Markets spooked by shock US data
Markets rattled as shock US data and looming debt ceiling spark investor sell-off
STOCKS were sent into a tailspin yesterday after new data showed US manufacturing growth almost ground to a halt last month.
The Institute of Supply Management purchasing managers’ index (PMI) collapsed to its lowest level in eight months, following the biggest one-month drop for more than two years.
The headline figure for the PMI was 51.3, diving way below expectations and indicating only meagre growth, just above the neutral 50 mark.
The Nasdaq took the largest tumble, dropping 2.61 per cent to 3,996.96, below the 4,000 level for the first time since late November, followed by the S&P 500 falling 2.28 per cent. The Dow also dropped 2.08 per cent during the day, falling 326.05 points to 15,372.80.
The CBOE volatility index jumped 16.5 per cent to 21.4, its highest level since December 2012.
The ISM blamed “adverse weather conditions” for the sudden decline, but analysts had predicted a much smaller slip to 56.
“Nearly all aspects of the survey were dreadful,” said ING’s Rob Carnell. The huge decline in new orders was the worst in 33 years.
The UK’s manufacturing PMI for January also slightly missed forecasts yesterday, slipping to 56.7 from December’s downwardly revised 57.2.
But orders from home and abroad flooded in at a faster rate, boding well for the economy at the start of the year. The FTSE 100 closed 0.69 per cent lower.
After turmoil in many emerging market currencies last week, China revealed overnight that non-manufacturing PMI dropped to 53.4, declining for the third month in a row, adding to fears of a general slowdown in developing economies. Japan’s Nikkei again led share market losses as a fresh two per cent drop took it to lows not seen since mid-November.
Treasury secretary Jack Lew added to the worries, warning that the US could start defaulting on the government’s obligations “very soon” after it runs out of room to borrow under a legal cap on public debt, set for this Friday – 7 February.