On 11 March, 2015 – Stocks mixed while dollar remains strong

Stock indices were mixed in the Asia Pacific region. European stocks rebounded from Tuesday’s losses while those in the US stabilized as investors reassessed Tuesday’s selloff.
United States
US stock indexes closed slightly lower, stabilizing a day after a global sell-off prompted by worries about higher US interest rates. The Dow Jones industrials, S&P and Nasdaq each lost 0.2%. Bargain hunting contributed to early strength. However, traders seemed reluctant to get back into the markets ahead of the Federal Reserve’s monetary policy meeting next week. On Tuesday, stocks in Europe and the US were battered as investors worried about the prospect of the Federal Reserve’s first interest rate increase in nine years. Those odds appeared to increase after the US government reported a burst in hiring last month. Low interest rates and other monetary stimulus have helped the S&P triple in price since the bull market began six years ago.
Apple was down after its iTunes and app stores suffered a rare outage that frustrated millions of users. Express was up after reporting fourth quarter results that exceeded expectations. Southwest Airlines gained after the airline said its flights were more crowded and a key revenue figure increased in February compared with a year earlier. Vera Bradley, a handbag and accessories company, retreated after the company reported fourth quarter results below estimates. Its updated outlook for the fiscal 2016 year also disappointed. Brown Shoe came under pressure after the footwear company reported fourth quarter earnings that beat estimates but provided disappointing guidance.
After markets closed, the Federal Reserve reported the final results of its stress tests. All US banks passed but two European banks — Deutsche Bank and Santander — did not. Santander has now failed the test, known as the Comprehensive Capital Analysis and Review (CCAR), two years in succession. Deutsche was tested for the first time this year.
Gold at the afternoon London fixing was down US$12.00 to US$1,150.00. Copper futures were down 0.6% to US$2.61. WTI spot crude was up 3 US cents to US$48.32. Dated Brent spot crude was up US$1.40 to US$57.79. The US dollar was up against all of its major counterparts including the euro, yen, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was up 1.4%. The yield on US Treasury 30 year bond was down 2 basis points to 2.68% while the yield on the 10 year note was 4 basis points lower at 2.11%.
Europe
European markets rebounded Wednesday, as weakness in the euro provided a boost to exporters’ shares. Meanwhile, representatives of the Greek government and the country’s international creditors will move to a ‘technical level’ of discussions later in the global market day to discuss the country’s economic reforms and unlock further funding. The FTSE was up 0.3%, the SMI gained 0.9% and the CAC and DAX added 2.4% and 2.7% respectively.
European Central Bank President Mario Draghi said Wednesday that the stimulus measures adopted by the ECB since January will stabilize inflation in line with the target and that they are working their way into the real economy. ECB and the national central banks began asset purchases under its public sector purchase program Monday. The decision to buy euro area government bonds had met strong opposition from German policymakers, who felt the deflation threat in Eurozone was not severe enough to warrant stimulus.
Auto makers including Volkswagen, BMW, Daimler, Renault and Peugeot gained on the day. Bayer increased after saying that it aims to achieve strong sales and earnings growth for its Life Science businesses in the coming years. E.ON gained after reporting financial results. Deutsche Post declined after its fourth quarter profit dropped. Société Générale, Crédit Agricole and BNP Paribas advanced. Miners including Fresnillo, Antofagasta and Glencore declined. Adecco surged after reporting financial results. Sika and Julius Baer gained as did Zurich Insurance and Syngenta. Geberit advanced. Credit Suisse was up after the company appointed a new CEO.
UK industrial and manufacturing output declined unexpectedly in January. Industrial output slipped 0.1% on the month while manufacturing was 0.5% lower.
Asia Pacific
Stock indices were mostly lower Wednesday as concerns over Greece’s debt talks, weak commodity prices and a soaring dollar on worries about the timing of a US interest rate increase kept investors on the sidelines.
The Shanghai Composite edged up 0.1% but the Hang Seng retreated 0.7%.
Disappointing economic data weighed on investors. Industrial output was up 6.8% in the first two months of 2015 on the year, down from 7.9% in December and missing the 7.6% forecast. Retail sales grew 10.7%, down from 11.9% in the preceding month and slower than forecasts for an increase of 11.6%. Similarly, fixed asset investment increased 13.9%, slower than an expected growth of 15%.
The Nikkei was up 0.3% thanks to a weaker yen and machinery orders came in slightly above market expectations, helping investors shrug off the selloff overnight. NTT Data, Nippon Soda, Kawasaki Kisen Kaisha and Ajniomoto rallied. Fast Retailing advanced along with Hitachi Construction Machinery and Komatsu. Mitsubishi UFJ Financial Group, Nikon and Inpex retreated. Sony advanced on news it will start selling its PlayStation 4 and PlayStation Vita videogame consoles in China from March 20, after months of delay. FamilyMart slumped after the convenience store operator confirmed earlier media reports that it has agreed to merge with smaller rival UNY Group Holdings in 2016. Japanese core machinery orders declined 1.7% in January after an 8.3% surge in December.
Both the S&P/ASX and All Ordinaries were down 0.5% after a senior central banker suggested there is room for more monetary policy easing at forthcoming meetings. BHP Billiton shares declined on going ex-dividend. Rio Tinto and Fortescue Metals also were lower. Rio Tinto said it expects about 85 million tons of excess supply to exit the global market this year. BHP Billiton also defended its business strategy to keep boosting iron-ore output at a time of falling prices and global oversupply. The four big banks retreated. Both the Kospi and Sensex were 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 releases February labour force survey. India reports February consumer prices and January industrial production. Germany and France post February consumer price indices. Eurozone releases January industrial production. The US releases February retail sales and import/export price indices and January business inventories along with the weekly jobless claims, Fed balance sheet and money supply data.
*Note — all releases are listed in local time.
Anne D Picker
Chief Economist
Econoday