On 26 March, 2015 – Global markets retreated primarily due to Middle East political concerns

US markets fell, but economic data and earnings helped to stem the decline. European markets also retreated, though energy and mining stocks performed well. Asian markets slid in line with US equities.
United States
US stocks fell for a fourth straight session on Thursday but indexes ended well off session lows with support from economic data and earnings. Investors continued to watch the Middle East, where Saudi Arabia has launched strikes on key military installations in Yemen. The price of oil rose. Despite the tension in the Middle East and the plane crash in Europe, investors were generally not moving into traditional havens of safety. Bond prices fell, gold prices were up only slightly and dividend paying stocks were lower. The Dow Jones industrials and S&P were down 0.2% while the Nasdaq lost 0.3%.
In Yemen, Saudi Arabia launched air strikes, along with others, in an effort to oust Shiite rebels that forced the country’s embattled president to flee. Yemen, which is located on the Arabian peninsula southwest of Saudi Arabia, plays a crucial geographic role in the world’s oil supply. All oil tankers going through the Suez Canal must navigate around Yemen, which makes any turmoil there particularly troublesome for the oil market.
Utilities led the decline while technology stocks were little changed after recording their biggest one day drop in roughly one year on Wednesday. SanDisk dropped after the maker of flash memory chips cut its revenue forecast. The company said sales of some of its products were weaker than expected and prices were falling. Lululemon Athletica advanced after the apparel maker posted better than expected quarterly results. Accenture gained after the firm raised its revenue growth target on a local currency basis.
Gold at the afternoon London fixing was up US$7.55 to US$1,203.15. Copper futures were up 0.5% to US$2.81. WTI spot crude was up US$2.12 to US$51.33. Dated Brent spot crude was up US$2.56 to US$59.04. The US dollar was up against the euro, pound, Swiss franc and the Australian dollar. However, it declined against the yen and the Canadian dollar. The Dollar Index was up 0.5%. The yield on US Treasury 30 year bond was up 10 basis points to 2.60% while the yield on the 10 year note added 8 basis points to 2.00%.
Europe
European stocks sold-off sharply Thursday as geopolitical concerns weighed on investor sentiment. However, the markets were able to pare some of their losses in afternoon trading after the US equity markets turned positive. Energy and mining stocks were among the best performers thanks to an increase in oil and commodity prices. The FTSE was down 1.4% and the SMI lost 1.2%. The CAC and DAX retreated 0.3% and 0.2% respectively.
Saudi Arabia and its allies launched air strikes against the Houthi rebels in Yemen, who recently overthrew the nation’s president. The Saudi ambassador in the US said the military action was aimed to defend the ‘legitimate government’ of Hadi, who has taken refuge in the southern port city of Aden. The news has led to worries about a broader sectarian conflict in the Middle East, as the Saudis consider the Houthi rebels as proxies for Iran.
Bayer declined on a broker downgrade. Deutsche Lufthansa dropped after new details emerged about Tuesday’s Germanwings plane crash. Banks including Commerzbank, Deutsche Bank, Crédit Agricole and Société Générale were down. However auto makers BMW and Daimler advanced. Alcatel-Lucent and Orange declined. The London Stock Exchange Group sank after Börse Dubai sold its entire stake in the exchange operator. Both International Consolidated Airlines and EasyJet retreated.
Asia Pacific
Most Asia Pacific markets declined Thursday after US stocks suffered their third straight session of declines Wednesday due to losses in technology and biotech shares. A dearth of economic data and concerns about the political situation in Yemen also kept investors risk shy.
The Nikkei dropped the most in 10 weeks, as concerns over the pace of US economic recovery and rising geopolitical risks in the Middle East sent investors into traditional safe haven assets including the Japanese yen. The index lost 1.4%, its biggest single day loss since January 14. Tokyo Electron, Sumco and Advantest retreated after a slump in technology and biotech stocks sent the Nasdaq to its biggest decline in nearly a year during the Wednesday global market day. Fujitsu and Sony also declined. Shipping line Nippon Yusen KK and Mitsui OSK Lines were lower. Inpex however advanced as oil prices received a boost from a weaker dollar and fresh concerns about supply disruptions amid the escalating conflict in Yemen. Sharp dropped on rumors it plans to reduce pay for its managers and other workers in fiscal 2015. Sumitomo eased after it warned of an annual net loss of ¥85 billion due to additional write-downs on a US shale oil project and on a Brazilian iron ore project. Toyota Motor was down on a Nikkei report that it will roll out more hybrid vehicles in Japan.
Australian shares fell the most in 3-1/2 months. The benchmark index S&P/ASX 200 dropped 1.6% while the All Ordinaries was 1.5% lower. Banks paced the declines. Bank of Queensland tumbled after the lender issued a cautious outlook for the short to medium term after posting a record half year cash profit. Fortescue Metals Group climbed after it founder Andrew Forrest stood by his comments made in Shanghai on Tuesday in relation to big miners capping iron ore production. BHP Billiton and Rio Tinto shed 0.6% declined as did Newcrest Mining.
The Shanghai Composite however, added 0.6% on expectations the government will unveil more stimulus measures to bolster the flagging economic growth. The Hang Seng edged 0.1% lower. The Kospi lost 1.0% after a report showed inflation expectations in the country over the next 12 months fell to a record low of 2.5% in March. Also, consumer confidence in South Korea dipped to a three-month low in March on the back of weakening prospects on household income and spending, fueling speculation the authority will ease its monetary policy further. The Sensex dropped for a seventh consecutive session on Thursday, with key benchmark indexes tumbling over 2% to hit 10-week lows after Saudi Arabia and its Gulf Arab allies started bombing rebel targets in Yemen.
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*
Japan releases February unemployment, consumer prices, household spending and retail sales data. The US posts the final estimate of fourth quarter GDP and final March consumer sentiment.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday