On 1 April, 2015 – Stronger than expected manufacturing data boosted European markets

Stocks were mixed in the Asia Pacific region but rallied in Europe. US shares retreated on disappointing private employment and manufacturing data.
United States
US stocks declined Wednesday, extending losses from a day earlier. Discouraging economic reports on manufacturing, jobs and construction spending weighed down the market, stoking investor concerns about corporate profits and global growth. Health care stocks were among the biggest decliners. The Dow Jones industrials, S&P and Nasdaq all were down 0.4% on the day.
ADP said that US companies added a seasonally adjusted 189,000 jobs in March. That was below market expectations for an increase of around 230,000. The Institute for Supply Management said its US manufacturing index slipped in March, the fifth monthly decline in a row. The slowdown comes as factory orders have been growing more slowly. Construction spending declined in February for the second month in a row. The decline was largely due to a 1.4% slide in private spending on construction of single family homes. That’s the biggest drop since 2010.
Macerich dropped after Simon Property Group called off its hostile US$16.8 billion takeover bid for the shopping mall operator. Ford Motor and General Motors declined after the automakers reported a drop in March US sales. UTI Worldwide sank after the company reported a wider fourth quarter loss and cut its guidance. Both Delta and American Airlines Group were down. Dyax surged after the biotechnology company’s potential inflammatory condition treatment met key goals in a study, meriting a faster review by government regulators. GoDaddy jumped 31% above their initial public offering price in their market debut Wednesday.
Gold at the afternoon London fixing was up US$10.00 to US$1,197.00. Copper futures were up 0.3% to US$2.75. WTI spot crude was up US$1.99 to US$49.59. Dated Brent spot crude was up US$1.69 to US$56.80. The US dollar was up against the Australian dollar. It was virtually unchanged against the pound. The currency declined against the euro, yen, Swiss franc and Canadian dollar. The Dollar Index was down 0.2%. The yields on both the US Treasury 30 year bond and 10 year note declined 7 basis points to 2.47% and 1.86% respectively.
Europe
Stocks rebounded from Tuesday’s losses thanks to positive manufacturing data. The Eurozone manufacturing sector expanded more than initially estimated as growth accelerated in Germany, Spain, Italy and the Netherlands. But weak US markets performance caused Europe to pare its early gains in the afternoon. The weaker than expected US private sector employment report as well as the ISM manufacturing data weighed on investor sentiment. The FTSE was up 0.5%, the CAC advanced 0.6%, the DAX gained 0.3% and the SMI edged up 0.1%.
ThyssenKrupp climbed on a broker upgrade while Heidelberg Cement retreated on a downgrade. Banks including Commerzbank, Deutsche Bank, Crédit Agricole, Société Générale and BNP Paribas advanced. Lloyds Banking Group gained on a broker upgrade. Also advancing were Barclays, HSBC and the Royal Bank of Scotland. Kingfisher retreated following the strong gains of the previous session. Randgold Resources climbed thanks to the gains in gold prices. Fresnillo also closed higher. Basilea Pharmaceutica was up after the company reported a license agreement for novel panRAF kinase inhibitors with a consortium of organizations. ASOS gained after saying it was confident of hitting profit expectations for its 2014/15 financial year. Although ASOS posted a 10% declined in first half profit, it exceeded forecasts.
The manufacturing PMI data are the latest signal that a modest recovery is taking hold in the euro area. The onset of European Central Bank quantitative easing has provided a further tailwind for stocks, helping exporters and multinationals by weakening the euro. The data counterbalanced worries over Greece’s negotiations with its creditors and a slide in oil prices that weighed down energy stocks.
Asia Pacific
Stocks were mixed with Chinese shares hitting fresh seven year highs on hopes for further stimulus while Japanese shares succumbed to selling pressure in the wake of a firmer yen. Traders continued to fret about falling oil prices and the likelihood of a Greek exit from the Eurozone after bailout negotiations between Greece and its international lenders ended in Brussels without new reform plans being agreed.
The Shanghai Composite jumped 1.7% as mixed economic readings reinforced calls for further policy easing. The Hang Seng added 0.7%. Mainland banks, however, ended on a subdued note after China said it would introduce on May 1 a program to insure bank deposits. The official CFLP manufacturing PMI edged above the breakeven point to 50.1 from 49.8 in February. However, the HSBC/Markit PMI declined to 49.6 from 50.7.
The Nikkei was down 0.9% thanks to a stronger yen and disappointing Tankan survey results. Among those companies that declined were Mitsubishi Motors, Sumitomo Metal Mining and Nissan Chemical Industries. ABC-Mart tumbled on a Nikkei report that the shoe store operator will likely report a 17% increase in group operating profit for the year ended February. Mizuho Financial Group and Sumitomo Mitsui Financial Group were lower while Mitsubishi UFJ Financial Group advanced. Citigroup said that it would sell its Japanese credit card business to Sumitomo Mitsui Trust Bank by the end of 2015 for an undisclosed amount.
Sentiment among Japan’s big manufacturers held steady in the first quarter, but both manufacturers and non-manufacturers expect conditions to worsen slightly in the coming three months according to the Bank of Japan’s Tankan survey. The large manufacturers’ index was unchanged from the previous quarter with a reading of 12. The March Markit manufacturing PMI dropped to 50.3 from 51.6 in February.
Both the S&P/ASX and All Ordinaries were down 0.5% as weak commodity prices drove mining and energy stocks lower. BHP Billiton, Rio Tinto and Fortescue Metals Group retreated after iron ore prices fell to fresh seven year lows overnight amid a widening supply glut and fears about demand from China. The big four banks also declined. The Kospi dropped 0.6%. The manufacturing sector in South Korea slid into contraction in March according to the latest purchasing managers’ index from HSBC showed with a reading of 49.2, down sharply from 51.1 in February and representing a four-month low. However, the Sensex was up 1.1% aided by strong buying in financial, auto and healthcare stocks on the first day of the new fiscal year. The stock markets will be closed on Thursday and Friday on account of Mahavir Jayanti and Good Friday, respectively.
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*
Thursday — Australia reports January merchandise trade. The European Central Bank releases minutes of its March meeting. India posts its March manufacturing PMI. Canada and the US post international trade. Weekly jobless claims will be reported in the US along with money supply and Fed balance sheet.
Friday — March composite PMIs will be posted for China and Japan. The US releases its March employment situation report.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday