So far, better than expected economic numbers from the United States have been enough to stem the overnight rout that started in Asian markets.
Nothing better exemplifies this “finger in the dike role” than the difference between the overnight close for the Nikkei 225 index in Tokyo—a loss of 6.35%–and the gains on the ADRs of Japanese stocks trading in New York today. Overnight Toyota Motor was down 4.61%; in New York the ADRs (TM) were up 0.59% as of noon New York time. Mitsubishi UFJ Financial fell 4.47% in Tokyo but was up 1.06% in New York (MTU.) Sumitomo Mitsui Financial fell 3.96% in Tokyo but climbed 1.29% in New York (SMFG.)
The good news from the U.S. economy came in the form of better than expected retail sales for May and better than expected initial claims for unemployment for the week ended June 8.
Retail sales climbed 0.6% in May. That was an improvement on the 0.1% growth in April and ahead of the 0.4% gain projected by economists surveyed by Bloomberg. Initial claims for unemployment dipped to 334,00 for the week that ended on June 8 from 346,000 the prior week. Economists surveyed by Briefing.com had expected 345,000.
Neither set of numbers was especially strong. Almost all of the upside for retail sales came from a 1.8% jump in auto sales that isn’t likely to be repeatable. The initial claims number continues a pattern of hovering on either side of the 350,000 mark that’s compatible with monthly job gains of 175,000 to 200,000.
But coming as these numbers did after markets had been spooked by a World Bank report that cut the forecast for global economic growth in 2013 to 2.2% from the previous 2.4%, the U.S. good news was good enough to stem the rout.
There is nothing in this data, however, to produce a longer-lasting recovery in global stocks, bonds, and currencies. I think that will have to wait until after the Federal Reserve meets next Wednesday and, in all probability, takes no action on tapering or anything else. In its current mood financial markets could well regard that as a disappointment. I think we’re still looking for markets, especially emerging markets, and the market for the dollar to find a bottom.
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