs to the payrolls in July, which is stronger than the ADP private payrolls reading of 114,000. Manufacturing gained 24,000 jobs, with a boost from vehicle manufacturing, gaining 12,000 jobs after losing 3,500 jobs in May, as Japan-related supply disruptions on the sector are finally starting to ease. Manufacturing gained 180,000 jobs from last July. Construction gained just 8,000 jobs in July, and it's up only 43,000 from a year earlier. Private-service producing jobs were up a healthy 112,000, led by a gain of 36,700 in health care and social services, as apparently people got sick from looking at all the bad news, gaining 346,600 jobs from last July. Education gained 1,600 jobs and was up 35,500 from a year ago. Professional and business services gained 34,000 jobs on 17,000 gains in professional and technical services and 13,300 jobs in administrative and waste services. Temporary hires were up by just 300 jobs; however, this figure is still up 132,300 over last year's, suggesting that the switch from temporary to permanent hires is underway.

The unemployment rate fell 0.1% to 9.1% in July, as the labor force fell 193,000 and household employment lost only 38,000 jobs. Household employment is up 250,000 during the past 12 months, less than payrolls, in a sharp correction for the divergence early in the recovery. The unemployment rate is now is 1.0% below its October 2009 peak. The unemployment rate for high school dropouts rose 0.7% to 15.0%--good news but still reflects continued scant demand for low-skilled jobs. By contrast, the rate for college graduates fell 0.1% points to 4.3% in July. The long-term unemployed remain unemployed, with the number of people unemployed longer than 26 weeks fell in July by 104,000 to 6.185 million--44.4% of the total unemployed.

Weekly hours were unchanged at 34.4. Hourly wage and salary payments jumped 10 cents, or 0.4% to $23.13. They have increased by 2.3% compared with July 2010 numbers. It gives people a little more money to spend, though gives the Fed less room to remain on easy street.

Less Money At The Gas Pump... Maybe A Little More At The Mall

Consumer spending fell and personal income barely rose in June. People are worried about their jobs and Washington's gridlock didn't help. So nobody spent. Personal income was up just 0.1% in June, with half of increase from higher government payments for social programs such as unemployment compensation. The weighty Wage and Salary component was flat. Disposable income also edged up 0.1% in June from a 0.2% gain in May (revised from 0.3%). Consumers have reacted by spending less and saving more. The saving rate increased to 5.4% in June from 5.0% in May. On a month-over-month basis, consumer spending dropped 0.2% in June, the first drop in nearly two years. The only good news in June was the drop in gasoline prices. When consumer spending was adjusted for inflation, it was actually flat. Finally, people had some more money to spend after they filled up their cars with gas. Now they just need to spend it.

July did see something of a turnaround, though still nothing spectacular. Sales at major retail chains rose 4.6% from last July, according to the compilation by the International Council of Shopping Centers, though were down 2.5% from the robust June sales (up 6.9% over last June). None of the sectors saw declines, though there was a slowdown in wholesale clubs, department stores, and drug stores. Apparel saw a sharp deceleration to 1.4% gain over last year after jumping 5.5% in June, which increases worries that back-to-school shopping will be less than stellar. Sales of light motor vehicles rose 6% over June, to a 12.2 million annual rate in July (11.5 million in June). Sales are up 16.0% from a year earlier. Chrysler, GM, and Ford led the increase, up 20%, 7.7%, and 8.7%, respectively, over June 2010. Honda and Toyota sales continued to disappoint, down 28.4% and 22.7%, respectively, and supply disruptions, due to the earthquake in Japan, likely continue to dent production.

Not Now, Uncle Sam!

Just as I expected, Congress waited to the 11th hour before it stopped the U.S. government from defaulting on its debt. On Monday, congressional leaders reached a deal on a plan that will raise the debt ceiling by over $2 trillion and support federal borrowing into the next election. At least the bulk of the putative cuts in the deal are so far in the future that their contractionary effects are likely to be small. The deal will cut some federal spending now, but all the tough decisions on tax and entitlement reform have now been put off for several months. Given how partisan debt ceiling talks were, the division will likely be just as severe as the elections approach and more pressing decisions need to be made. At least the law doesn't give the decision makers any room to stall. It included a trigger mechanism that will force automatic cuts if they can't reach a compromise.

However, the deal rules out further fiscal stimulus now, and certainly a problem for us if the economy stumbles, even more than it already has. There may be an eventual decision by Congress to extend the 2011 payroll tax cut through 2012. But with the deficit reduction package that accompanied the last minute deal to raise the debt ceiling showing that a move towards fiscal consolidation is well underway, GDP growth will remain low and the unemployment rate will remain high in 2012 too.

The question now is whether Uncle Ben and the Fed can help, when Uncle Sam won't? Our worry is that they can't do much. They will likely keep rates at near zero into 2013 and even consider another round of quantitative easing. In the near term, they may open the books for a cut to the 0.25% interest on excess reserve (IOER) rate, to give banks incentive to send money elsewhere. Unfortunately, they will be fighting the sharp economic slowdown with a slingshot when they need a gun.

Financial Market Highlights

Below are the financial market highlights for the week ending Aug. 5, 2011.

Treasury yield curve

The 10-year Treasury yield dropped sharply this week to 2.47% on Friday (early afternoon) from 2.86% the previous week as recession fears compelled investors to flee riskier assets like stocks and seek safety in U.S. government debt. The rate on three-month Treasury bills remained stable at 6 basis points (bps) this week. The two-to-10-year spread slipped 24 bps to 234 bps over the week and was 7 bps below than a year ago. The 10-year Treasury spread above inflation-protected bonds (TIPS), a measure of inflation expectations, slipped 4 bps over the past week to 170 bps and is 47 bps above the level of a year ago.

Table 1

Treasury Yield Curve (Constant Maturities)
--Change over--
(%) Current level One week Four weeks 13 weeks One year
Three-month 0.06 (0.00) 0.04 0.03 (0.10)
Six-month 0.12 0.01 0.04 0.03 (0.08)
One-year 0.17 (0.03) (0.02) (0.03) (0.10)
Two-year 0.33 (0.08) (0.13) (0.27) (0.21)
Five-year 1.25 (0.28) (0.47) (0.69) (0.34)
10-year 2.67 (0.33) (0.50) (0.60) (0.29)
30-year 3.94 (0.34) (0.44) (0.40) (0.10)
Inflation Indexed Treasury (LT) 0.97 (0.29) (0.50) (0.47) (0.76)

Credit markets

Risk aversion heightened this week on debt ceiling worries. The equity market volatility index (VIX), a measure of the market's uncertainty, rose to 31.66 this week from 23.74 the previous week, to the highest level in 13 months, surpassing the peak hit in March after Japan's earthquake disaster and nuclear crisis, as investors worried about the state of the U.S. economy and the European debt crisis. The T-bill-to-Eurodollar (TED) spread, a measure of banks' willingness to lend, rose 1 bp to 20 bps this week, but it was down 8 bps from a year ago. Fixed mortgage rates dropped to its lowest level in eight months to 4.39% over the past week amid concern that the economic recovery in the U.S. is showing signs of faltering. The 30-year mortgage rate remains well above the November 2009 all-time low of 4.17%. Mortgage applications increased to 7.1% during the week ended July 29, following a rise of 5% the previous week. The refinancing index gained by 7.8%, following a 5.5% rise the previous week. The purchase index increased 5.2% this week, following a decline of 3.8% the previous week.

