Everywhere you look in the US, there seems to be unremitting gloom, even though there are some positives, such as jobs growth in the depressed car making state of Michigan and several other hard-hit areas of the US.
Those reports are just too few to be seen as important by the markets.
Investors are starting to get nervous about the earnings of big US banks and consumer products companies in the third and fourth quarters simply because the same quarters in 2009 were so strong and there’s just no way those earnings surges can be repeated in coming months.
The earnings conviction among US investors is starting to be tested, with estimates for third quarter growth being wound back to around 25% (which will prove to be too high), from well over 30%.
Eight more American banks failed on Friday and were either taken over or closed in several states.
Four of the banks, all small local businesses, were based in California, others were in Virginia and Illinois.
Total cost to the Government of the failures was well over $US460 million.
The failures take to 118 the number of US banks to have failed so far in 2010 and the number is probably going to grow more quickly than expected in the fourth quarter and in early 2011 if the US economy continues to slow like it has been.
Even some $US60 billion in mergers and acquisitions in the US, Canada, London, Australia and India last week was not enough to entice investors to get back into the market because of the pessimistic outlook.
The Potash Corp bid from BHP was the biggest at $USS39 billion, but Intel Corp bought software maker McAfee Inc for $US7.7 billion, Korean National Oil Co made a $US3 billion hostile bid for a UK oil company and Verdanta, the big Indian resources group, is buying a share of Cairn Energy’s Indian business for $US9.6 billion and Agrium, the Canadian fertilser group, bid $A1.2 billion for AWB.
For the week, the Dow fell 0.9%, the Standard & Poor’s 500 slipped 0.7%, but the Nasdaq added 0.3%.
It was the second week of falls for the Dow and the S&P.
On Friday, the Dow fell 57.59 points, or 0.5% to 10,213.62; the S&P 500 was off 3.94 points, or 0.3%, to 1,071.69. The Nasdaq Composite Index rose 0.8% to 2,179.76.
The US dollar rose late in the week as pessimism grew about the health of the economy. US 10 year bond yields ended at 2.61%.
In Europe, shares fell with the Stoxx Europe 600 Index off 1.3%.
Shares fell on 16 out of 18 western European major markets last week.
France’s CAC 40% dropped 2.4% as the government reduced its forecast for growth in 2011, Germany’s DAX slid 1.7% and London’s FTSE 100 retreated 1.5%.
On Friday the FTSE 100 was down 0.3%, the DAX, 1.2% and the CAC 40 was off 1.3%.
Asian shares fell Friday but still ended the week higher.
The MSCI Asia Pacific Index rose 0.4% over the week, but failed to reverse the previous week’s 3.7% fall.
Shanghai’s composite index fell 1.7% and Hong Kong’s Hang Seng index dropped 0.4%.
In fact Shanghai is starting to recover and looks a bit more upbeat than other Asian markets, which could be an omen for the region later in the year if the Chinese economy cools nicely.
The Australian market’s ASX/200 index was off 1.1%, as the election headed to a cliff-hanging end, which it did.
The ASX200 index was down 48.1 points or 1.1% on Friday and will open lower today after Wall Street’s fall on Friday night and of course, the indecisive election result.
