On 24 July, 2015 – European markets slid on weak corporate earnings and a sharp fall in commodities

Major stock indices globally retreated on Friday and most were down on the week. Weak Chinese data and some disappointing earnings reports in the US led to the declines.
United States
US stocks dropped Friday thanks to disappointing quarterly results and outlooks from several companies. New signs pointing to a slowing of China’s economy also added to investor jitters, bringing down the price of oil and other commodities. While corporate profits have mostly exceeded expectations so far this earnings season, investors have grown uneasy as many companies provided cautious outlooks or weak sales.
The mixed company earnings increasingly weighed on stocks as the week wore on. Trading was choppy, with stock prices largely driven by corporate results. The focus on individual companies marked a turnaround from earlier this month, when all eyes were on developments in Greece’s bailout talks and China’s tumbling stock market. The Dow Jones industrials were down 0.9% while both the S&P and Nasdaq lost 1.1%. For the week, the indices declined 2.9%, 2.2% and 2.3% respectively.
Biotechnology company Biogen and pharmaceutical company AbbVie both reported a better than expected second-quarter profits, but their revenue fell short of forecasts. Both companies declined. Capital One Financial sank after announcing quarterly results a day earlier that failed to live up to analysts’ expectations. Anthem agreed to buy rival Cigna for US$48 billion in a deal that would create the nation’s largest health insurer by enrollment covering about 53 million US patients. Both stocks declined. Investors did welcome Amazon’s latest results. The company announced a surprise profit late Thursday.
Gold at the afternoon London fixing was dropped US$16.60 to US$1,080.80. Copper futures were down 0.1% to US$2.38. WTI spot crude was down 31 US cents to US$48.14. Dated Brent spot crude was down 65 US cents to US$54.62. The US dollar was up against the euro, Swiss franc and the Australian dollar. It was virtually unchanged against the pound, yen and the Canadian dollar. The Dollar Index edged up 0.1%. The yields on both the US Treasury 30 year bond and the 10 year note slipped 1 basis point to 2.96% and 2.26% respectively.
Europe
Shares declined to a new one week low Friday, with companies such as satellite operator SES slumping after a disappointing update and commodity shares tracking a sharp decline in mining and oil prices. The FTSE retreated 1.1%, the DAX lost 1.4% and both the CAC and SMI were 0.6% lower. The FTSE declined 2.9%, the DAX retreated 2.8% and both the CAC and SMI lost 1.3% on the week.
SES sank after cutting its full year revenue and profit guidance following a delayed satellite launch and a decline in earnings from fixed data customers due to the strong dollar. BASF was down after its earnings missed expectations. Volkswagen was down after Manager Magazin said the company’s China manager was readying a cost saving program because the carmaker’s full-year group profit could fall by more than €1 billion due to weak demand in the country. Aggreko plummeted after issuing a profit warning and Spain’s Abengoa tumbled despite saying it would act to prevent speculative trading on its debt, a day after losses for its bonds, credit default swaps and stocks. Thales climbed to an all-time high after its first half operating profit rose by a larger than expected 18% to €473 million, buoyed in part by a tighter grip on costs in its defense and security business. Rio Tinto, Glencore, BHP Billiton and Antofagasta all recorded heavy drops in the week as anxiety over ebbing demand in China alongside oversupply sent commodities into a broad retreat.
Asia Pacific
Stocks stumbled Friday after a survey showed China’s manufacturing activity crumbled to 15-month lows rekindling concerns about growth. The flash Caixin/Markit China manufacturing PMI dropped to 48.2 and the lowest reading since April last year. It was the fifth straight month below 50, the level which separates contraction from expansion. China’s disappointing data combined with South Korea’s weakest expansion in six years for the second quarter. At the same time, Japanese exports to China were relatively weak, reviving concerns of slowing corporate profits across Asia.
The Nikkei was down 0.7% even though Japan’s flash manufacturing PMI climbed to 51.4 in July from a final 50.1 in June, suggesting economic growth is picking up after an expected slump in the second quarter. The Nikkei lost 0.5% for the week. The IMF’s warning that Japan’s debt could rise three times the size of its economy by 2030 and that the country should not rely too much on the weak yen to boost growth also dampened investor sentiment. Among the stocks that declined were Mitsubishi, Japan Steel Works, Asahi Glass, Fast Retailing and Fanuc. Softbank retreated on a Nikkei report it is gearing up to issue euro-denominated bonds. Mitsubishi Motors slid on reports it will end production in the US and focus on the growing Asian market.
The Shanghai Composite ended down 1.3% Friday but still advanced for a third consecutive week, this time by 2.9%. Chinese stocks gave up earlier gains in the afternoon as investors opted to cash in on recent gains to protect themselves from market moving headlines this weekend according to some analysts. China’s securities regulators have been known to release policies over the weekend. The three week rebound came amid massive intervention measures from the government. The stock regulator has said the central bank would inject cash into regulator owned fund China Securities Financial Corp., which helps brokerages finance loans for stock buying. The Hang Seng declined 1.1% on the day and 1.1% on the week.
Both the S&P/ASX and All Ordinaries were 0.4% lower Friday and were down 1.8% and 1.7% respectively for the week. BHP Billiton retreated while Rio Tinto closed unchanged and Fortescue Metals advanced. Gold miners Newcrest and Evolution Mining slumped as spot gold prices dropped below the psychological threshold of US$1,080, resuming their slide after a brief respite on Thursday.
The Kospi was down 0.9% on the day and 1.5% on the week as foreign investors extended their selling spree to a sixth straight session in the wake of recent data showing slowing growth and worries over the timing of the first US Federal Reserve interest rate increase in nearly 10 years. The Sensex also lost 0.9% Friday and was down 1.2% on the week.
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*
Monday — Germany posts July’s Ifo survey. The Eurozone releases June M3 money supply data. In the US, June durable goods orders and July Dallas Fed manufacturing survey will be reported.
Tuesday — the UK reports its first estimate of second quarter gross domestic product. In the US, June S&P/Case Shiller house price index and July consumer confidence and Richmond Fed manufacturing index will be released.
Wednesday — Japan reports June retail sales. In the US, July pending home sales index is on tap. The FOMC announces its monetary policy decision.
Thursday — Japan posts June industrial production. Germany releases July unemployment. The Eurozone posts EC economic sentiment for July. The US releases its first estimate of second quarter GDP along with the weekly jobless claims, money supply and Fed balance sheet.
Friday — Japan reports June consumer prices, household spending and unemployment. Australia posts second quarter producer price index. France reports June consumption of manufactured goods and producer prices. The Eurozone reports flash harmonized index of consumer prices for July and June unemployment. in the US, final July consumer sentiment will be released.
*Note — all releases are listed in local time.