Table 2

U.S. Credit Spreads
--Change over (%)--
Current level One week Four weeks 13 weeks One year
Money market
Three-month euro 0.26 0.01 0.02 (0.01) (0.17)
90-day corporate paper 0.19 0.08 0.04 0.03 (0.07)
Three-month CD 0.33 0.10 0.07 0.11 (0.02)
Swap rates
One-year 0.45 0.01 0.05 0.07 (0.04)
Two-year 0.59 (0.04) (0.12) (0.18) (0.14)
Five-year 1.57 (0.21) (0.44) (0.56) (0.21)
10-year 2.83 (0.24) (0.45) (0.50) (0.08)
30-year 3.71 (0.24) (0.38) (0.40) (0.04)
Other key interest rates
Prime rate 3.25 0.00 0.00 0.00 0.00
15-year mortgage 3.54 (0.12) (0.21) (0.35) (0.41)
30-year mortgage 4.39 (0.16) (0.21) (0.32) (0.10)
Volatility markets
VIX equity market volatility 25.75 4.98 9.69 9.20 3.26
Swaption two-10 year 30.94 2.18 4.18 5.32 3.26
Liquidity spreads (bps)
Three-month eurodollar to three-month Treasury 20.30 18.89 22.58 23.63 27.91
10-year swaps to 10-year Treasury 15.55 6.80 10.75 5.60 (5.40)
bps--Basis points.
Fed policy and interest rate outlook

The Federal Open Market Committee (FOMC) maintained the federal funds rate at a record low of 0%-0.25% at its June 21-22 meeting, reiterating the "extended period" language in its statement. The statement mentioned that the economic recovery is progressing at "a moderate pace," even though that pace is slower "than the Committee had expected." However, temporary factors are partially responsible for the slowdown, and the Fed expects the pace of the recovery to increase in the second half of this year. The Federal Reserve also released its new economic projections, which were weaker than the April forecasts. The Fed cut the "central tendency" projection of 2011 GDP growth to 2.7%-2.9% from 3.1%-3.3% in January, with the core consumer deflator forecast up 1.5%-1.8% (from 1.3%-1.6%). Federal Reserve Chairman Ben Bernanke stated that the Fed expects the unemployment rate to fall to the 7.0%-7.5% range by fourth-quarter 2013. The minutes of the meeting mentioned that members discussed specific "exit strategy principles" and further monetary stimulus. In his semiannual congressional testimony on July 13, Ben Bernanke said that the recent economic weakness was due in part to high energy costs and supply chain disruptions from the Japan crisis. He added that the Fed remains "prepared to respond" if stimulus is needed. The Beige Book compendium of reports from the 12 Federal Reserve district banks (released July 27) indicated that the soft patch in the economy has continued, with six of the central bank's 12 districts reporting a slowdown in activity since the previous report, as consumers remain hesitant to spend in light of high gasoline prices and rising unemployment.

Table 3

Fed Policy And Interest Rate Outlook
--Change over--
(%) Current level One week Four weeks 13 weeks One year
Funds target 0.25 0.00 0.00 0.00 0.00
Effective 0.14 0.07 0.07 0.05 (0.05)

Table 4

Fed Funds Futures Contracts (Yield)
--Change over (%)--
Federal Open Market Committee meeting date Contract month Current level (%) One week Four weeks 13 weeks
Aug. 9 Aug-11 0.10 0.03 (0.01) (0.04)
Sept. 20 Sep-11 0.11 0.02 (0.02) (0.04)
Oct-11 0.12 0.01 (0.02) (0.04)
Nov. 1/2 Nov-11 0.13 (0.00) (0.03) (0.06)
Dec. 13 Dec-11 0.13 (0.01) (0.04) (0.03)
Jan. 24/25 Jan-12 0.14 (0.01) (0.04) (0.05)

Table 5

Euro Dollar Futures Curve
--Change over--
(%) Current level One week Four weeks 13 weeks
Aug-11 0.26 0.05 (0.01) (0.01)
Sep-11 0.29 0.04 (0.01) 0.01
Oct-11 0.32 0.03 0.00 0.02
Nov-11 0.40 0.08 0.02 0.05
Dec-11 0.40 (0.00) 0.04 0.02
Jan-12 0.40 0.01 0.02 0.00
Global interest rates

