Friday, January 24, 2014

China Growth Jitters Sends Global Stocks Lower

US markets fell after China handed in a weak manufacturing sentiment survey for January. Even companies with positive earnings reports such as KeyCorp, Johnson Controls and Jacobs Engineering were not spared, falling at least 3% each
. The S&P 500 was down 0.9% and the Dow, 1.1%. But Netflix’s 17% surge and Microsoft’s 4% rally helped the Nasdaq notch a smaller 0.6% loss.

In economic news, the number of Americans claiming jobless benefits ticked higher last week, but the overall trend is still falling. The four-week average for new claims fell 3,750 to 331,500. Americans also bought more houses. Sales of existing US homes rose 1% in December to an annual rate of 4.87 million units, the National Association of Realtors said. Financial data firm Markit said US manufacturing sentiment was likely 53.7 in January – slightly weaker than in December, but still firmly in expansion territory.

Europe equities also dipped, despite data from the region lifting investor spirits. Purchasing managers in the manufacturing and services sectors were more positive in January, led by Germany, the region’s powerhouse. Euro zone composite HSBC/Markit PMI jumped to 53.2. Germany composite PMI surged to a 2½ year high, while France’s survey rose to a three-month high.

Japan equities closed 0.8% lower, the Nikkei 225 hit by a contraction in China’s HSBC/Markit PMI reading. The preliminary reading for January showed a surprising contraction in Asia’s manufacturing driver, and hit Tokyo stocks. Many Japanese companies have investments or factories in China. Investors are also focused on earnings results and forecasts going forward, with the government set to raise the sales tax (from 5% to 8%) for the first time since 1990 in April.