April factory orders fell 0.6%, well below the consensus estimate, which was for a 0.1%-0.2% increase. In addition, March’s 1.5% decline was revised downward to show a 2.1% drop. Durable goods orders were revised down from last week’s advance estimate (to flat instead from a 0.2% increase), and nondurable goods industries orders fell 1.1%.

European stock markets were also mixed Monday, with the hardest hit indexes rebounding while others continued to fall. The broad-based Stoxx Europe 600 fell 0.5%, and the German DAX index fell a full percentage point. But the IBEX 35 index of Spanish stocks jumped nearly 3%, admittedly from nine-year lows, while the FTSE MIB barometer of Italian stocks rose over 1%. Yield spreads between Spanish and Italian government bonds narrowed against German bund prices, which gave up some of the huge gains they made last week. The 30-year German security fell about 8/10ths of a point and the 10-year lost about 1/3 of a point, raising their yields about three basis points. The euro was stronger, gaining 0.5% against the dollar to end late at just under $1.25.

Chinese stocks were down more than 2% on Monday, both in reaction to Friday’s weak U.S. jobs report and a decline in the country’s non-manufacturing sector. The Chinese purchasing managers’ index fell to 55.2 in May from 56.1 in April, the lowest reading since March 2011. On a positive note, the figure remains above 50, the dividing line between expansion and contraction.

Reports/dates/facts/links worth paying attention to over the next week:

1. June 5: ISM non-manufacturing index for May.
2. June 6: Productivity and costs for Q1, first revision; release of Federal Reserve Beige Book for May.
3. June 7: Weekly jobless claims; consumer credit for April; Fed Chairman Ben Bernanke testifies before the Joint Economic Committee on the economic outlook.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

For a change, the main driver in Friday’s stock selloff wasn’t Europe – although that is never far from investor consciousness these days – but a disappointingly weak U.S. jobs report. The Labor Department said nonfarm payrolls rose by just 69,000 in May, the smallest increase in a year and less than half the 150,000 increase the Street was expecting. Private-sector payrolls rose by just 82,000, half the 164,000 jobs analysts were expecting. In addition, Labor revised down the two previous months’ figures by a combined 49,000 jobs (38,000 in April and 11,000 in March). The headline unemployment figure also rose, to 8.2% from 8.1% in April.

Other big economic indicators released Friday were something of a wash. Consumer spending for April rose 0.3%, in line with the consensus estimate and up from April’s revised 0.2% increase; personal income was up only 0.2%, down from April’s 0.4% increase and below the 0.3% consensus estimate. The ISM purchasing managers’ survey for May came in close to expectations (53.5 vs 53.8), with the new orders component rising to the highest reading in over a year. Finally, new car and light truck sales dipped to the slowest rate (13.7 million) of 2012, short of the Street’s forecast of 14.5 million.

European stocks were down long before the U.S. jobs report was released, losing ground for the third straight session. The DAX index was the big loser Friday, falling 3.4% to bring its loss for the week to 4.6%. The Stoxx Europe 600 lost nearly 2% on Friday and more than 3% for the week. Markit Economics released a bevy of manufacturing purchasing managers’ reports that showed growing weakness in Europe. The index for the 17-nation euro zone fell to 45.1 in May from 45.9 in April, the lowest figure in nearly three years and the 10^th straight month below 50, which signals a shrinking manufacturing sector. (As bad as these numbers are, it should be noted that they were generally no worse than market forecasts.) The PMI for Germany fell to 45.2 in May from 46.2, while France dropped to 44.7 from 46.9. The index for Spain fell to 42.0 from 43.5, the biggest monthly decline of all the countries surveyed. Separately, the European Union said the number of people unemployed in the euro zone in April rose to 17.4 million, the highest number ever recorded in the history of the currency union.

Bonds were the big gainers on Friday and for the week. The 30-year U.S. Treasury bond jumped more than two points in price reducing its yield to 2.52%, down a whopping 32 basis points on the week, while the 10-year yield fell to 1.45%, down 29 bps for the week. In Europe, the 30-year German bund jumped nearly two points to cut its yield to 1.67%, down 30 bps for the week. The two-year German note yield, which had fallen below zero on Thursday, ended the week at 0.01%. The euro rebounded on Friday to 1.2435, ending the week down 0.7%, bringing its Y-T-D decline to 4%. Oil prices fell another 4% Friday, but precious metals bounced back, with gold gaining 4%.

U.S. stocks are down roughly 10% from their 2012 highs, in a correction in other words. And while bonds have provided ballast to balanced portfolios in this stock slide, it is bonds that look to be overpriced at current valuations. For the moment, however, bonds have a safe-haven appeal to anxious investors.

Reports/dates/facts/links worth paying attention to over the next week:

1. June 4: Factory orders for April.
2. June 5: ISM non-manufacturing index for May.
3. June 6: Productivity and costs for Q1, first revision; release of Federal Reserve Beige Book for May.
4. June 7: Weekly jobless claims; consumer credit for April; Fed Chairman Ben Bernanke testifies before the Joint Economic Committee on the economic outlook.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

For the world bond markets, the intractability of the European debt crisis sent investors scrambling for cover in the safe haven markets for German bunds and U.S. Treasury, pushing yields down to what may be the lowest levels in history – certainly the lowest in over six decades. The yield on Germany’s 10-year bund fell to 1.20% on Thursday, down seven basis points for the day, while in the U.S. the 10-year T-note fell to 1.56%, down six bps on the day and 35 bps for the month of May. The long Treasury’s yield fell to 2.64%, where it was down 47 bps for the month – but one of the exceptions to the rule of lower-than-2008 lows; the 30-year T-bond yield is still 12 bps above its December 2008 low of 2.52%. With the exception of Italy, Spain, Ireland, Portugal and Greece, all developed markets saw their 10-yaer government bond yields hit lower lows than were seen during the 2008-09 financial crisis. The twos-tens Treasury yield curve fell to 1.30% today, its flattest level since December 2008.

Unlike yesterday’s market action, Thursday saw three of the S&P 500′s market sectors advance – financials (+0.7%), telecom (+0.8%) and utilities (+0.6%). Tech stocks were lower, while some of the social media stocks gained, with Facebook (+5%) and Zynga (+7%) enjoying rare rallies. For the most part, commodities prices concluded a tough month of May with more declines Thursday. Crude oil was off close to 18% in the past month, followed by copper (-12%), silver (-10%) and gold (-6%). The three major U.S. stock market averages had declines for the month in the -6%-7% range, while the Barclays U.S. bond market aggregate had roughly a 1% return for the month. For the S&P 500, May’s 6.3% price decline was the benchmark’s worst monthly showing since last September’s, although it left the S&P up 4.2% for the year-to-date period, where it was still roughly double the Barclays aggregate Y-T-D return.

Reports/dates/facts/links worth paying attention to over the next week:

1. June 1: Employment situation for May; personal income and outlays for April; motor vehicle sales for May; ISM manufacturing composite index for May.
   
2. June 4: ISM non-manufacturing survey for May.
   

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

Prices of high-grade sovereign bonds shot up as investors piled in for safety. The U.S. 30-year bond jumped three points in price, reducing its yield 14 basis points to 2.70%, its lowest level since late 2008, near the depths of the financial crisis. The 30-year German bund also jumped nearly three points to yield 1.82%, down 11 bps on the day, while the rate on the country’s two-year security plunged to 0%. By contrast, yields on bonds of weaker countries, such as Spain and Italy, rose as much as 20 basis points. Oil prices, meanwhile, plunged 3.5% on the day, with Nymex crude falling to around $87.50 a barrel. Commodity prices were mostly negative, although gold managed a 1% increase. The VIX volatility index jumped 15% to 24.

The likely cause of all this commotion was Spain, where depositors are pulling money out of the country’s banks. The European Central Bank said retail and corporate deposits in Spanish banks fell €31.4 billion ($39.3 billion) to €1.624 trillion, the lowest level since the euro-zone debt crisis began. The European Commission said the new European Stability Mechanism should be allowed to lend directly to weak banks rather than through central governments, a move strongly opposed by the euro zone’s strongest members such as Germany. The EC also reported Wednesday that its economic sentiment index for the currency zone fell to a weaker than expected 90.6 in May from 92.9 in April.

On this side of the Atlantic, a disappointing home sales report added to the negative tone. The National Association of Realtors’ index of pending sales of previously owned homes dropped 5.5% in April, the first decline in four months and steepest in a year. The index fell to 95.5 from a two-year high of 101.1 in March; the market consensus had been for a slight increase.