Government long-term bond yields were largely up this week. Most one-year LIBOR rates held constant. Key central banks have finished loosening rates, and the European Central Bank (ECB) was the first major bank to tighten. Recent trends include:

  • The European Central Bank (ECB) held its benchmark refinancing rate at 1.5% on August 4. ECB President Jean Claude Trichet repeated that the ECB is determined to anchor inflation expectations and that the economy shows positive underlying momentum. He gave no indication that the ECB would hold off from further rate hikes, saying that policy is still "accommodative".
  • The Bank of England held its bank rate at 0.5% at its August 4 meeting after weaker-than-expected GDP data reaffirmed a weak economic recovery. This kept policymakers focused on boosting economic growth despite a rise in inflation, as the current economic recovery is too fragile to support a rate hike at this stage.
  • The Bank of Japan left its ultra-loose monetary policy steady at a range of 0.0% to 0.1% in its August 4 monetary policy meeting. The Board also decided to expand the asset program by ¥5 trillion - ¥15 trillion in order to put the economy back on the growth track and to support the government's effort to curb gains in the domestic currency.
  • The U.S. Federal Reserve left the federal funds rate steady at 0%-0.25% at its June 21-22 meeting. It reiterated that the economic recovery is continuing at "a moderate pace", but was slower "than the Committee had expected."
  • The People's Bank of China raised its benchmark interest rate by 25 bps to 3.5% on July 6, its third rate hike this year, in order to rein in high inflation. The move comes despite recent fears of an economic slowdown in the country, indicating that taming inflationary pressures remains a top priority for the bank.
  • The Bank of Canada maintained its target overnight rate at 1% on July 19, as the economic recovery is proceeding largely as anticipated and inflation expectations remain well anchored. The bank issued a statement hinting more strongly than before that it would resume hiking rates as soon as it sees the sturdy domestic economy contrast with global rising risks.
  • The Norges Bank held the deposit rate steady at 2.25% during its meeting on June 22.
  • Sweden's Riksbank raised its seven-day repo rate by 0.25%-2% on July 5, its seventh hike in a year, to contain high inflation.
  • The Swiss National Bank cut its interest rate target band to 0.00%-0.25% from 0.00%-0.75% in order to stem the rapid rise of the Swiss franc.
  • Poland's central bank left its seven-day reference rate at 4.50% on July 6.
  • The Reserve Bank of Australia left its interest rate unchanged at 4.75% for the 10th consecutive month in light of uncertainty in global financial markets due to weak U.S. data and the eurozone debt crisis.
  • The Reserve Bank of New Zealand left its key rate unchanged at 2.5% on July 27, but signaled that it will raise its rates sooner than expected to contain rising inflation as the nation's economy rebounds from the country's deadliest earthquake in 80 years.
  • South Korea's central bank left its key interest rate unchanged at 3.25% in its July 13 monetary policy meeting due to rising uncertainty on the global economic recovery, including the eurozone debt crisis.
  • The Bank of Thailand increased its benchmark overnight rate to 3.25% on July 13 and signaled further tightening is likely, to tame inflationary pressures, as a new government moves to boost growth and increase wages.
  • The Reserve Bank of India raised its lending rate or repo rate by 50 bps to 8% from 7.5% to rein in persistently high inflation, despite signs of an economic slowdown in the country.

Table 6

Global Interest Rates
--Change over--
(%) Current level One week Four weeks 13 weeks One year
12-month LIBOR rates
U.S. 0.76 0.01 0.03 0.01 (0.26)
Canada 1.84 (0.01) (0.02) (0.08) (0.07)
Europe 2.16 (0.01) 0.01 0.05 0.77
U.K. 1.59 0.00 0.01 0.01 0.11
Swiss 0.51 (0.02) (0.02) (0.04) 0.01
Japan 0.56 (0.00) (0.00) (0.00) (0.11)
Aussie 5.39 (0.02) (0.09) (0.21) (0.20)
10-year bond yields
U.S. 2.67 (0.33) (0.50) (0.60) (0.29)
Canada 2.69 (0.23) (0.39) (0.59) (0.29)
Europe 2.44 (0.29) (0.56) (0.79) (0.19)
U.K. 2.87 (0.23) (0.45) (0.55) (0.52)
Swiss 1.36 (0.17) (0.36) (0.70) (0.15)
Japan 1.07 (0.04) (0.11) (0.15) 0.04
Aussie 4.75 (0.18) (0.47) (0.67) (0.44)
Foreign exchange rates

The dollar was mixed this week against all the major currencies as a sharp drop in risk sentiment on concerns over global growth and eurozone debt contagion kept safe-haven currencies in demand. Early Friday afternoon, the euro dropped to $1.418 from $1.439 last week as investors were surprised by the ECB's move to broaden its liquidity operations as it revived its bond buying program in the secondary market by purchasing Portuguese and Irish bonds. The yen dropped to ¥78.55 per dollar from ¥77.03 per dollar a week ago, after both the Japanese government and the central bank intervened heavily in the currency market to stem the rise of its currency. The U.S. trade gap widened sharply in May to $50.2 billion, the highest since October 2008, as high oil prices helped push imports up 2.6% to $225.1 billion, the highest since July 2008. U.S. exports slipped 0.5% from the previous month to $174.9 billion.

Table 7

Foreign Exchange Rates (Spot)
--Change over (%)--
Current level One week Four weeks 13 weeks One year
TWI (broad) 94.20 (0.02) (0.87) (0.17) (7.41)
TWI (major) 68.53 (0.20) (1.50) 0.05 (8.56)
TWI (OITP) 122.22 0.13 (0.32) (0.37) (6.44)
US$-Mexican pesos 12.05 2.92 4.43 2.76 (4.07)
US$-C$ 0.98 3.39 2.38 1.51 (3.47)
€-US$ 1.41 (1.69) (1.89) (3.07) 6.85
£-US$ 1.63 (0.71) 1.78 (0.80) 2.27
US$-Swiss francs 0.76 (4.77) (9.63) (12.36) (27.06)
US$-¥ 78.89 1.57 (2.90) (1.47) (8.08)
A$-US$ 1.05 (4.90) (2.90) (1.09) 14.22
Commodity price indices

Commodity prices dropped this week as investors fled commodity markets on growing fears that the global economy is weakening. Oil prices fell sharply to $85.95/barrel on Friday (early afternoon) from the prior week's $95.60/barrel, dragged down by a plunge in global stock markets as traders lost confidence in U.S. economic growth, and amid rising speculation that a slowing global economy will further weaken demand for crude oil. Brent prices slipped to $108/barrel from the previous week's $117/barrel, remaining high relative to West Texas Intermediate (WTI). Natural gas prices dropped to $2.76/mbtu this week from the prior week's $3.11/mbtu. Gold prices touched an all-time high of $1,681.67 this week. The metal was trading at $1,669/ounce on Friday (early afternoon) from $1,630/ounce a week earlier, on mounting concerns over the threat of contagion from the eurozone crisis, and as worries about a slowdown in U.S. growth fuelled buying in the metal. Agriculture prices dropped 1% and are up 30.9% from a year ago. Livestock prices increased 1.2% in the week and are up 2.6% over the past year.

Table 8

Commodity Price Indices
--Change over (%)--
Current level One week Four weeks 13 weeks One year
CRB 338.12 (2.50) (0.91) (6.26) 22.11
Gold (CME) 1,642.84 1.93 8.53 7.37 38.19
Crude oil (CME) 92.59 (6.19) (4.34) (15.45) 13.66
Natural gas (CME) 4.10 (5.74) (3.58) (10.39) (13.05)
GSCI 674.21 (3.37) (0.27) (8.07) 25.35
Agriculture 790.90 (0.99) 4.49 (4.71) 30.91
Livestock 2,257.07 1.20 0.48 1.57 2.62
U.S. equity market

