Asian stocks fell more than 2 percent and gold sat near a record above $1,660 an ounce on Wednesday, with fears increasing that Washington’s efforts to cut spending will slow growth at a time when global factory output is already stagnating. Completion of a last-gasp deal to avoid a US default failed to bring any relief, as investors focused instead on how tighter fiscal policy could constrict US growth and Europe’s debt crisis was still worsening.
“I think the conditions have completely changed this week,” said Koichi Ono, senior strategist at Daiwa Securities Capital Markets in Tokyo. “Until last week, people have been saying the US debt ceiling was the problem. Now they talk about worries about the health of the economy.” In Europe, financial spreadbetters were calling the major share indexes to open down 1.3-1.4 percent. Views on the economic outlook were rapidly being revised, with JPMorgan cutting its forecast on 2012 US growth to 1 percent and markets reflecting expectations of more than 80 basis points of rate cuts in Australia — 60 basis points more than a day ago — contributing to the Australian dollar’s slide below $1.07. US consumer spending fell in June for the first time in nearly two years and incomes barely rose, signs that the economy lacked momentum as the second quarter drew to a close, data on Tuesday showed.
That followed Monday’s manufacturing data from the United States, Europe and China showing growth near a standstill and last week’s disappointing second-quarter US GDP estimate. A series of US employment data releases from Wednesday through Friday will be closely watched. “The market is standing on the edge of the cliff. US manufacturing activity, growth rate, employment data are all close to a critical point,” said Kim Se-jung, a strategist at Shinyoung Securities in Seoul.
