Morning News Impacting Global ETFs

By Carl Delfeld of Chartwell ETF and Chartwell Partners Asset Management

Markets around the world took a nice hit today as worries escalated. Barchart reports that the European DJ Stoxx 50 this morning is trading -0.78% on continued worries about the financial sector, this morning's $1.70 rally in crude oil prices, and on concern about declining earnings growth in general. HBOS, the largest UK mortgage lender fell 2.1% today. Citigroup forecast today that three US banks (Lehman, Goldman, Morgan Stanley) will together write down another $6.4 billion in Q3.

Asia-Pacific stocks today closed lower across the board: Japan -0.77%, Hong Kong -2.58%, China -3.51%, Taiwan -1.74%, Australia -1.10%, Singapore -1.39%, South Korea -1.77%, Bombay -2.96%.

Today’s weekly initial unemployment claims report is expected to fall –10,000 to 440,000, adding to last week’s decline of –10,000 to 450,000. Weekly continuing claims are expected to fall –12,000 to 3.405 million, reversing a small part of last week’s surge of +114,000 to 3.417 million. Today’s expected reports would leave the initial and continuing claims reports just mildly below their recent 6-year and 4-1/2 year highs, respectively. The initial claims report illustrates the high pace of new layoffs as businesses shed workers in anticipation of an extended period of weak economic growth.

Meanwhile, the 4-1/2 high in continuing claims indicates that the number of people on unemployment is accumulating, thus pushing the unemployment rate higher. The US unemployment rate will undoubtedly go even after hitting a 4-year high of 5.7% in July. The unemployment rate in the last US recessionary period peaked at 6.3% in June 2003, which is 0.6 points higher tha n the current level.

Today’s July leading indicators report is expected to show a decline of -0.2%, adding to the -0.1% decline seen in June. On a year-on-year basis, the June leading indicator index was down –2.1%, which was a 7-year low. The LEI is pointing to continued weak US economic growth going forward. The market consensus is that US GDP will slow to +1.2% in Q3 and +0.4% in Q4, and then rebound mildly higher to +1.4% in Q1-2009.