Weak German Confidence, Russian Stocks Fall

123jump.com Staff
26 Aug, 2008
New York City

European stock market indexes fell as German consumer and business confidence declined in August. The rising oil and food prices lowered the propensity to spend by consumers. Businesses battle rising wages, struggling exports and elevated euro in the international markets. Russian ruble dropped more than 1% and stocks dropped sharply after Russia recognized two breakaway provinces from Georgia. The oil and gas heavy RTS index dropped 5% and has now lost 25% in two months.

[R]9:20AM New York – German confidence read drag market averages lower I Europe. Russian stocks fell further on fears of long stand-off with the West on Georgia.[/R]

Elevated euro, rising oil and food prices and worries related to slow down in German exports was finally reflected in the latest read of the confidence index. The business climate index fell to a 3-year low of 94.8 in August from 97.5 in July. The decline in index follows the first quarterly economic contraction of 0.5% in the quarter ending in June. The index is calculated based on a survey of 7,000 business managers by Ifo Institute in Munich.

Separately, German consumer confidence fell on rising energy and food prices. Wages in Germany are on the rise but new job creations are anemic. Consumer climate index that measures consumer’s propensity to spend declined. The overall indicator is forecasting a value of 1.5 points for September after the revised 1.9 for August matching the last comparable value in summer of 2003.

Sentiment in Russia worsened and stocks and ruble declined as foreign investors dominated markets fell further. Ruble dropped more than 1% to 24.7 against one U.S. dollar. Benchmark indexes dropped for the second week in a row. RTS Index plunged 5% to 1,565. All major sectors represented on the exchange fell with metals and mining sector falling 7% and telecom, utilities and financial services sectors declining between 4% and 5%. Oil and gas weigh more than 50% in the index and Gazprom and Lukoil dropped 5% today. The index lost 14% in July and dropped another 10% so far in the month of August.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 99.95 or 0.78% to 12,778.71, , Hang Seng index in Hong Kong decreased 48.13 or 0.23% closed to 21,056.66.ASX 200 index in Australia decreased 7.40 or 0.15% to close 5,007.50. The KL Composite index in Malaysia decreased 8.23 or 0.76% closed to 1,070.50.

The Kospi Index in South Korea decreased 11.86 or 0.79% to close at 1,490.25, SET index in Thailand closed lower 9.28 or 1.37% to 668.92 and JSE Index in Indonesia decreased 19.68 or 0.92% to 2,107.55. The Sensex index in India increased 31.87 or 0.22% closed to 14,482.22.

Europe Markets Review

In London FTSE 100 Index traded lower 89.00 or 1.62% to 5,416.60, in Paris CAC 40 Index decreased 30.12 or 0.69% to 4,325.75 and in Frankfurt DAX index traded higher 8.02 or 0.13% to 6,304.97. In Zurich trading SMI decreased 19.06 or 0.27% to 7,043.52.