Financial markets were in a risk-off mode on Thursday as driven by weak Eurozone PMI, mixed US data and mixed comments from Fed officials concerning further monetary easing. Wall Street retreated steadily with the DJIA and the S&P 500 Indices losing -0.88% and -0.81% respectively. In the commodity sector, crude oil prices reversed gains after initially climbing higher. Gold, however, surged to as high as 1677.5 before settling at 1672.8, up 1.97%, taking cues from Chicago Fed President Charles Evans' supports for more easing and rumors Spain might request funding from the EFSF soon.
St Louis Fed President James Bullard commented more monetary easing might not be needed. He stated while the August FOMC minutes signaled additional easing measures are needed, these views were developed based on "old" data and "the minutes are a bit stale". Bullard believed that some data released after the meeting were stronger and he would not take action "right now" with the latest data on hand. His comments followed Atlants Fed's Dennis Lockhart who worried that the Fed might be moving "too aggressively". Chicago Fed President Charles Evans, however, believed there are many reasons for further stimulus as there's no need "to see any more data to know that I think we should have more accommodation". The upcoming Jackson Hole Symposium would be a key event as Fed Chairman Ben Bernanke would give his comments on the economic outlook and the likelihood of further easing.
There were reports that Spain has been negotiating with its European partners over conditions to seek financial assistance. This news lifted sentiment at one point. However, it was later denied by the EU Commissioner Rehn who stated that there are "no negotiations underway on any other sort of program". Recent data continued to show that the economic outlook in the 17-nation bloc remained weak. The Eurozone manufacturing PMI climbed +1.3 points to 45.3 in August, compared with market expectations of 44.2. The services PMI, however, fell to 47.5 from 47.9 in July. In Germany, the manufacturing PMI recovered to 42.1 in August from 43. However, the services PMI slipped to the contractionary territory to 48.3 in August.
In the US, new home sales soared +3.6% m/m to 372K in July. Sales exceeded market expectations of 362K and recovered all losses made in the previous month. House price purchase index gained +1.8% q/q in 2Q12. However, better-than-expected housing data were overshadowed by US Initial jobless claims which unexpectedly rose to 372K in the week ended August 18 from 366K in the prior week. The increase exceeded market expectations of 365K, sending the data to a one-month high. The four-week moving average, as a result, climbed to 368K. The focus today would be on durable goods orders which probably gained +2.0% m/m in July after adding +1.6% in the prior month. Excluding transportation, the reading would have added +0.5% after a drop of -1.1% in June.