The US markets declined further on Wednesday after Fed Chairman Ben S. Bernanke refrained from taking action even as consumer spending flagged, job growth slackened and manufacturing cooled. The US central bank refrained from further easing moves, but noted economic activity had decelerated somewhat during the first half of the year and stated that it will pump fresh stimulus if necessary into the weakening economic expansion, to boost growth and reduce an unemployment rate that’s been stuck at 8 percent or higher for more than three years. The Federal Open Market Committee will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability. Before its next meeting to be held on September 12-13, the FOMC will assess unemployment reports for July and August.
Besides, the Institute for Supply Management’s manufacturing index remained under the 50% level for a second month. The latest snapshot of the US manufacturing industry suggests growth has cooled off considerably over the past few months. It’s the first time that’s happened since the tail end of the last recession. The Institute for Supply Management’s index was basically unchanged in July at 49.8% vs. 49.7% in June. Readings under 50% generally indicate that factory work is slowing; readings above that level indicate business is expanding. On the other hand, other report showed better-than-expected data on the labor market, which boosted optimism ahead of the government’s nonfarm payrolls data due on Friday. ADP Employer Services stated, companies added 163,000 jobs in July compared to a revised 172,000 in June. The private sector added 163,000 jobs in July, as employment growth ticked down from the prior month, according to data released. In June, private employment rose a revised 172,000, compared with a prior estimate of 176,000.
In Europe, ECB President Mario Draghi is attempting to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before policy makers convene a meeting tomorrow. Compared to the Fed, the expectation bar is far higher for European Central Bank meeting in the wake of comments last week. German Chancellor Angela Merkel and French President Francois Hollande echoed ECB President Mario Draghi in pledging to do whatever it takes to protect the euro. Separately, Euro-zone manufacturing recession deepened at start of the third quarter, final data from Markit Economics showed the manufacturing Purchasing Managers' Index for the euro-zone fell to a 37-month low of 44, down from 45.1 in June and below the earlier flash estimate of 44.1.
The Dow Jones industrial average lost 37.62 points, or 0.29 percent, to 12,971.10. The S&P 500 Index lost 4.18 points, or 0.30 percent, to 1,375.14, while the Nasdaq Composite was down by 19.31 points, or 0.66 percent, to 2,920.21.
The Indian ADRs closed mixed on Wednesday, HDFC Bank was up 0.51%, Infosys was up 0.32%, Dr. Reddy’s Lab was up 0.17% and Tata Motors was up 0.14%. On the flip side, Tata Communications was down 0.07%.
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