An investor check stock information at a brokerage house in Taiyuan, Shanxi province, on Thursday. China's main stock index ended down 0.5 per cent in thin volume on Thursday as lingering global market weakness and worries over a sharp slowdown in the world's second-largest economy kept investors on the sidelines, traders said.Reuters
That crunching sound investors are hearing this morning is another major crack up in world equity markets Friday morning, as bleak economic figures from just about all over the globe hammered stocks.
Just after the opening, the Toronto market sagged 133 points or 1.2 per cent to 11,377.02, while the Dow Jones Industrial Average plummeted 153 points or 1.2 per cent.
Stocks in Europe were also posting large losses on major markets, led by German equities, which were down 3.3 per cent.
Investors fled stocks and poured money into traditional safe havens, such as gold and super safe U.S. Treasury bonds. Gold rallied $40 to $1,600 (U.S.) an ounce while 10-year U.S. Treasury note yields fell below the 1.5 per cent for the first time on record.
The biggest market moving data of the morning were disappointing U.S. job figures for May. Economists had been expected the U.S. economy to create about 150,000 jobs, but instead the increase clocked in at a paltry 69,000. Figures for the previous two months were also revised downward, by 49,000 positions, adding to the gloomy mood.
Meanwhile, purchasing manager index figures from both China and Europe pointed to slowing conditions in those major economies, while Canadian GDP figures for the first quarter matched expectations of a modest 1.9 per cent rise . Economists said the growth figure for March of only a 0.1 per cent gain (compared to expectations of 0.3 per cent) indicated the soft patch seemed to be accelerating as the quarter drew to a close.
Here is some of the commentary from economists on the U.S. job numbers, which are so bad they've prompted speculation of more monetary easing by the Fed.
"Today's employment report confirmed that after a blistering pace of job creation through the winter, hiring slowed significantly through the spring. The economy created an average 73,000 jobs per month in April and May, falling short of the range suggested by Chairman Bernanke that is required if the Fed's forecast for the unemployment rate is to be realized. …...Fear that against a backdrop of uncertainty regarding the European debt crisis and slowing Chinese demand, the pace of job creation will slow further is keeping the prospect of additional Fed asset purchases alive with markets looking to the FOMC meeting later this month for guidance." Dawn Desjardins, assistant chief economist Royal Bank of Canada
"May's employment report clearly suggests that US labour market conditions are deteriorating again, which will undoubtedly prompt more speculation that QE3 is coming soon. Non-farm payrolls increased by only 69,000 in May (less than half the consensus forecast) and April's gain was revised down to a similarly lacklustre 77,000, compared with the initial estimate of a 115,000 gain. ….Given the marked slowdown in employment growth, Fed Chairman Ben Bernanke's congressional testimony on the economic outlook next Thursday is now going to be even more closely watched for any hint that QE3 is coming, possibly even at the June FOMC meeting. We still don't think it is the near certainty some commentators seem to believe. Nevertheless, it does now appear that the global slowdown, and events in Europe particularly, are beginning to have a more marked impact on the US economy. And given the uncertainty surrounding exactly how events in Europe will play out, we certainly wouldn't rule out a QE3 if conditions continue to deteriorate." Paul Ashworth, chief US economist at Capital Economics