Reports/dates/facts/links worth paying attention to over the next week:

1. May 31: Q1 GDP first revision; ADP national employment report for May; weekly unemployment claims; Ireland’s vote on the European Fiscal Treaty.
2. June 1: Employment situation for May; personal income and outlays for April; motor vehicle sales for May; ISM manufacturing composite index for May.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

While Spanish stocks were an exception, losing another 2% on concerns about Spanish banks, most European bourses saw higher prices on the day after polls of the Greek populace suggested that voters favor pro-Euro parties. Germany and France had better-than-1% gains Tuesday, and the U.K.’s FTSE-100 rose 0.6%. This euro-optimism failed to boost the euro currency, which fell to an 11-month low of $1.2495, but it did appear to boost U.S. investor spirits, as did speculation that additional pro-growth policies are on the docket for China. Share prices in Shanghai rose 1.2% for a second day this week, while Japan’s Nikkei 225 index (+0.7%) had a fourth day of gains.

The Conference Board reported today that its consumer confidence index fell to 64.9 in May from 69.2 in April, falling short of Street expectations of 69.6. This month’s reading of consumer attitudes, at a four-month low according to the Conference Board, was especially disappointing, coming only one business day after the University of Michigan reported a four-year high in its consumer sentiment gauge. Also out this morning at 9:00 ET was the Case-Shiller data on U.S. home prices, which was basically in line with market expectations. On a seasonally adjusted basis, the Case-Shiller 10-city index rose for a second straight month in March – the first time that has happened in almost two years; on the negative side of the ledger, the past two months’ gains in prices were about as small as you can get (+0.1%), and prices are still generally running 2%-3% below year-earlier levels.

U.S. Treasury bond prices had small price declines Tuesday, with the 10-year ticking up to 1.75% in late trade. TIPS prices were mostly lower across the yield curve. Crude oil futures gave back early gains and finished flat at $91 a barrel, and gold dipped $13 (0.8%) to $1556 an ounce.

Reports/dates/facts/links worth paying attention to over the next week:

1. May 30: Pending home sales index for April.
   
2. May 31: Q1 GDP first revision; ADP national employment report for May; weekly unemployment claims.
   
3. June 1: Employment situation for May; personal income and outlays for April; motor vehicle sales for May; ISM manufacturing composite index for May.
   

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

The main focus of the market’s attention Friday wasn’t Greece but Spain. Bankia, Spain’s fourth largest bank, said the government will inject €19 billion into the troubled lender, the biggest bank bailout in the country’s history. Standard & Poor’s cut the credit rating of Bankia and four other big Spanish banks. Meanwhile, financial troubles are now also beginning to surface among Spain’s regional governments, as the head of the Catalonia region asked the central government to expedite aid to help the regions pay their debts. Yield spreads on Spanish government bonds widened against German debt Friday, although the IBEX 35 index of Spanish stocks rose 0.5% Friday. The index is down 24% so far this year.

European stocks ended higher on Friday and, despite this week’s worries about Spain and Greece, up for the week. The DAX index rose 0.4% Friday, ending up 1.1% for the week, while the Stoxx Europe 600 rose 0.6% Friday to bring its weekly gain to 1.5%. The big winner for the week, of course, was the 30-year German bund, which dropped 12 basis points in yield to a record low 1.97% after starting the week at 2.09%. The 10-year German note fell six bps in yield to end at 1.37%. German Chancellor Angela Merkel, while opposed to the issuance of jointly-issued euro bonds, reportedly is willing to consider a proposal on common liability for sovereign debt that involves the creation of a fund that would help governments in the euro zone reduce their outstanding debt in exchange for economic reform. The euro fell for the fourth straight day, bringing its loss for the week to 1.6%.

In the only economic report released Friday, the University of Michigan consumer sentiment index jumped to 79.3 from 76.4 at the end of April, its highest level since October 2007. More favorable job and wage prospects were the main factors behind the improved outlook, the UM report said. The index easily beat the Street’s consensus estimate, which had called for no change from the mid-month reading of 77.8.

