On 4 March, 2015 – European stocks rose but investors were cautious before European Central Bank meeting

Stock indices were mixed Wednesday. Declines in the Asia Pacific region and the US were partially attributed to profit taking after recent gains. Caution before the European Central Bank and the US employment report was also evident.
United States
Stocks retreated Wednesday, pulling indexes further below recent closing highs. The drop was modest but broad — nine of the 10 sectors in the S&P lost ground. The Dow Jones industrials were down 0.6%, the S&P lost 0.4% and the Nasdaq was 0.3% lower. The early weakness was partly due to profit taking, with traders continuing to cash in on the strength seen over the past few weeks. Healthcare stocks were the only bright spot after a US Supreme Court hearing and a cancer drug approval.
Alcoa sank on a broker downgrade. Abercrombie & Fitch dropped after it posted quarterly profits that beat analysts’ estimates but its sales fell short. A top executive at the retailer warned that it will likely face trouble from a stronger dollar.
In economic news, the ADP private payrolls report said that 212,000 jobs were added in February. The February ISM nonmanufacturing index edged up to a reading of 56.9 from 56.7 the month before.
The Federal Reserve published its Beige Book in preparation for its March 17 and 18 FOMC meeting. It stated that the US economy continued to expand across most of the country amid broad based hiring and rising consumer spending. Some points of concern included the bad weather in the Northeast, the impact of lower oil prices on businesses in the industry and the West Coast port dispute that slowed trade. These were counterbalanced by auto sales were rising, manufacturing increased and rising loan demand. Payrolls “remained stable or expanded” across broad range of sectors, though “wage pressures remained moderate and were limited largely to workers in skilled occupations. Prices for goods and services were flat or increasing slightly. The Fed found modest or moderate growth in eight of its 12 districts. Elsewhere the pace of economic activity was increasing only slightly or slowing.
“Both the New York and Boston Districts reported that harsh winter weather negatively affected retail business in their Districts,” according to the Beige Book. “However, the Boston and Cleveland Districts also reported increased sales of winter-related items such as winter apparel, rock salt and snow shovels.” A work slowdown at West Coast ports hurt agricultural exports cargo volumes at some Midwest trucking firms, but boosted traffic at East Coast ports. Energy-related activity took a hit as crude oil prices remained low.
Gold at the afternoon London fixing dropped US$13.25 to US$1,199.50. Copper futures were up 0.1% to US$2.66. WTI spot crude was up US$1.26 to US$51.78. Dated Brent spot crude was down 66 US cents to US$60.36. The US dollar was up against the euro, pound and Swiss franc. It was virtually unchanged against the yen and Australian dollar. However, it declined against the Canadian dollar. The Dollar Index was up 0.8%. The yields on both the US Treasury 30 year bond and 10 year note were unchanged on the day at 2.71% and 2.12% respectively.
Europe
European markets advanced Wednesday even though investors remained cautious ahead of Thursday’s European Central Bank meeting, which will be held in Cyprus. The ECB is expected to provide details on its quantitative easing measures. The FTSE and SMI added 0.4% while the CAC and DAX gained 1.0%.
Henkel was down after reporting full year results. Deutsche Telekom was up on a broker upgrade. Auto makers Daimler, BMW, Volkswagen, Renault and Peugeot advanced. Axel Springer declined after the company announced that it expects full year 2015 earnings and revenues to increase due to an increase in ad revenues. However, the company’s dividend proposal was unchanged from the prior year. Investment firm Aurelius was up despite a broker downgrade. Air France-KLM declined on a broker downgrade. Fresnillo dropped after reporting decreased profit for the year. Glencore, Anglo American, Rio Tinto and Randgold Resources retreated. Legal & General was down after reporting annual results. ITV climbed after announcing a special dividend. Standard Chartered was up after it announced financial results. IAG surged in late trading to close 2 higher after reporting a 5.5% increase in group traffic in February. British broadcaster ITV jumped after the company said it plans to return £250 million to shareholders through a special dividend after posting a better than expected 2014 profit.
Economic data from the Eurozone was mixed, with an unexpected increase in retail sales but a downward revision from the flash estimate of February composite PMIs. US economic data were also mixed. Eurozone retail sales growth accelerated unexpectedly in January on both food and non-food turnover. Retail sales were up 1.1% on a monthly basis after increasing a revised 0.4% growth in December. UK service sector expansion slowed unexpectedly in February with the services PMI slipping to 56.7 in February from 57.2 in January.
Asia Pacific
Stocks here were mostly lower Wednesday as caution set in ahead of a European Central Bank meeting Thursday and the all-important US employment report due on Friday.
The Sensex jumped over the 30,000 mark for the first time ever after the Reserve Bank of India (RBI) surprised markets with a 25 basis point interest rate cut to 7.5%. However, the index ended down 0.7% on selling of metal, banking and IT stocks. Investors locked in profits at higher levels as they waited for the outcome of the European Central Bank meeting on Thursday and the US employment report.
The Shanghai Composite rebounded 0.5% after Tuesday’s 2.2% loss. Activity in China’s services sector grew moderately in February as new orders rose at their quickest pace in three months according to the HSBC China Services Business Activity Index. The reading rose slightly to 52.0 from January’s six month low of 51.8. The Hang Seng retreated 1.0%.
The Nikkei dropped to a one week low as the yen strengthened and investors developed cold feet on concerns over valuation following solid gains over the last month. The Nikkei was down 0.6%. Sumco dropped on equity dilution worries after it filed shelf registration to issue up to ¥60 billion in common shares. Struggling electronics firm Sharp retreated as further details emerged of its plans to request capital infusion from its two main creditors. Panasonic edged up while Sony Corp was down. Tokyo Electron declined after announcing partial changes in its organization structure. Automakers including Suzuki Motor, Mazda, Toyota, Honda Motor and Nissan Motor declined across the board. Mitsubishi UFJ Financial, Sumitomo Mitsui Financial Group and Mizuho Financial were down on the day. Nippon Steel & Sumitomo Metal after the steel producer said that it would shut a blast furnace in Kokura, western Japan, and spend ¥1.35 trillion to upgrade facilities over the next three years.
Both the S&P/ASX and All Ordinaries were down 0.5% with banks under selling pressure, weighed down by Tuesday’s Reserve Bank of Australia’s interest rate decision and weak GDP data. December GDP grew by a softer than expected 0.5% in the fourth quarter following a 0.4% expansion in the previous three months. GDP grew 2.5% when compared with the same quarter a year ago. The Kospi was down 0.2%.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Australia reports January merchandise trade and retail sales. The Bank of England and European Central Bank both announce their monetary policy decisions. France posts fourth quarter unemployment. Germany releases January manufacturers’ orders and Italy posts its second estimate of fourth quarter GDP. January factory orders along with the weekly jobless claims, money supply and Fed balance sheet will be released in the US.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday