Markets extend losses on lack of positive news

US markets retreated further on Tuesday as new economic data failed to bolster the investors’ optimism sufficiently to overcome the cautious stance they adopted amid rising global uncertainty and tension. The Conference Board reported its consumer confidence index fell sharply to 86.0 in September after an increase to 93.4 in August. The experts had expected a modest drop to 92.5. This was the first decline in five months. The Institute of Supply Management in another report indicated that the Chicago area PMI fell to 60.5 this month from 64.3 in August. The third report showed the annual home price growth slowed in July to the slowest pace since 2012 as the S&P/Case-Shiller home price index indicated. On this backdrop of disappointing economic statistics, the S&P 500 closed down 5.5 points, or 0.3%, at 1,972.29. The Dow Jones Industrial Average dropped 28.23 points, or 0.2%, to 17,042.90. Today at 16:00 CET the ISM Manufacturing, Prices Paid indexes together with the US Census Bureau’s Construction Spending indicator will be released in US. The outlook is negative.

In Europe Eurostat reports indicated Eurozone inflation slowed again in September with consumer prices in the 18 countries rising 0.3 percent in September year-on year after 0.4 percent increases recorded in August and July. German unemployment rose unexpectedly though still remains within the bounds of natural employment levels. Markets rose and Euro fell against dollar on expectations of more ECB action to stimulate the economy. The ECB governing council meets on Thursday and investors are watching closely whether ECB will expand its monetary easing program by adding government bonds to the list of asset-backed securities the bank purchases currently to inject liquidity into the markets.

Amid slowing production in much of Asia in September as indicated by declining PMIs and output prices for Japan, Taiwan, India and South Korea, Chinese authorities cut mortgage rates and downpayment levels for second-home buyers on Tuesday to boost demand and prevent further decline in the property market, which accounts for about 15 percent of the world’s second biggest economy.

The slowing production highlighted the concerns over slowing economic growth globally and falling demand for commodities. Lower than expected demand due to slower growth rates have resulted in expanding surpluses which add further pressure together with rising dollar. The investors are bearish on commodities in general and banks like Societe General, Citigroup and Goldman Sachs have lowered their price forecasts for commodities and predict further losses. Corn fell to a five-year low on Tuesday and soybeans were the cheapest since 2010 as farmers begin harvesting bumper crops in the U.S., the largest producer of both crops. 

Spot gold closed at $1208.74 an ounce yesterday after touching $1204.4, the lowest since January. It lost 6 percent in September, its sharpest monthly drop since June 2013 and first quarterly loss of the year. Stronger US dollar makes dollar- denominated precious metals more expensive and weak demand from slowing China provides insufficient support to turn the bearish markets. Platinum and silver also continued falling, with platinum falling to a five-year low.