On 18 March, 2015 – European markets were mixed due to concerns over Greece

Stocks were mixed in the Asia Pacific region and in Europe as investors waited for the Federal Reserve’s monetary policy decision.
United States
US stocks rallied after the Federal Reserve suggested a less aggressive timeline for raising interest rates. The Dow Jones industrials were up 1.3%, the S&P gained 1.2% and the Nasdaq added 0.9%. Investors had expected the Fed to signal that it was getting closer to raising rates for the first time in close to a decade. Instead, the Fed said that it needed to see further improvement in the job market and higher inflation before it raises interest rates.
As expected, the Federal Reserve eliminated the word ‘patient’ from its policy statement. Policy changes remains data dependent. At the same time, the FOMC left its policy fed funds rate unchanged at range of zero to 0.25% and said it would continue to reinvest its holdings of securities.
The FOMC released its latest forecasts for the economy. It lowered its forecasts for the unemployment rate as well as for GDP growth and inflation. The Fed appears to either be willing to accept lower unemployment or acknowledge that labour force participation is declining. The lowered forecasts support the Fed’s dovish statement.
In her press conference, Chair Janet Yellen emphasized the FOMC’s data dependency. Ms Yellen specifically noted that the removal of ‘patient’ does not mean the FOMC will be ‘impatient.’ According to the Fed chair, there has been no decision on the timing of a first rate increase.
The advance on the Dow was led by utilities. Utilities tend to benefit in a low interest rate environment as investors seek out the stocks in a search for income.
Gold at the afternoon London fixing was down US$3.50 to US$1,147.25. Copper futures were up 0.2% to US$2.64. WTI spot crude was up US$1.80 to US$45.26. Dated Brent spot crude was up US$3.24 to US$56.75. The US dollar dropped sharply against all of its major counterparts after the FOMC announcement. It was down against the euro, yen, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was down 3.2%. The yield on US Treasury 30 year bond was down 11 basis points to 2.50% while the yield on the 10 year note declined 14 basis points to 1.91%.
Europe
Stocks were mixed as investors waited for the Federal Reserve policy announcement that would come after markets here were closed for the day. Concerns regarding Greece also put a damper on risk. Greece reportedly frustrated its main creditors Tuesday by refusing to update Eurozone peers on its reform progress at a scheduled teleconference. The FTSE was up 1.6%, the CAC edged up 0.1% and the SMI added 0.6%. The DAX however retreated .05%.
Sweden’s central bank, the Riksbank, unexpectedly slashed its key interest rate on Wednesday and said it will buy more government debt, citing deflationary concerns due to a strengthening krona. The Executive Board, led by Governor Stefan Ingves, cut the repo rate by 15 basis points to minus 0.25%. Policymakers also decided to buy government bonds for SEK 30 billion, with maturities of up to 25 years.
UK Chancellor of the Exchequer George Osborne in his budget message, raised the economic growth forecasts for this year and next, but warned that any adverse development in Greece could significantly affect the economy. The growth forecast for this year was raised to 2.5% from 2.4% predicted by the Office for Budget Responsibility in its December autumn statement. The projection for next year was boosted slightly to 2.3% from 2.2%. The ILO unemployment rate was forecast to fall to 5.3% this year, while the inflation forecast was revised down to 0.2%.
BMW was lower after the company presented its forecast for 2015. Volkswagen and Daimler also declined as did Renault and Peugeot. Both RWE and E.ON advanced. Standard Chartered surged on a broker upgrade. Inditex, which reported annual results, gained in Madrid. Both Roche and Novartis were up. Financial stocks including Julius Baer, UBS and Credit Suisse advanced. Holcim surged. According to media reports, the company is involved in intense discussions with Lafarge on the terms of their merger deal. Shares in investment company Hargreaves Lansdown and wealth manager St James’s Place were up after the British government announced fresh changes to the savings system in its last budget before the May 7 general election.
Asia Pacific
Shares were mixed Wednesday. Mainland Chinese and Hong Kong stocks extended recent gains on hopes for more stimulus while in Japan, the market gained on optimism about increased shareholder returns. Elsewhere markets were flat with downward movements ahead of a key Federal Reserve meeting later today.
The Shanghai Composite added 2.1% as the index hit a seven year high as weak home price data helped fuel stimulus expectations. The Hang Seng was up 0.9%, buoyed by the rally in mainland shares. China’s average new home prices fell for the sixth straight month in February despite the government’s efforts to spur demand. New home prices fell an annual 5.7% following January’s 5.1% decline.
The Nikkei climbed to a fresh 15-year high, with a stable yen and hopes for an economic recovery underpinning investor sentiment. Wage increases at large firms fueled optimism about the economy. The Nikkei was up 0.6%, its highest level since April 2000. Nintendo soared 21% on news that it will finally make games for smartphones and tablets. Sony jumped after the company revised its third quarter operating profit upwards, but confirmed that it was on course to incur an annual loss. Toyota Motor gained on a Nikkei report that it will report record-breaking operating profit of ¥2.7 trillion this year. Japan’s trade deficit nearly halved from a year earlier in February. The monthly deficit stood at¥424.598 billion, beating expectations for a shortfall of ¥986.6 billion. While exports grew an annual 2.4%, imports dropped 3.6%.
Australian shares ended little changed ahead of the Fed decision. The S&P/ASX virtually unchanged while the All Ordinaries edged down 0.1%. BHP Billiton and Rio Tinto advanced even as iron ore prices hit a new six year low. Fortescue Metals plunged after it pulled an A$2.5 billion high yield bond issue, citing unfavorable debt markets. The Kospi inched down 0.1% even as foreign investors extended their buying streak to a fourth straight day. The Sensex lost 0.4% with investors adopting a cautious stance ahead of the FOMC meeting later in the Wednesday global market day. With key reform bills pending, the government is reportedly considering extending the first part of the Budget session by two more days.
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*
Thursday – the Swiss National Bank announces its monetary policy assessment. In the US, fourth quarter current account, March Philadelphia Fed Survey, February leading indicators and weekly jobless claims, money supply and Fed balance sheet will be released.
Friday – Germany posts February producer price index. The UK reports February public sector finances. Canada releases February consumer price index and January retail sales.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday