On 12 March, 2015 – US stocks rally, led by banks

Stock indices were mixed in the Asia Pacific region and Europe but rebounded strongly in the US helped by a rally in banking shares.
United States
US stocks closed higher Thursday, rebounding from two days of losses, helped by a weaker dollar and a rally in banking shares. The Dow Jones industrials were up 1.5%, the S&P advanced 1.3% and the Nasdaq added 0.9%. Financials led the rally after the Federal Reserve did not fail any of the big US bank’s capital plans, allowing for an increase in dividend and share buyback programs that had been slashed at the height of the financial crisis. Both cyclical and defensive industries including consumer staple and discretionary companies, utilities, industrial and telecoms advanced as the dollar weakened from its recent rapid rise. Only the energy sector within the S&P declined following lower crude oil prices Thursday.
Some investors attributed Thursday’s rally in part to the weak retail sales report. February retail sales unexpectedly dropped for a third month in February. A pause in the dollar’s rally helped ease worries about corporate profits and eased the outlook for first quarter growth and a June interest rate increase by the Federal Reserve.
United Technologies said it would explore strategic alternatives for its Sikorsky Aircraft business, which is known for its Black Hawk helicopters. Intel cut its revenue outlook for the current quarter, blaming weaker than expected demand for business desktop computers and lower inventory levels across its personal computer supply chain. Citigroup advanced after it passed the Federal Reserve’s stress tests, allowing it to raise payouts. However, Bank of America was down after it was told to get a better grip on internal controls and its data models. Lumber Liquidators gained in volatile trading. The company, facing US government investigations over claims of dangerous levels of a cancer-causing substance in its flooring products, stood by the safety its products and offered free indoor air quality testing for qualifying consumers.
Gold at the afternoon London fixing was up US$2.25 to US$1,152.25. Copper futures were up 2.0% to US$2.66. WTI spot crude was down US$1.14 to US$47.03. Dated Brent spot crude was down 34 US cents to US$57.20. The US dollar was down against the euro, yen, Swiss franc and the Canadian and Australian dollars. However, it gained against the pound. The Dollar Index was down 0.5%. The yield on US Treasury 30 year bond was up 1 basis point to 2.69% while the yield on the 10 year note was unchanged at 2.11%.
Europe
Markets were mixed Thursday with mining and energy stocks among the best performers as commodity prices recovered a bit of ground. Economic data, which was sparse earlier this week, was abundant today. Eurozone industrial production declined unexpectedly in January. Data from the US was mixed, with an unexpected drop in retail sales but a larger than expected decrease in weekly jobless claims. The FTSE and SMI added 0.6% and 0.1% respectively while the CAC and DAX edged down 0.2% and 0.1%.
Deutsche Lufthansa declined after its full year profit decreased from a year ago. Hugo Boss was down after it reported lower fourth quarter profit. K+S gained after it reported fourth quarter results. Technip climbed but Total retreated. Home Retail dropped after it reported weak sales at its Argos and Homebase business units in the final eight weeks of the full year. Serco Group sank after it reduced its full year dividend. ITV climbed after it agreed to acquire Talpa Media BV. Wm Morrison Supermarkets advanced despite a drop in its 2015 profit and a dividend cut. SABMiller increased on a broker upgrade. TSB, which was spun off from Lloyds gained after it received a takeover bid from Spain’s Sabadell. AstraZeneca advanced on hopes for positive news on its key heart drug Brilinta when full clinical trial results are presented at weekend.
Eurozone industrial output declined 0.1% unexpectedly in January as the impetus from the weaker euro and oil prices were insufficient to maintain the growth in production. The UK January visible trade deficit narrowed largely due to a decline in oil imports. The visible trade deficit narrowed to £8.4 billion in January from £9.9 billion in December.
Asia Pacific
Most markets rallied Thursday with Mainland Chinese shares leading the way on hopes for new stimulus measures while Japanese shares followed on optimism about economic recovery. A weaker yen, encouraging Australian employment data and upbeat comments from ECB head Mario Draghi on quantitative easing, inflation and eurozone growth also helped investors shrug off the lackluster performance of US shares on Wednesday.
The Shanghai Composite jumped 1.8% to a six week high led by banks as credit growth topped estimates and brokerages Barclays and Nomura predicted faster cuts in interest rates and lenders’ reserve requirement ratios. The Hang Seng added 0.3% with mainland banking stocks pacing the gainers after Beijing unveiled plans to let local governments swap out expensive debt.
The Nikkei jumped 1.4% and in the process briefly climbed above the 19,000 level for the first time in nearly 15 years on optimism about the domestic economy. Fast Retailing, Fanuc and SoftBank gained. Toyota Motor advanced on reports it is likely to agree to a bigger wage increase for 2015. Exporter Nikon, Panasonic and Honda Motor were up boosted by a weaker yen. Fujitsu gained on a Nikkei report that its free cash flow will top ¥100 billion for the first time in five years in the coming fiscal year.
The S&P/ASX rallied 1.0% while the All Ordinaries added 0.9% after the employment report largely met expectations and investors thronged to stocks with high dividend yields. The four big banks advance. However, miners BHP Billiton, Rio Tinto and Fortescue Metals Group retreated after the spot price of iron ore fell further Wednesday amid rising supply, mainly from Australia and Brazil. The economy added 15,600 jobs in February while the unemployment rate slipped to 6.3% from 6.4%.
The Kospi was down 0.5%. The Bank of Korea unexpectedly cut interest rates for the first time in five months to boost sluggish growth and prevent the nation from falling into deflation. The BoK lowered the seven day repurchase rate by 25 basis points to a record low of 1.75%. The Sensex rebounded 0.9% amid reports that the Modi government has struck a deal with Congress to ensure a smoother path for the Insurance Laws Amendment Bill in the Rajya Sabha.
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*
Canada posts its February labour force survey. The US reports February producer price indices and preliminary March consumer sentiment.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday