On 24 September, 2015 – Most global markets slid as the Volkswagen diesel emission scandal impacted automakers

Continued concerns regarding Chinese economic health and the need to know when the Federal Reserve will increase rates also weighed on investors’ spirits.
United States
US stocks retreated before a speech by Federal Reserve Chair Janet Yellen as investors looked for further clarity on the central bank’s policies. Stocks trimmed losses in late afternoon trading, surging as energy shares rallied with crude oil. Stocks further pared losses after JPMorgan Chase’s global head of derivative and quantitative strategies said in a note today that technical selling pressure from volatility targeting strategies was largely completed, and in the coming days and weeks flows may be skewed toward buying. The Dow Jones industrials lost 0.5%, the S&P retreated 0.3% and the Nasdaq declined 0.4%.
Investors continued to evaluate economic data for hints on possible Fed action. The volatile durable goods report showed a drop of 2% in August, reflecting declines in defense and aircraft. Momentum in orders for business equipment stalled following gains the prior two months as US investment took a breather amid volatility in financial markets and concerns that global growth is slowing. August new home sales jumped in August to a seven year high. A selloff in shares of Caterpillar weighed on broad indexes after the company issued a deep cut to its revenue forecast for the year. It also said it would lay off up to 10,000 people. The company’s business lines, from construction to energy to commodities, are closely linked to the global economy, particularly demand from China.
Investors remained cautious ahead of a speech by Federal Reserve Chair Janet Yellen later in the day at the University of Massachusetts-Amherst, which could offer clues on the timing of a rise in rates. Despite worries over global growth, many investors note that, by many measures, the US economy remains on track. Job growth has expanded and the unemployment rate is creeping down toward 5%. Inflation, however, remains subdued and corporate profit growth has slowed drastically.
In her talk after US markets closed on Thursday Fed chair Janet Yellen noted that the recent shortfall in US inflation is largely a result of fleeting factors and reiterated her expectation that the Federal Reserve will lift rates this year. She said that while the FOMC is monitoring the risk that an overseas slowdown hits US growth, it did not currently expect this to have a “significant” effect on the path for US monetary policy. She cautioned however, that Fed strategy would have to change if there are economic surprises.
Ms Yellen said that some slack remains in the labour market and that this, coupled with low energy prices and the 15 percent rise in the US dollar had been important drags on inflation. However Mr Yellen expected inflation to return to a 2 percent annual rate over the next few years as these temporary factors wane. “Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter. But if the economy surprises us, our judgments about appropriate monetary policy will change.”
Gold at the afternoon London fixing was up US$23.15 to US$1,154.50. Copper futures were up 0.3% to US$2.30. WTI spot crude was up 67 US cents to US$45.15. Dated Brent spot crude was up 55 US cents to US$48.30. The US dollar was down against the euro, yen, Swiss franc and the Canadian and Australian dollars. It was virtually unchanged against the pound. The Dollar Index was down 0.3%. The yields on both the US Treasury 30 year bond and the 10 year note were down 3 basis points to 2.92% and 2.12% respectively.
Europe
Stocks retreated Thursday as the fallout from the Volkswagen diesel emission scandal continued to pressure the rest of the European automakers. Stocks with exposure to China were also hard hit by continued concerns over the slowdown in China’s economy. Disappointing economic data from Germany and continued uncertainty on the outlook for US monetary policy following last week’s Federal Reserve decision also weighed on investor sentiment. The FTSE was down 1.2%, the SMI lost 2.0% and both the CAC and DAX retreated 1.9%.
BMW dropped amid concerns raised about the emission levels in BMW X3 models. Daimler declined along with tire maker Continental. Volkswagen was up in early trading after recovering some ground yesterday. The company’s Chief Executive Martin Winterkorn resigned Wednesday, due to the diesel emission scandal. However, the stock turned sharply lower after it was reported that the same software that manipulated emission levels in the US was also installed on some European vehicles. In Paris, Peugeot and Renault declined. Car parts maker Valeo also retreated. Rolls-Royce dropped.
Fresenius and Fresenius Medical Care were lower. RWE and E.ON weakened. Total and Technip tumbled. In London, Thomas Cook gained. The tour operator sees full year guidance in line with expectations. Next increased on a broker upgrade. Randgold Resources and Fresnillo gained as gold prices increased. However, both Glencore and Anglo American declined. Schindler declined in Zurich. Chinese authorities have reportedly taken in a pair of Schindler’s managers in the country for questioning. Hennes & Mauritz declined after the retailer reported flat profit for the third quarter.
Asia Pacific
Shares were mixed Thursday as soft manufacturing data from China and the US fueled worries about global growth. Japanese shares led declines in the region as both a firmer yen and downbeat manufacturing data hit investors’ risk appetite. Investors eagerly waited for Federal Reserve Chair Janet Yellen’s speech later in the global market day for additional clarity on when the central bank plans to raise interest rates.
Japanese shares tumbled as trading resumed after a three day holiday. The Nikkei tumbled 2.8%. Automakers including Honda, Mazda, Mitsubishi Motors, Nissan and Toyota retreated after Volkswagen chief executive Martin Winterkorn announced his resignation, accepting responsibility for the irregularities that have been found in diesel engines. Ibiden and NGK Insulators, which manufacture diesel particulate filters, plummeted. Fast Retailing, robot maker Fanuc, and Softbank slumped. Nomura Holdings retreated after it said that it had agreed to settle legal claims brought by Banca Monte dei Paschi di Siena SpA over a 2009 deal dubbed Alexandria that allegedly obscured losses at the Italian lender. However, J Front Retailing, Seven & i Holdings and Oracle Corporation Japan advanced. Japan’s September flash manufacturing PMI eased to a reading of 51.2, down from 51.7 in August.
Australian shares rebounded from a two year low hit in Wednesday’s trading session after China’s September flash PMI confirmed an ongoing contraction in China’s manufacturing sector. The S&P/ASX 200 was up 1.5%, reversing a large portion of Wednesday’s losses. The All Ordinaries index advanced 1.4%. The big four banks closed up more than 1% each after steep losses in the previous session. BHP Billiton shares edged up, showing little reaction to news that US based asset manager BlackRock has cut its stake in the company. Rival Rio Tinto advanced while Fortescue Metals Group retreated. Gold miner Newcrest Mining and Evolution Mining advanced after gold futures snapped a two-day losing streak to settle higher on Wednesday amid a wave of short covering.
The Shanghai Composite was up 0.9% after losing more than 2% in the previous session on growth worries. The Hang Seng dropped 1.0%. The Kospi inched up 0.1% as foreign funds extended their selling spree to a fourth consecutive session amid lingering worries about China’s slowdown and the prospects of a Fed rate increase. The Sensex advanced 0.2% ahead of a long weekend and the upcoming monetary policy meeting on Tuesday with most economists expecting the Reserve Bank of India to cut rates by 25 basis points to boost growth.
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 August consumer price index. The Eurozone reports August M3 money supply. In the US, final second quarter gross domestic product will be reported along with final September consumer sentiment.
*Note — all releases are listed in local time.