U.S. equity markets dropped for the second consecutive week, after panic triggered the worst sell-off on Wall Street since the recent global financial crisis hit, signaling a high level of anxiety among investors as fear of another severe downturn tightens its grip on the financial markets. The S&P 500, Dow, and Nasdaq were trading at 1,184, 11,296, and 2,511, respectively, on Friday (early afternoon). Stocks were in a bear market from October 2007 until March 2009. Despite recent losses, they have now recovered much of those losses. All market indices remain up during the past 12 months. The S&P 500 has dropped into negative territory and is now down 5.8% from the year-end 2010 level of 1,258 and is up 75.1% from its March 9, 2009 low of 676.

Table 9

U.S. Equity Market
--Change over (%)--
Current level One week Four weeks 13 weeks One year
Standard & Poor's indices
S&P 1500 291.30 (5.03) (6.55) (7.12) 13.10
S&P 500 1,258.74 (4.93) (6.24) (6.95) 12.37
S&P 400 912.40 (5.92) (8.85) (8.77) 18.36
S&P 600 417.19 (5.43) (8.37) (7.16) 18.69
Other indices
Dow Jones Industrial 11,884.49 (4.65) (5.80) (6.76) 11.84
Nasdaq Composite 2,683.94 (4.64) (5.40) (5.64) 17.41
DJ Wilshire 13,271.25 (5.09) (6.65) (7.13) 13.67
U.S. equity market by sector

Equity sectors in the U.S. sank over the past week through Thursday. Industrial stocks dropped the most (down 6.7%), after recent data showed a drop in the U.S. services sector and factory orders, followed by energy and material stocks (both down 6.2%) due to a heavy sell-off in oil and commodities market. Energy and consumer discretionary shares saw the largest 12-month gains (up 31% and 20.5%, respectively). Financial stocks turned negative for the past 12 months (down 3.5%).

Table 10

U.S. Equity Market Performance By Sector
--Change over (%)--
Current level One week Four weeks 13 weeks One year
S&P 500 1,258.74 (4.93) (6.24) (6.95) 12.37
Consumer discretionary 302.80 (5.35) (7.04) (5.26) 20.53
Consumer staples 312.81 (2.94) (4.15) (3.69) 11.92
Energy 544.98 (6.20) (4.09) (5.59) 30.99
Financials 193.75 (4.54) (7.46) (11.54) (3.46)
Health care 381.20 (5.46) (8.29) (6.93) 12.48
Industrials 289.65 (6.69) (11.61) (12.57) 8.44
Information technology 409.51 (4.21) (2.73) (4.12) 14.04
Materials 230.10 (6.20) (7.87) (7.74) 17.16
Telecommunications 124.54 (3.31) (7.99) (7.53) 11.31
Utilities 165.77 (3.24) (3.43) (1.60) 6.11
Global Standard & Poor's stock indices

World equity markets plunged this week through Thursday, amid growing fears about the weakening U.S. economy along with concern in Europe that the troubled economies of Italy and Spain might require more help from the European Union. Asia-Pacific and Canadian markets dropped the most (both down 5.2%), followed by European markets (down 5%). During the past 12 months, the U.S. market has reported the biggest gain (up 12.4%), followed by the Canadian market (up 9.9%). Australia and Japan led the 12-month decline (down 4.7% and 2.7%, respectively), as these countries have been plagued by natural disasters.

