On 25 March, 2015 – European markets declined on weak US economic data
Stocks were mixed in the Asia Pacific region but dropped in Europe and the US thanks to a poor US durable goods orders report.
United States
US stocks dropped Wednesday for a third day, this time thanks to a slump in technology and biotech shares. An unexpected drop in durable goods orders also contributed to the downward pressure. The Dow Jones industrials dropped 1.6%, the S&P declined 1.5% and the Nasdaq plummeted 2.4%.
HJ Heinz and Kraft Foods announced plans to merge in a deal that would create one of the world’s largest food companies. The merger was engineered by Heinz’s owners, Berkshire Hathaway and the Brazilian investment firm 3G Capital. It still needs approval from federal regulators and Kraft shareholders. Kraft’s stock soared. Lam Research, Avago Technologies and Nvidia declined.
Orders to American factories for durable goods declined in February for the third time in four months. Durable goods orders dropped 1.4% as demand for commercial aircraft, cars and machinery waned. Traders said the surprise decline in durable goods orders set the negative tone for the day, which was dominated by short-term investors. Losses deepened around midday, led by declines in biotechnology and semiconductor stocks. However, investors snapped up energy stocks as the price of crude oil continued to gain.
Gold at the afternoon London fixing was up US$4.10 to US$1,195.60. Copper futures were down 0.4% to US$2.79. WTI spot crude was up US$1.39 to US$48.90. Dated Brent spot crude was up US$1.12 to US$56.23. The US dollar was up against the Swiss franc and the Canadian and Australian dollars. However, it declined against the euro, yen and the pound. The Dollar Index was down 0.4%. The yield on US Treasury 30 year bond was up 4 basis points to 2.50% while the yield on the 10 year note was up 5 basis points to 1.92%.
Europe
Shares declined Wednesday. Early losses in Europe deepened after weak durable goods orders dragged US markets lower despite the better than expected German business confidence report. The markets weakened after the Euro gained ground against the US dollar. The FTSE was down 0.4%, the CAC declined 1.3%, the DAX lost 1.2% and the SMI retreated 1.1%.
Greece needs to come up with a list of reforms by early next week to get fresh aid from its creditors and avoid a messy default. Government spokesman Gabriel Sakellaridis stated yesterday that the detailed reform proposals would be delivered by Monday at the latest. Greece will run out of money by April 20 without any release of funds.
Deutsche Lufthansa declined after the Germanwings crashed in the French Alps Tuesday. Airbus also dropped after Tuesday’s crash. The company also plans to sell about 1.38 million shares that it owns in Dassault Aviation. Munich Re and United Internet were down on broker downgrades. Both RWE and E.ON advanced. TUI gained after it said it would cancel and repay its €300 million hybrid bond at nominal value plus accrued interest. Barclays retreated on a broker downgrade. Balfour Beatty advanced after the company reported a wider annual loss and suspended its dividend for a year. However its underlying revenue from continuing operations grew 2% in constant currency. Bellway climbed on impressive first half results. Travel firm TUI gained after it said it was confident of meeting a target to lift full year underlying operating profit by 10 to 15%, helped by rising holiday sales and prices.
German March business morale improved for the fifth straight month to an eight-month high in March as firms expressed greater optimism about future developments. The Ifo business climate index climbed to 107.9 from 106.8 in February. This was the highest score since July 2014 when the reading was 108. French business confidence weakened in March but remained close to its long-term average.
Asia Pacific
Stocks were mixed in a lackluster trading session. Fluctuations in oil prices and uncertainty over the direction of US monetary policy offset upbeat data from the US and Europe.
The Shanghai Composite declined for the first time in 11 days. The index dropped 0.8% to ending its longest winning streak since May 1992 after Agricultural Bank of China posted profits for 2014 that undershot expectations. The Hang Seng was up 0.5% aided by a rally in Hutchison Whampoa after it agreed to buy O2, the British cellphone carrier owned by the Spanish telecommunications giant Telefónica.
The Nikkei posted modest gains before stocks go ex-dividend on Friday. The index edged up 0.2%. Exporters ended with mixed, with Fanuc, Sony and Sharp retreating while Honda Motor, Nikon and Mazda Motor advanced. Eisai dropped on profit taking after recent sharp gains as its partner Biogen revealed promising early data from an experimental Alzheimer’s treatment. Santen Pharmaceutical Company soared after the drug maker raised its profit forecast.
The S&P/ASX inched up 0.1% while the All Ordinaries was virtually unchanged. The big four banks advanced. Miners were mixed with BHP Billiton and Rio Tinto declining while Fortescue Metals Group and Newcrest Mining advanced. The Kospi was up 0.1% amid a lack of fresh triggers to drive the market higher. South Korea’s fourth quarter GDP expanded 0.3% on the quarter and 3.3% on the year. The Sensex slipped 0.2%, its sixth consecutive decline.
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*
France posts final estimate of fourth quarter GDP. The UK releases February retail sales. The Eurozone posts February M3 money supply. In the US, weekly jobless claims, money supply and Fed balance sheet will be reported.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday