NY market down, soft US manufacturing concerns: morning market insights

The New York Stock Exchange fell overnight after a report showed US business growth was tepid – the slowest since November 2009, with soft manufacturing activity in the huge commercial centres of Dallas and Chicago resurrecting concerns about the state of America’s recovery.

The Institute for Supply Management-Chicago said business activity in the mid-west slowed during April. The ISM-Chicago index fell 62.2 in March to a 56.2 reading for April — it’s lowest since the 2009 global financial crisis.

The Dallas Federal Reserve Bank manufacturing index fell to a -3.4 reading in April from 10.8 in March. The US Commerce Department said consumer income rose 0.4% last month, adding some good news.

Spain’s government announced it went into recession overnight, a week after the UK announced it was in recession.

“Europe is in a chronic situation,” Russ Koesterich, San Francisco-based global chief investment strategist for the IShares unit of BlackRock, told Bloomberg.

His firm oversees $3.68 trillion and he said: “Even under a best case scenario where there’s no banking crisis the reality is it’s going to be a very slow process. While you’ve got evidence that the US is recovering, the rebound will be uneven.”

The S&P500 Index dropped overnight, finishing down 0.39% to 1397.91.

The Dow Jones Industrial Average was down 0.11% or 14.68 points to 13213.60.

The NASDAQ Index fell 0.74% or 22.84 points to 3046.36.

Barnes & Noble (BKS: US) soared 52% after Microsoft (MSFT: US) said it plans to invest $300 million in a joint venture with the biggest bookstore chain in the US – Barnes & Noble has more than 705 retail outlets and 636 university bookshops.

Barnes & Noble CEO William Lynch said the partnership with Microsoft will boost its expansion into international markets.

“We don’t aspire to be anything less than being a leader in international markets when we launch,” Lynch told Bloomberg.

“We couldn’t have done a better deal and had a better partner than Microsoft that allows us to compete internationally.”

The new subsidiary combines Barnes & Noble’s Nook e-reader and university bookstore businesses.

Microsoft will own about 18% of yet to be named unit and Barnes & Noble will own the balance. The investment values the unit at about $1.7 billion, which is more than Barnes & Noble’s total market capitalisation.

The West Texas Intermediate (WTI) oil price was down slightly, 0.06% to $US104.87 a barrel overnight.

Gold was also slightly down overnight at 0.04% and trading at $US1664.20 an ounce.

The Australian dollar was slightly up, buying $US1.0427 at 8am AEST.

Europe

European stocks fell after investors realised the Spanish problem was still looming.

Spain’s economy officially entered its second recession since 2009 as gross domestic product contracted 0.3% in the first quarter.

This week the UK fell into another recession while Spain’s official unemployment rate has hit a record high 24.4%.

There are now at least a dozen European countries in recession and the continent may have entered an economic downturn.

The London FTSE 100 closed down overnight, 0.68% to 5737.78.

The German DAX was down 0.59% or 40.13 points, to 6761.19 and the European Stoxx50 index fell 1.60% to 2306.43.

Europe is the world’s biggest consumer of goods and Ford said it expects to lose up to $US600 million ($AU575.8 million) in Europe this year.

Ford chief financial officer Bob Shanks said the European business model clearly isn’t profitable.

“We’re starting from the point of view that the economic environment and the issues associated with (European) sovereign debt are going to be around for quite some time,” Shanks told CNN Money.

He said he is not expecting European sales to return to normal levels for at least four or five years.