US retreats for third day: Morning market insights

Wall Street

The New York Stock Exchange retreated for a third day overnight on reports manufacturing and services activity had contracted in Europe and China.

The US decline has merely trimmed back an impressive rally that has continued since last October, which has resulted in an 11% gain. In that time US banking and technology equities have gained more than 30%.

“There’s enough of a reason there after the sharp run-up in stocks for the market to pull back or go sideways in the short term,” says Mark Bronzo, who helps manage about $US125 billion at Guggenheim Investments in New York.

“Most people recognise that China growth has slowed. It’s a question of: is it going to be a sharp or a mild slowdown?” he said to Bloomberg.

The S&P500 Index was down 0.72% to 1392.78. The Dow Jones Industrial Average dropped 0.60%, or 78.48 points, to 13046.10. The NASDAQ Index was flat, at 0.39% up to 3063.32.

The West Texas Intermediate (WTI) oil price fell 01.56% to $US105.60 a barrel overnight.

Gold was down 0.32% to trade at $US1645.00 an ounce.

The Australian dollar was down again overnight, buying $US1.039 at 8.20am AEST.

Europe

European sharemarkets posted a fourth day of declines overnight, ending a rally largely built on the relief investors felt when a Greek debt deal was put together to avert immediate financial turmoil a few weeks ago. But overnight reports that Eurozone manufacturing and services were contracting sobered the market.

“People have been too optimistic regarding global economic recovery,” Stephane Ekolo, chief European strategist at Market Securities in London, told Bloomberg. “We will hear more and more people saying China is heading for a hard landing and that the eurozone isn’t finished with its problems.”

European Central Bank chief Mario Draghi has told German newspaper Bild the situation was “really critical” in Europe last October when there could have been a serious credit crunch.

“The worst is over, but risks remain,” Draghi says.

The German DAX fell a hefty 1.27% to 6981.26.

The European Stoxx50 index was down 1.46% to 2530.22.