German Industrial Output Unchanged
Output was flat after a revised 0.6 percent increase in April [from 0.9%] the Economy Ministry in Berlin said on Tuesday. The reading compares with the median estimate of economists for a 0.1 percent gain. Output climbed 2.1 percent from a year earlier.
Data on Monday showed German factory orders, a gauge of future output, slipped 0.2 percent in May after two months of gains.
Global economic growth slows amid renewed emerging market downturn
Global economic growth slowed for a third month running in June, according to worldwide PMI survey data. The JPMorgan Global PMI, compiled by Markit, sank to 53.1 from 53.6 in May, its lowest since January, to signal a rate of global GDP growth of approximately 2% per annum.
Global economic growth
With global factories reporting the smallest rise in production for 23 months, the June surveys finished off the worst quarter for two years for manufacturing.
Service sector growth also slowed, dropping to the lowest since January, but the rate of expansion was unchanged on average compared to the first quarter. (…)
Global manufacturing and services
Developed world growth slowed to the weakest since January, though remained solid. The same cannot be said for emerging markets, where the PMI data signalled the steepest downturn for just over six years. (…)
Developed and emerging markets PMI
The main source of global economic weakness was once again the emerging markets, which saw business conditions deteriorate at the fastest rate since April 2009, their collective PMI dropping below 50 for the first time in almost two years.
China’s composite PMI, covering both manufacturing and services, fell to 50.6, signalling a near-stagnation of the economy and the worst performance since May of last year. All three other BRIC economies saw deteriorating business conditions. Brazil saw the steepest contraction, with a PMI reading of 41.0 registering the steepest drop in activity since March 2009. India meanwhile slid into contraction for the first time since April of last year and Russia dipped back into decline for the first time in three months, albeit with the rate of contraction far less severe than seen earlier in the year.
Other emerging markets, especially in Asia, also saw worsening conditions. To highlight the intensifying malaise affecting the region, South Korea and Taiwan sank to the bottom of the worldwide manufacturing PMI rankings in June.
Emerging markets
Commodities Skid on China’s Stock Rout Investors fear weaker demand from one of the world’s largest consumers of raw materials
The S&P GSCI, an index that tracks a diversified basket of commodities, fell 4.9% to 412.51 Monday. This was its steepest drop since November and its lowest level since April. (…)
Oil prices posted their steepest drop in three months. U.S. benchmark light sweet crude oil for August delivery settled down 7.7% to $52.53 a barrel on the New York Mercantile Exchange, its biggest daily drop since Feb 4 and its lowest level since April 13. The losses in oil come as inventories in the U.S. surprised higher last week and as a potential deal over Iran’s nuclear program threatens to unleash additional energy supplies on the global market, traders and analysts said.
Copper prices slumped by the most since January, with September-delivery futures closing down 3.5% at $2.5380 a pound on the Comex division of the Nymex.
Soybeans fell 1.1% to $10.33¾ a bushel, a one-week low, on the Chicago Board of Trade. Cotton prices fell 0.7% to 66.95 cents a pound, a six-session low, on the ICE Futures U.S. exchange. (…)
“There will be repercussions [for commodities] given how many millions of people opened accounts and started buying stocks,” said Edward Meir, senior commodities strategist with brokerage INTL FCStone. “When your stocks account is getting crushed, you’re not going to go out and buy that washing machine…it’s all related,” he said. (…)
“Greece, from a demand perspective, doesn’t matter, but it is impacting sentiment and risk appetite…it’s creating uncertainty and loss of risk appetite,” Mr. Melek said. (…)
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Political crisis hits Chile’s economy Government announces downward revision in growth estimates
Commodities: Commotions Across the Oceans
The latest Greek crisis in the Eurozone and the wild roller coaster ride in Chinese stock prices are boosting the US dollar and unsettling commodity markets. In addition, a possible deal with Iran over its nuclear program is depressing the price of oil, which is also boosting the US dollar, which is also weighing on other commodity prices. (…)
What does it all mean? Investors may be starting to fret that the Greek crisis and the Chinese stock market roller coaster ride could weaken global economic growth. It is a legitimate concern.
And El Nino is threatening:
The El Nino forming across the Pacific has been turbocharged by a series of tropical cyclones that helped to shift the direction of trade winds, potentially adding to warming that’s evoking parallels with the record 1997-98 event. (…)
El Ninos can affect weather worldwide by baking Asia, dumping rain across South America and bringing cooler summers to North America. (…)
CHINA 
China stock market rout deepens Over 25% of listed companies suspended, freezing $1.4tn of equity
(…) The sell-off that began on June 12 has wiped roughly $3tn off the market, in the country’s steepest decline since 1992, according to data from Bloomberg. (…)
In a renewed effort to stabilise the market, the China Association for Public Companies, a Beijing-based organisation, called for “listed companies and their major shareholders and senior executives to buy back, increase their shares and other measures to stabilise the companies’ share price”. (…)
One domestic journalist, who did not want to be named, said the government had banned local media from using the terms “equity disaster” and “rescue the market” in their reports on the stock market.
According to Bloomberg, margin traders reduced holdings of shares for a record 11th day on Monday.
Citigroup analysts have warned that this trend was likely to continue, as only a quarter of margin buys have been forced out so far. (…)
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China sell-off threatens credibility Warnings of ‘crisis of confidence’ in state after emergency moves
(…) Financial magazine Caijing reported on Monday that the National Social Security Fund had told its external fund managers they could buy stocks but were not permitted to sell them. Central Huijin, a unit of China’s sovereign wealth fund, also said on Sunday it was supporting the market by buying blue-chip exchange traded funds. (…)
Muted Response to Greece Reflects Change in Markets Money managers are more confident in ability of central banks to deal with situation
Money managers have become more confident in the ability of the European Central Bank and U.S. Federal Reserve to deal with this kind of crisis and in the ability of the global economy to withstand it. (…)
Because of the ECB’s success in stabilizing European finances and stimulating the economy, many investors still hope it will find a compromise, avoiding a messy default and possible Greek exit.
There is no guarantee that this will happen, said Mr. Freeman of Westwood, and if the ECB fails to find a compromise, U.S. and European stocks could fall harder. (…)
Charles Schwab & Co.’s chief global investment strategist, Jeffrey Kleintop, went a step farther in a report to clients. “There have been a number of developments unrelated to the situation in Greece that we believe may be at least as important to the direction of markets in the second half of 2015,” he wrote.
“The five developments you may have missed in the past week include: rising manufacturing activity in Europe, recovering home prices in China, an increase in the oil rig count, a rebound from deflation in Britain, and improving business sentiment in Japan.”
My own list of developments is longer and not quite as straightforward: Puerto Rico, Chinese equities, Beijing’s panic, Iran, all four BRICs economies close to or in recession, Canada also flirting with recession, weak U.S. exports, collapse in commodity prices, low oil prices impacting the U.S. more than expected, U.S. dropping labor participation, rail carloads declining. Oh! and how about global deflation coming back on the list?
BTW, nobody’s saying, but the German Dax is down 12.2% from its April peak. The French CAC 40 is down 10.8%.
1 thought on “NEW$ & VIEW$ (7 JULY 2015): Global growth not that global; Commodities, China skid.”
Nickel, a key, leading industrial metal, is getting absolutely hammered today. It is down 10% on the day, a rare event. I don’t recall such a rout of this important economic bellwether metal even during the 2007-2009 recession.
It’s down to $4.74 right now, incredibly low. Commodities producers are getting smashed as well today.
It’s hard to know if the world has flipped risk-off, as central bank liquidity is still a very powerful back-stop. However, the recent market gyrations seem to be waking up complacent participants.
China has a much bigger problem on their hands with the margin calls on all the small speculators. Above all, the Chinese government desires social stability, and their support of speculation in equity markets smacks of desperation as they continue to deal with capital flight and over-capacity in everything from property to infrastructure, auto production, steel production, and more.
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