Table 11

Global Standard & Poor's Stock Indices
--Change over (%)--
Current level One week Four weeks 13 weeks One year
Global 1200 1,417.97 (4.87) (6.06) (8.15) 9.90
Global 100 1,225.56 (4.93) (6.15) (9.06) 7.32
S&P 500 1,258.74 (4.93) (6.24) (6.95) 12.37
Canada 50 702.56 (5.22) (5.82) (8.38) 9.94
LatAm 40 4,642.39 (4.23) (8.33) (8.44) 1.17
Europe 350 1,045.67 (4.99) (6.86) (8.96) (2.28)
Japan 150 711.05 (2.80) (3.61) (4.12) (2.66)
Asia Pac 50 3,353.82 (5.16) (8.41) (8.78) 2.23
Aussie 50 4,351.87 (3.37) (5.33) (9.12) (4.68)
Global equity market performance by sector

International sectors dropped this week through Thursday. Energy stocks led the declines (down 10.7%). Material stocks came in second (down 10.3%). Energy stocks posted the largest gain (up 12.7%) during the past year, followed by consumer discretionary stocks (up 11%). In contrast, financial stocks dropped the most during the past 12-month period (down 9.9%), followed by utility stocks (down 6.5%).

Table 12

Global Equity Market Performance By Sector
--Change over (%)--
Current level One week Four weeks 13 weeks One year
S&P Global 1200 1,417.97 (4.87) (6.06) (8.15) 9.90
Consumer discretionary 1,525.18 (9.04) (12.28) (9.83) 11.02
Consumer staples 1,756.97 (4.98) (6.41) (5.06) 10.72
Energy 2,423.03 (10.69) (11.62) (10.29) 12.72
Financials 848.05 (8.80) (12.71) (15.71) (9.94)
Health care 1,450.38 (7.78) (9.75) (8.32) 9.35
Industrials 1,463.96 (9.32) (14.94) (15.01) 3.66
Information technology 1,474.92 (6.62) (8.51) (9.46) 6.45
Materials 2,596.12 (10.31) (13.37) (11.75) 8.68
Telecommunications 1,037.41 (4.07) (5.92) (7.88) 4.83
Utilities 1,225.34 (6.84) (8.90) (10.95) (6.55)

Data tables and text provided by Kaustubh Pandey at Standard & Poor's/CRISIL.

Table 13

Economic Release Calendar
Date Time Release For Forecast Consensus Previous
9-Aug 8:30 Productivity Rev (%) - Prelim Q2 (0.8) (0.8) 1.8
Unit Labor Costs (%) - Prelim Q2 2.0 2.5 0.7
2:15 FOMC Policy Announcment 0.125 0.125 0.125
10-Aug 10:00 Wholesale Trade Sales Jun 1.0 0.7 (0.2)
2:00 Treasury Budget Jul (140) (140) (43.1)
11-Aug 8:30 U.S. Trade Jun (47.0) (48) (50.2)
Initial Claims 6-Aug 395 400 400
4:30 Weekly Money Supply 1-Aug
12-Aug 8:30 Retail Sales Jul 0.4 0.4 0.1
Retail Sales (ex-auto) Jul 0.2 0.2 0
9:55 Consumer Sentiment - Prelim Aug 64.0 62 63.7
10:00 Business Inventories Jun 0.5 0.5 0.9
15-Aug 8:30 Empire State Index Aug 3 2 (3.8)
9:00 Treasury International Capital Jun
16-Aug 8:30 Housing Starts Jul 0.595 0.603 0.629
Export Price Index Jul 0.1 0.2 0.1
Import Price Index Jul (0.4) (0.1) (0.5)
9:15 Industrial Production Jul 0.3 0.3 0.2
Capacity Utilization Jul 76.8 76.9 76.7
17-Aug 8:30 PPI Jul 0.0 0.1 (0.4)
PPI (ex-food & energy) Jul 0.1 0.2 0.3
18-Aug 8:30 CPI Jul 0.1 0.2 (0.2)
CPI (ex-food & energy) Jul 0.1 0.2 0.3
Initial Claims 13-Aug
10:00 Existing Home Sales Jul 4.9 4.9 4.77
Leading Indicators Jul 0.2 0.2 0.3
Philadelphia Fed Index Aug 5.0 4.0 3.2
4:30 Weekly Money Supply 8-Aug
Credit Market Services:Beth Ann Bovino, Senior Economist, New York (1) 212-438-1652;
bethann_bovino@standardandpoors.com

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