On 16 June, 2015 – European markets rebounded on German Chancellor Merkel’s statement on Greece

Stocks were mixed globally with Asian Pacific shares retreating and those in Europe and the US rebounding from previous losses.
United States
US stocks rebounded Tuesday after two days of losses as investors waited for news on Greece’s bailout talks and the outcome of the Federal Reserve’s policy meeting. Stocks also were boosted by deal activity in the consumer and healthcare sectors. The Dow Jones industrials and S&P were both up 0.6% while Nasdaq added 0.5%.
Aetna advanced after The Wall Street Journal reported that the UnitedHealth Group approached its rival health insurer about a deal. UnitedHealth also was up on the day. Coty surged on news reports that it had won an auction to buy several Procter & Gamble businesses. Aerie Pharmaceuticals soared after the Food and Drug Administration gave the pharmaceutical company clearance to amend the key goal of a late stage study on an eye drop Aerie is developing. Oshkosh retreated after the specialty truck & vehicle maker cut its full year profit forecast, citing bad weather and delayed product introductions. Microsoft and Oracle advanced. Monster Beverage jumped to lead consumer staples higher. United Rentals declined on a broker downgrade.
May housing starts declined after a sharp increase in April, but a surge in permits for future construction to a near eight year high suggested the pullback was temporary and pointed to underlying strength in housing.
Gold at the afternoon London fixing was down US$3.65 to US$1,177.75. Copper futures were down 1.1% to US$2.62. WTI spot crude was up 47 US cents to US$59.99. Dated Brent spot crude was down 19 US cents to US$63.76. The US dollar was up against the euro, Swiss franc and the Australian dollar. It was virtually unchanged against the yen and Canadian dollar. However, it declined against the pound. The Dollar Index was up 0.2%. The yields on both the US Treasury 30 year bond and 10 year note were down 4 basis points to 3.05% and 2.32% respectively. 
Europe
Stocks rebounded in late trading even though they were down initially due to concerns over Greece and over a disappointing German investor sentiment report. Greece remains at an impasse with its international creditors and the inability of the two sides to reach a compromise has led to worries about a potential Greek default at the end of the month. But the markets rebounded following comments made by German Chancellor Angela Merkel. Merkel stated that she is hoping for a Greek deal by Thursday. A meeting of the European finance ministers will be held in Luxembourg on Thursday. The FTSE was virtually unchanged (down 0.42 point) while the CAC, DAX and SMI all gained 0.5%.
But Greece was not the only situation that made investors wary. They will be watching for developments from the Federal Reserve monetary policy meeting, which will conclude on Wednesday. A bond buying program announced by the European Central Bank in 2012, which helped to calm the financial markets amid the peak of the sovereign debt crisis, was upheld by the top EU court on Tuesday, further strengthening ECB President Mario Draghi’s crisis fighting efforts. Responding to a challenge from German politicians and academics, the European Court of Justice in Luxembourg said the outright monetary transactions (OMT) program is compatible with EU law.
Henkel slipped after the company’s US rival Coty has reportedly won an auction to buy certain businesses from Procter & Gamble. Bayer, Merck, Fresenius and Fresenius Medical Care all advanced. Deutsche Lufthansa retreated. Automakers Renault and Peugeot gained on the day. Both Alcatel-Lucent and Orange were up. Ashtead Group declined after its fourth quarter report. British American Tobacco gained on a broker upgrade. GlaxoSmithKline was up on takeover speculation. Ladbrokes was up on a broker upgrade. However, mining stocks were weak as metal prices declined.
Germany’s investor sentiment weakened for a third straight month in June to its lowest level in seven months as fears of a ‘Grexit’ intensified. June ZEW economic sentiment dropped to a reading of 31.5 from 41.9 in May. The decline in UK consumer prices proved to be short lived as they increased in May, while factory gate prices continued to decline.
Asia Pacific
Stocks here declined broadly Tuesday as investors adopted a cautious stance ahead of a new round of talks between Greece and its creditors on Thursday and the two day US Federal Reserve meeting that began later in the global market day.
The Shanghai Composite dropped 3.5% — the most in nearly three weeks — as margin tightening worries and signs of stepped up IPO issuance prompted some bearish traders to lock in recent gains. The Hang Seng retreated 1.1% to a 10 week low, ahead of this week’s vote on a contentious electoral reform package backed by Beijing.
The Nikkei was down 0.6% in cautious trading as investors looked ahead to the Federal Reserve and Bank of Japan monetary policy announcements on Wednesday and Friday respectively. The yen weakened against its major rivals after Bank of Japan Governor Haruhiko Kuroda said he hadn’t meant to predict the future movement of yen in remarks last week that sent the currency climbing against the US dollar. Banks including Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial declined. Automaker Toyota Motor slid after it won a controversial investor vote on issuing a new class of shares to long-term shareholders. Suzuki Motor was down after signing a pact with Proton Holdings to rebadge compact cars. Fast Retailing eased after it joined hands with consulting firm Accenture to develop digital innovation in customer service.
Both the S&P/ASX and All Ordinaries edged down 0.1% in volatile trading after minutes of RBA’s June board meeting offered no clues on when the central bank might cut interest rates again. Miners retreated while banks advanced. The Kospi lost 0.7%. Sentiment was hit by worries about a Greek default and the MERS outbreak as South Korea’s health ministry reported three more fatalities. The Sensex added 0.4%. Merchandise trade data for May painted a mixed picture of the domestic economy, with the deficit narrowing to a three month low, helped by lower gold imports.
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 reports May merchandise trade balance. The Bank of England publishes minutes from the monetary policy committee meeting held earlier this month. The UK reports May labour market report. The Eurozone releases final harmonized index of consumer prices for May. In the US, the Federal Reserve publishes the FOMC announcement and its forecast updates. Chair Janet Yellen holds her quarterly press conference.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday