Global equity markets sold off sharply yesterday with the S&P 500 closing down nearly 3 percent during the trading session. As Beijing gears up for a massive parade and two-day holiday in celebration of an Allied victory in World War II, a massive late-day injection of capital made today into local stock markets, believed to be executed by government-controlled entities, was unable to lift benchmark indexes into positive territory. The Shanghai composite index rose from lows of the day approaching –4.7 percent to close down only 0.2 percent after briefly entering positive territory. The fact that buying was heavily focused on financials, which finished up by 2 percent as a segment of the benchmark index, further reinforced the perception that the rally was spurred by intervention. In a speech today in Jakarta, International Monetary Fund Managing Director Christine Lagarde underscored how the recent spillover of volatility into the equity markets of the developed world underscores the centrality of Asia to investor confidence. From a macro perspective, equity investors now face a bleak scenario: slowing growth and confidence signals from China and a Federal Reserve that appears committed to raising rates regardless of the turmoil abroad.
CalPERS and CalSTRS call on Moynihan to step down from board. It was revealed yesterday that the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) had delivered a letter the day before asking that Bank of America leader Brian Moynihan cease to hold a dual role as board chair and chief executive. The pensions argue that the combined roles create a conflict of interest and voiced a desire for a more independent board of directors.
U.K. alters wording of referendum vote question. Yesterday the administration of U.K. Prime Minister David Cameron agreed to change the question to be asked of voters in the upcoming referendum on whether or not the U.K. should remain a member of the European Union. The change came after pressure from the Electoral Commission, which argued that how the original question was phrased showed bias towards a pro-EU outcome.
Euro zone producer prices contract again. July euro zone producer price index levels released today confirmed an anticipated contraction with the headline index down by 2.1 percent in July versus the prior year or 0.1 percent versus June. Once again the energy segment was a primary driver of the decline, registering a 6.5 year-over-year contraction.
EIA reports increase in supplies. The U.S. Energy Information Administration today reported 4.7 million more barrels of crude for the week ending August 28. Oil prices fell below $45 on the back of the news. Last week’s report revealed that inventories decreased by 5.5 million barrels for the period although inventories remain at a seasonal multidecade high.