Reports/dates/facts/links worth paying attention to over the next week:

1. May 29: S&P/Case-Shiller home price indexes for March; Conference Board consumer confidence index for May.
2. May 30: Pending home sales index for April.
3. May 31: Q1 GDP first revision; ADP national employment report for May; weekly unemployment claims.
4. June 1: Employment situation for May; personal income and outlays for April; motor vehicle sales for May; ISM manufacturing composite index for May.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

European stock markets recovered about half of what they lost in Wednesday’s rout, but it certainly wasn’t due to the disappointing economic reports that were released Thursday. The Stoxx Europe 600 rose 1% and the CAC 40 rose 1.2%. But the German DAX index rose only 0.5%. That might have been due to the release of the Ifo business climate index for Germany, which fell to 106.9 in May from a previous 109.9. The index had been above 109 in each of the previous three months and is now at its lowest level since November. Other European economic reports were nearly as negative. The Markit PMI composite output index for the eurozone fell to 45.9 in May from 46.7 in April, the steepest rate of decline in nearly three years. Output has now fallen in eight of the past nine months. The index for Germany fell to 49.6 from 50.5 in April, the first drop in six months and only the second time since July 2009. Yet, the 30-year German bund rose in price again, tacking on ½ point to reduce its yield still further to 1.97%, down two basis points.

There were also new concerns about China. According to a report on Bloomberg, China’s biggest banks may fall short of lending targets for the first time in at least seven years due to reduced demand for credit. The European slowdown is reducing demand for Chinese goods. Separately, the HSBC PMI flash estimate for Chinese manufacturing fell to 48.7 in May from 49.3 in April, its seventh consecutive month below 50, which indicates worsening business conditions. Chinese stock prices were mostly in the red Thursday.

U.S. economic reports released Thursday were also on the disappointing side. Durable goods orders for April rose a weak 0.2%, up from March’s 3.7% decline but below the 0.5% increase the Street was expecting.  Ex transportation, orders fell an unexpected 0.6% following the 0.8% drop in March, the first back-to-back decline in a year. Forecasts had called for a 0.7% increase. Weekly unemployment claims were basically unchanged at 370,000.

Reports/dates/facts/links worth paying attention to over the next week:

1. May 25: University of Michigan consumer sentiment (second reading for May); U.S. bond markets to close at 2 P.M. ET for Memorial Day weekend.
2. May 29: S&P/Case-Shiller home price indexes for March; Conference Board consumer confidence index for May.
3. May 30: Pending home sales index for April.
4. May 31: Q1 GDP first revision; ADP national employment report for May; weekly unemployment claims.
5. June 1: Employment situation for May; personal income and outlays for April; motor vehicle sales for May; ISM manufacturing composite index for May.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

European markets got clobbered, as it looks more and more likely that Greece will eventually leave the euro zone, with whatever implications that entails. The Stoxx Europe 600 dropped 2%, while the main German, French and U.K. indexes all fell by about 2.5% each. Bourses in southern Europe got hit even worse, with Spanish and Italian stock indexes both down more than 3%. In a sign of how panicky European markets are getting, the 30-year German government bund jumped more than 2.6 points in price to lower its yield by more than 10 basis points to 1.99%, the first time it has been under 2.0%. By way of comparison, the yield on the 30-year U.S. Treasury bond closed Wednesday at 2.82%, down four bps. The euro dropped more than 1% to a 52-week low of $1.2545 earlier in the day but managed to bounce back slightly to trim its loss for the day to 0.8%, ending late at just under $1.26. The euro has lost 5% in the past four weeks.

Wednesday brought additional evidence that the U.S. housing market may have hit bottom, although the news got little attention. New home sales for April rose 3.3% compared to March to a seasonally adjusted annual rate of 343,000, beating the Street estimate of about 335,000. Compared to a year ago, sales were up 10%. The report also showed a rise in home prices, with the median sales price climbing 4.9% from the same month last year. In a separate report, the FHFA’s home price index rose 1.8% in March, up from a 0.3% increase the month before, and up 2.7% compared to a year earlier.

The Congressional Budget Office warned that the U.S. economy would fall into a “mild” recession in the first half of next year if Congress allows the Bush tax cuts to expire and $1.2 trillion in spending cuts to take effect in January. The CBO said the measures, while reducing the federal budget deficit, would lead to an economic contraction at a 1.3% annual rate in the first half of 2013 (which would in fact undo at least part of any deficit reduction).

