St George Economics economy and finance update
Equity markets were hit by weaker than expected economic growth in China and by weaker than expected manufacturing growth in the New York region (see below).
Adding to the mix was the sharp fall in the price of gold and other commodities which hurt mining stocks.
In Europe, the FTSE was down 0.6%, the Dax fell 0.4% and the French CAC40 index fell 0.5%.
In the US, the Dow fell 1.8% while the S&P500 fell 2.3%.
The fall in equity prices sparked a rush for bonds. US treasury prices rose and yields fell.
A US 10 year government bond now yields 1.68%, down 4 basis points.
German long bonds fell just 1 basis point, to 1.25% while Australian 10 year bonds yield 3.31%.
AUD weakness continued overnight with the AUD falling briefly below $US 1.03.
The AUD as a commodity based currency outweighed other views of the Aussie as commodity prices tumbled.
The AUD fell below 100 yen and fell back against the UK pound to levels seen in early March of around 65.5 pence.
The price of gold fell a further $US 133.40 or 9.0% overnight.
Reasons put forward include a slowing of the global economy, and therefore reduced inflationary reasons for holding gold; the possibility that the US will cut back on quantitative easing and therefore reducing the risk of US inflation; better returns in other markets; selling of leveraged positions by hedge fund and selling by the Central Bank of Cyprus.
All contributed to the decline but none seem sufficient on their own.
Both copper and oil were down on the weaker outlook for global economic growth.
Housing finance for owner occupiers rose 2.0% in February, following four consecutive months of declines.
For the year to February, housing finance moved back into positive territory, with a 1.5% increase.
By value, investor housing finance rose 1.8% in February, after gaining 4.4% in January.
Yesterday's data suggests housing finance is stabilising, led by investors, with improved affordability and strong rental yields stoking investor demand.
GDP growth was softer than expected, rising 1.6% in Q1.
This saw the annual rate ease to 7.7% in the year to the first quarter, from 7.9% in the year to the fourth quarter last year. This was lower than expectations which stood at 8.0%.
Industrial production rose 8.9% in the year to March, disappointing consensus expectations for a 10.1% increase.
Fixed Assets Investment rose 24.1% in the year to March, down from 24.6% in the year to February.
The slowdown in investment was surprising given data last week showing strong credit growth in China.
China's retail sales rose 12.6% in the year to March, which matched consensus expectations.
While results may have been below market expectations, China is still experiencing solid economic growth on the back of ongoing urbanisation and industrialisation.
The euro zone's trade surplus grew in February to €12.0 billion from €8.7 billion in January.
The positive balance was helped by lower demand for imports rather than export growth.
The value of goods imported by euro zone countries decreased by 7% in the year to February.
This, in part helps explain some of the weaker growth in China, which is a major supplier to European markets.
Industrial production rose 0.6% in February.
For the year to February, industrial production has contracted 10.5%, an improvement on the 11.0% contraction in industrial production in the year to January.
The performance of services index remains in expansionary territory, having edged down to 55.4 in March, from 55.5 in February.
The details in the report were positive, with the employment and sales components stronger and new orders easing, indicating growth in new orders slowed.
The softest component was inventories, which sank to 49.6 in March, from 54.1 in February.
United States: Manufacturing activity in the New York region failed to meet market expectations.
The Federal Reserve Bank of New York's general economic index fell to 3.1% in April, down from 9.1% in March.
The market was expecting the index to move down to 7.
At the same time, the NAHB homebuilder confidence index fell in April to 42, its third straight monthly decline and its lowest level since October.
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