Global stocks are weaker on softer economic reports: In China, the HSBC/Markit index remained at 49.9, still in contraction territory. Industrial production in South Korea also fell by 1.9 percent in August, more than expected.
The German stock market is down 3 percent, as German retail sales dropped 2.9 percent in August. The Dax is having its worst quarter in 10 years (!).
As if the euro zone needed more problems....euro zone inflation was higher than expected at 3 percent in September, highest in three years. That's a problem because it was widely expected the European Central Bank (ECB) would be cutting interest rates shortly; high inflation makes that tougher to do.
Sure would be nice if outgoing ECB President Jean-Claude President Trichet, who leaves in November, would hand ingoing president Mario Draghi a Valentine by cutting interest rates just before he hands over the reins.
Gold, while having its worst month in nearly three years, is having its best quarter in 40 years.
1. Austria has approved the European Financial Stability Facility (EFSF) expansion. So we now have 14 of the 17 euro zone countries voting, all in favor of the EFSF expansion: Austria, Estonia, Germany, Cyprus, Slovenia, Finland, Ireland, Portugal, Belgium, France, Spain, Italy, Luxembourg, and Greece.
Waiting for Malta, Netherlands, and Slovakia.
Here's a sign of future problems: Austria's constitution needs to be amended to allow for the EFSF successor, the European Stability Mechanism (ESM), to come into effect in 2013. It needs a two-thirds majority to get an amendment through, and some in Austria's parliament have clearly indicated they will want private creditors to take the first losses in all future debt crises.
2. Rough quarter for U.S. stocks, but much worse abroad.
a) This quarter: S&P 500 index down 12 percent (worst since fourth quarter 2008); Nasdaq Composite index down 11 percent (worst since second quarter 2010); and Dow Industrials down 10 percent (worst since first quarter 2009).
b) But look at some of the historic declines in Europe and Asia this quarter: Greece down 38 percent (worst ever); Russia down 30 percent (worst since fourth quarter 2008); Italy down 27 percent (worst ever); Germany and France down 25 percent (worst since third quarter 2002 for both); Emerging markets down 22 percent (worst since fourth quarter 2008); Hong Kong down 21 percent (worst since third quarter 2001); Spain down 18 percent (worst since third quarter 2002); and South Korea down 16 percent (worst since fourth quarter 2008).
c) Outside equities, it’s just as ugly with many commodities having their worst quarter since the second half of 2008: Copper down 25 percent; crude oil down 15 percent; silver down 13 percent; and platinum down 11 percent.
d) The only winners: U.S. dollar up 6 percent (best since second quarter 2010), and gold up 7.5 percent, now up 12 straight quarters, best quarterly gain since fourth quarter 2010.
3. More signs of a slowdown:
Ingersoll-Rand drops 8 percent after warning on third quarter and full-year guidance, citing weak demand for its security and residential heating/air-conditioning products in North America. The industrial conglomerate slashes third quarter earnings to 77 cents a share to 80 cents a share, below 91 cents a share consensus, and cuts its full-year earnings guidance to $2.70 a share to $2.80 a share vs. $2.96 a share consensus.
Texas Industries reported a bigger-than-expected loss (loss of 27 cents a share vs. loss of 26 cents a share consensus). The cement maker warns that "economic headwinds may cause our successes to be uneven in the near term" and expects to be in a down construction market for an extended period.
4. IBM is number 3: IBM's market cap, at $213.9 billion has passed Microsoft's market cap ($213.3 billion) for the first time since 1996.
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