On 29 July, 2015 – Shares rally after FOMC leaves policy unchanged

Stocks advanced Wednesday as investors in Asia and Europe waited for the FOMC announcement that would be posted after their respective markets closed. US shares rallied after the FOMC left its policy unchanged.
United States
US stocks rallied thanks to better than forecast earnings and after the Federal Reserve said the labor market has improved as it moves closer to raising interest rates. Both the Dow Jones industrials and the S&P added 0.7% while Nasdaq climbed a modest 0.4%.
Twitter tumbled as its top executives struck a critical tone on user growth. Microsoft was up amid a low-key introduction for its Windows 10 operating system. MasterCard erased an earlier drop to climb even as it said that profit fell 1.1% as expenses rose and a strengthening US dollar hurt earnings overseas. Yelp plunged after the customer review website reduced its revenue forecast and at least five analysts downgraded the stock. In addition to cutting its third quarter sales prediction, Yelp announced it would stop selling national brand advertising. Facebook posted a 39% increase in second quarter revenue. The company reported revenue of US$4.04 billion for the three month period ended June 30, compared with US$2.91 billion a year earlier. General Dynamics advanced to hit a record high after its earnings announcement. It sparked a sector-wide rally across major aerospace stocks including Northrop Grumman, Spirit AeroSystems, Lockheed Martin and Transdigm Group.
As almost universally expected, the Federal Reserve left its fed funds interest rate range at zero to 0.25% at today’s FOMC meeting. The statement was little changed from the June meeting although the committee did add the word ‘some’ to its description of the improvement it is looking for in the labor market. The FOMC said that it would “be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market”, suggesting the data only need to improve modestly from current levels to warrant a rise in interest rates. The Fed said economic growth continued to meet its expectations, and it indicated officials did not need to see much more progress before raising rates.
Gold at the afternoon London fixing was down US$5.95 to US$1,090.25. Copper futures were up 0.4% to US$2.41. WTI spot crude was up 89 US cents to US$48.87. Dated Brent spot crude was up 27 US cents to US$53.57.The US dollar was up against the euro, yen, Swiss franc and the Canadian and Australian dollars. It was virtually unchanged against the pound. The Dollar Index was up 0.7%. The yield on US Treasury 30 year bond and 10 year note were up 3 basis points to 2.99% and 2.28% respectively.
Europe
Stocks mostly advanced Wednesday for a second day. Continued strength in corporate financial results coupled with signs of stabilization in China provided a boost to investor sentiment. Chinese authorities hinted at more policy easing to boost liquidity and pledged to buy shares to stabilize the market following record losses earlier in the week. The FTSE and SMI both gained 1.2% while the CAC was up 0.8% and the DAX added 0.3%. Investors were waiting for the Federal Reserve’s monetary policy announcement which was published after markets here were closed for the day.
Bayer increased after its second quarter earnings beat analysts’ estimates. However, Volkswagen tumbled after the automaker posted higher quarterly profit but lowered its sales guidance, citing slowing demand in China. HeidelbergCement sank after it entered into a purchase agreement with Italmobiliare for its about 45% shareholding in Italcementi. Total advanced after the company posted a 4% decline in second quarter net profit amid a steep drop in the price of oil. LVMH rallied after it reported a 5% increase in first half net profit, as sales jumped 19% driven by strong growth in Europe and the United States. Peugeot gained after it reported net income for the first half of 2015 of €571 million compared to loss of €114 million in the previous year. Tate & Lyle surged after the company retained its guidance for the full year, saying that its first quarter trading performance was in line with expectations. Barclays and British American Tobacco gained after the companies posted solid results. Hikma Pharmaceuticals was up on a broker upgrade. Sky was higher after the company reported a profit before tax of £1.52 billion for the 12 months ended 30 June 2015 compared to £1.02 billion the previous year.
Greece’s stock market will probably stay closed for the rest of this week due to technical glitches at local banks, prolonging a five week shutdown caused by capital controls according to the exchange. The Athens Stock Exchange (ASE) has been shut since June 29, when the government closed banks and imposed strict limits on withdrawals and foreign transfers to prevent a run on deposits by savers and companies. The European Central Bank (ECB) gave Greece the go-ahead on Tuesday to reopen the stock market without restrictions for foreign investors, but with limitations for local investors to avert the risk of further capital outflows.
Asia Pacific
Shares were mixed Wednesday as volatility in Chinese shares subsided and commodities held steady after recent China-inspired losses. The focus was firmly on the FOMC announcement which would occur after markets closed here for the day. Investors were looking to see if the FOMC would provide clues on the timing of an interest rate increase.
China’s stock market roared higher in the final hour of trading. The Shanghai Composite spent most of the day in negative territory but had traded within a range of down 1.4% to up 1.5% until the final hour of the session. Then the index shot up, closing 3.4% higher on the day. Some reports have pointed to a rush of buying by government backed funds in the final hour. Sentiment improved somewhat after China Securities Regulatory Commission said it was “looking into incidents of share-dumping” on Monday that sent the Shanghai Composite to its biggest loss in eight years. The Hang Seng added 0.5% after the People’s Bank of China hinted at more policy easing to boost liquidity and the securities regulator pledged to buy shares to stabilize the market following record losses earlier in the week.
The Nikkei slipped 0.1% thanks to poor earnings from technology companies. Fanuc tumbled after the industrial robot-maker lowered its earnings forecast for the full year to ¥159.5 billion from the prior forecast of ¥191.2 billion, citing slowing demand in China. Tokyo Electron slumped after the semiconductor equipment maker lowered its earnings and sales outlook, citing weak demand in the chip market. Orix dropped on news it will acquire 17 midsize planes for ¥90 billion from an aircraft leasing company of General Electric to boost its aircraft leasing operations. Komatsu, which has heavy exposure to the Chinese market, rebounded from Tuesday’s losses. June retails sales were up 0.9% from a year ago although the pace of growth slowed for a second consecutive month.
Both the S&P/ASX and All Ordinaries added 0.7%. BHP Billiton, Rio Tinto and Fortescue Metals Group were up after iron ore prices rebounded overnight. The Kospi retreated 0.1% as investors waited for the outcome of the two day FOMC meeting. The Sensex added 0.4%.
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 posts June industrial production. Germany releases July unemployment. The Eurozone reports 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.
*Note — all releases are listed in local time.