Reports/dates/facts/links worth paying attention to over the next week:

1. May 24: Durable goods orders for April; weekly unemployment claims.
2. May 25: University of Michigan consumer sentiment (second reading for May); U.S. bond markets to close at 2 P.M. ET for Memorial Day weekend.
3. May 29: S&P/Case-Shiller home price indexes for March; Conference Board consumer confidence index for May.
4. May 30: Pending home sales index for April.
5. May 31: Q1 GDP first revision; ADP national employment report for May; weekly unemployment claims.
6. June 1: Employment situation for May; personal income and outlays for April; motor vehicle sales for May; ISM manufacturing composite index for May.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

The market’s early rise appeared to be the result of this morning’s report of a 3% increase in sales of existing homes in April and a 10% jump in median selling prices last month. These upticks, particularly the higher home prices, comport with other recent evidence suggesting modest improvement in the long-depressed housing sector. Not as reassuring was the fall in the Richmond Fed’s manufacturing index during May; like the Philly Fed’s survey release last week, this seems to point to some uneven regional economic trends.

On a far broader scale, the Organization for Economic Co-operation and Development (OECD) made a similar point in its economic forecasts out today – namely disparate trends in different regions of the global economy. Warning of no growth or worse in the Euro area, OECD forecasters look for better trends in some regions of the global economy (U.S. and Japan) and a moderate upswing in the large emerging economies. In addition to seeking ways to keep the monetary union together, tomorrow’s mini Euro summit has the objective of finding ways to promote growth and work down sovereign debt. European stocks had their best day in a month Tuesday, with the Bloomberg European 500 index climbing 2.0% and Italy (+3.4%) especially strong.

Germany will sell 5 billion euros of new two-year notes Wednesday, which is noteworthy because they will pay no interest. As radical as this sounds, two-year German notes offered only a yield of just 4 basis points in the secondary market at the low last Thursday. Japanese two-year debt yields ten bps currently, and two-year U.S. Treasury notes yielded just 16 bps at their low last September and are only 29 bpscurrently. Given that inflation rates are running close to 2% in the U.S. and Germany, the low or zero interest on nominal German and U.S. debt point up the high value placed on safe havens currently – as well as the financial repression being exercised by world central bankers.

Reports/dates/facts/links worth paying attention to over the next week:

1. May 23: New home sales for April; Federal Housing Finance Agency house price index for March.
2. May 24: Durable goods orders for April; weekly unemployment claims.
3. May 25: University of Michigan consumer sentiment (second reading for May); U.S. bond markets to close at 2 P.M. ET for Memorial Day weekend

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

A rebound in European stocks led U.S. share prices higher on Monday, although the gains there were more modest compared to American markets. Over the weekend, leaders from the Group of Eight nations affirmed their desire that Greece remain in the euro zone, while weekend polls showed growing support for Greek conservative parties heading into the June 17 parliamentary elections. Global share prices may also have gotten a boost from reports of growth-supporting comments from Chinese Premier Wen Jiabao. The Stoxx Europe 600, which fell more than 5% last week, rose 0.5% Monday, with German stocks rising a full percentage point and French stocks gaining 0.6%. The euro rose 0.2%, climbing back above $1.28. German bunds were narrowly mixed, with securities at the long end rising about ¼ point in price while shorter-term notes fell slightly; yields on the debt of other European sovereigns inched lower.

Facebook wasn’t helped by Monday’s general upturn – quite the opposite in fact. In its second day of trading, FB slumped more than $4 a share, to about $34. The stock was down from the opening, hitting its session low of $33 a share just before 10 A.M. before recovering a bit and holding steady the rest of the session. J.P. Morgan Chase fell 3%, or about $1 a share, to $32.52 after the bank said it was suspending its $15 billion share-repurchase program following the disclosure of its $2 billion-and-counting trading loss. However, the bank said it intends to keep its current dividend in place.

The VIX volatility index, which has been on a sharp upswing the past two months, settled down on Monday. The index fell more than 12%, to 22. Since March 26, when it hit a 2012 low of 14.2, the index had jumped 76% to over 25 before Monday’s pull back. But it’s still a long way from its 52-week high of 48 reached last August.

Reports/dates/facts/links worth paying attention to next week:

1. May 22: Existing home sales for April.
2. May 23: New home sales for April; Federal Housing Finance Agency house price index for March.
3. May 24: Durable goods orders for April; weekly unemployment claims.
4. May 25: University of Michigan consumer sentiment (second reading for May); U.S. bond markets to close at 2 P.M. ET for Memorial Day weekend.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.