On 07 April, 2016 – Global growth worries
Most indices retreated on global growth worries and looming earnings season.
United States
US markets were lower Thursday led by losses in banks and technology companies. Oil prices inched lower after a 5 percent jump a day earlier. Growth anxieties are returning after stocks rebounded yesterday on rekindled merger speculation in the drug industry and as energy producers surged with crude oil. The Dow Jones industrials were down 1.0 percent, the S&P retreated 1.2 percent and the Nasdaq lost 1.5 percent.
Verizon shares declined. Goldman Sachs led banks lower. Charles Schwab dropped. EBay led the losers among tech stocks. Mining and metals companies declined along with Freeport-McMoRan. Wynn Resorts increased after the company proposed a new development. Wynn said it wanted to build a recreational lake and hotel behind its Wynn Las Vegas property. CarMax retreated even though the company reported strong fourth quarter results. The company said it faced tougher sales conditions in the second half of the fiscal year. Bed Bath & Beyond and the Ollie’s Bargain Hunting Outlet Holdings both traded higher after the companies announced their quarterly results. Costco declined after the company disclosed its March sales. ConAgra Foods advanced after it reported third-quarter profit and sales that were stronger than expected.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$20.70 to US$1,242.10. Copper futures were down 3.4 percent to US$2.07. WTI spot crude was down 30 US cents to US$37.45. Dated Brent spot crude was down 23 US cents to US$39.61. The US dollar was up against the euro, pound, Swiss franc and the Canadian and Australian dollars. However, it declined against the yen. The Dollar Index was virtually unchanged (up 0.04 percent). The yield on US Treasury 30 year bond was down 7 basis points to 2.51 percent while the yield on the 10 year note declined 6 basis points to 1.69 percent.
Europe
After initially increasing Thursday, stocks reversed course and retreated on the day after crude oil prices reversed early gains. The FTSE was down 0.4 percent, the CAC declined 0.9 percent, the DAX dropped 1.0 percent and the SMI slipped 0.1 percent.
The European Central Bank published minutes from its March 9 and 10 general council meeting. At that time, the council discussed the possibility of a sharper interest rate cut in March, but decided that a smaller one was appropriate as further reductions cannot be ruled out if the inflation outlook worsens. At that meeting, the ECB announced a slew of stimulus measures that included a reduction to all of its main three interest rates and a new long term refinancing operation. This was a broad if not unanimous agreement regarding a 10 basis point reduction in the deposit rate (to minus 0.40 percent) as well as both a €20 billion increase in monthly asset purchases (to €80 billion) and the expansion of the Asset Purchase Programme (APP) to include corporate bonds. Everyone seemed happy about launching a new round of targeted longer-term repo operations (TLTROs). However, discussions about the rate cut were intense.
Daimler dropped as it began trading on an ex-dividend basis. Banks including Deutsche Bank, Commerzbank, BNP, Société Générale and Crédit Agricole finished lower. Wirecard declined after the financial services and technology firm reported a 32 percent jump in 2015 net profit. Peugeot and Renault declined. Marks & Spencer Group climbed after the retailer delivered mixed results for the fourth quarter. J. Sainsbury advanced on a broker upgrade. Randgold Resources rallied on a broker upgrade. However, a broker downgrade on Glencore and Antofagasta sent both lower. AstraZeneca advanced on a broker upgrade.
Asia Pacific
Shares were mixed Thursday despite the rallies in US and European stocks the day before along with a surge in oil prices. The US dollar remained under pressure after minutes of the Federal Reserve’s monetary policy meeting suggested that rates will probably remain at current level at the April meeting.
The Nikkei edged up 0.2 percent aided by dovish remarks by Bank of Japan Governor Haruhiko Kuroda. Energy explorer Inpex and JX Holdings climbed along with Asahi Glass, East Japan Railway, NTT DoCoMo, KDDI and Daiichi Sankyo. Retailer Seven & I dropped after rejecting a proposal to replace the president of Seven-Eleven Japan President and COO. Exporters ended mostly lower, with Canon, Sony and Sharp. Fast Retailing tumbled before delivering disappointing second quarter results after market close. Takata lost 1.4 percent after an exploding Takata air bag claimed another life.
At the same time, The Shanghai Composite dropped 1.4 percent ahead of a slew of March data releases due over the next week including consumer and producer prices, industrial output and retail sales. First quarter gross domestic product will be released as well. Investors were also worried about the imminent expiration of a temporary ban on stock sales by large shareholders. China Securities Journal commentary about the risks of inflation expectations triggered by rising pork prices and curbs on soaring top-tier home prices as well as Fitch’s warning over huge debt levels in the country also served to increase anxiety among investors. The Hang Seng added 0.3 percent.
Both the S&P/ASX and All Ordinaries added 0.4 percent. Beach Energy, Woodside Petroleum and Santos along with BHP Billiton and Rio Tinto advanced. Troubled steel and mining group Arrium entered into voluntary administration. The big four banks ended narrowly mixed. The Kospi edged up 0.1 percent in lackluster trading. The Sensex dropped 0.9 percent.
Global Stock Markets
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*
Germany posts February merchandise trade. France and the UK report February industrial production. The UK also releases February merchandise trade. Canada releases March labour force survey.
*Note — all releases are listed in local time.
Source: Fidelity
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