On 29 April, 2015 – European markets declined sharply on weak US GDP data

Stocks retreated in the Asia Pacific as investors waited for critical US data to be released later in the global market day. In Europe and the US, stocks declined on disappointing first quarter US growth. There was little US reaction to the mid-afternoon FOMC statement.
United States
Stocks dropped Wednesday after news that the economy skidded to a near halt in the first three months of the year, battered by harsh weather, plunging exports and sharp cutbacks in oil and gas drilling. Shares remained lower after the Federal Reserve downgraded its assessment of the economy and kept its key interest rate unchanged. The Dow Jones industrials and S&P were down 0.4% while the Nasdaq slid 0.6%.
The overall economy grew at a weak annual rate of 0.2% in the January to March quarter. That was the poorest showing in a year and down from 2.2% growth in the fourth quarter. Plummeting exports pulled growth down by nearly a full percentage point.
Corporate earnings were mixed. Starwood Hotels and Resorts surged after the company reported earnings that surpassed analysts’ expectations and its board of directors said that it would explore a “full range” of strategic and financial options for the company. Buffalo Wild Wings slumped after the company reported disappointing first quarter results. The company’s net income and revenue grew, but the price of chicken wings surged and the company incurred expansion costs. Stratasys, a maker of 3-D printers, plunged after the company warned investors late Tuesday that its profit and revenues would fall short of analysts’ estimates. The company blamed a decline in capital spending and the strengthening dollar for a weaker than expected performance.
There was no change in Federal Reserve policy in today’s FOMC announcement. The fed funds rate range remained zero to 0.25%. In its statement, the Fed acknowledged that growth had slowed due in part to transitory factors (poor weather and the West Coast port strike). The vote was unanimous. The FOMC noted that the pace of job gains had moderated although the unemployment rate remained stable. Inflation continues to be below the Fed’s target of 2.0% because of low energy prices while non-energy import prices remain low due to the strong US dollar. Household spending growth declined despite high consumer sentiment. However, business investment has softened. The Fed gave no indication that it is any closer to raising the fed funds rate from its six year low. The FOMC repeated language that they need to be “reasonably confident” that low inflation will move back to its 2% target before making a move.
Gold at the afternoon London fixing was unchanged at US$1,209.00. Copper futures were down 0.05% to US$2.79. WTI spot crude was up US$1.45 to US$58.51. Dated Brent spot crude was up 99 US cents to US$65.63. The US dollar was down against euro, pound, Swiss franc and the Canadian and Australian dollars. However, the currency was up against the yen. The Dollar Index dropped 1.1%. The yield on US Treasury 30 year bond was up 7 basis points to 2.75% while the yield on the 10 year note added 6 basis points to 2.05%.
Europe
European markets dropped sharply, largely due to uncertainty ahead of an announcement from the US Federal Reserve. The weaker than expected US GDP report for the first quarter also weighed on investor sentiment. The euro also extended its recent gains against the US dollar, which in turn put added pressure on exporters. The FTSE declined 1.2%, the CAC dropped 2.6%, the DAX retreated a hefty 3.2% and the SMI was 1.7% lower.
The European Central Bank raised further the ceiling on emergency liquidity assistance for Greek banks amid lingering uncertainty regarding the government’s reform proposals. The emergency funding cap was raised to €76.9 billion from €75.5 billion last week. Under the ELA scheme, the Bank of Greece provides funding to the country’s solvent banks. The risk of lending lies with the Greek central bank and the loans under the scheme are costlier for banks.
The Executive Board of Sweden’s Riksbank decided to purchase government bonds for a further SEK 40 to 50 billion and left the key rate unexpectedly at minus 0.25% but signaled further reduction. Riksbank was expected to cut its rate to minus 0.35% today. The bank last reduced it in March by 15 basis points after taking it into the negative zone in February.
Volkswagen declined after the automaker reported a near 19% increase in first quarter profit, benefiting from cost cutting efforts and favorable currency movements. Daimler and BMW along with Renault and Peugeot also declined. Saint-Gobain was down after the building material company maintained its objectives for the year after reporting flat sales for the first quarter. British American Tobacco retreated after the cigarette maker reported lower revenue and sales volumes for the first quarter. Barclays was down after the lender put aside another £800 million to cover legal costs for settling allegations it rigged currency benchmarks. Antofagasta dropped after it reduced its copper output forecast for the full year. Next gained after its full price sales topped expectations.
Eurozone economic confidence weakened unexpectedly in April as the Greek crisis started to dampen activity. The economic sentiment index slipped to 103.7 from 103.9. Meanwhile, bank lending grew for the first time in three years in March. Lending to euro area households and firms increased for the first time in three years in March. Money supply growth accelerated more than expected after the announcement of quantitative easing by the European Central Bank.
Asia Pacific
Stocks retreated Wednesday as investors stayed on the sidelines waiting US GDP data and the FOMC announcement — both would be released after markets here had closed for the day. Chinese shares paused for breath following the recent strong run. The Japanese market was closed for the Showa Day holiday. The Bank of Japan concludes a two-day policy meeting on Thursday with investors waiting to see whether the central bank revises its inflation outlook.
The Shanghai Composite was virtually unchanged (up 0.4 point) even though resource stocks rallied amid news that China will charge its resource tax of molybdenum and tungsten concentrates based on prices rather than volumes starting from May 1. The Hang Seng slipped 0.1%.
The S&P/ASX was down 1.8% while the All Ordinaries declined 1.7% dragged down by banks amid expectations the Reserve Bank of Australia might keep the cash rate steady at its monetary policy meeting May 5. Miners also closed broadly lower despite firmer iron ore prices on rumors that the People’s Bank of China will allow banks to swap local-government bailout bonds for cash as part of efforts to sustain reasonable growth in liquidity and money supply. BHP Billiton, Rio Tinto, Fortescue Metals Group and BC iron were down. Insurance Australia Group sank after the insurance company lowered its full year insurance margin guidance in the aftermath of the recent storms in Sydney. QBE and Suncorp also retreated.
The Kospi lost 0.2%. Samsung Electronics advanced after the company posted its highest profit in three quarters and said it would be aggressive in its sales strategy for mid-to-low end smartphones in emerging markets. The Sensex dropped 0.6% in cautious trading ahead of the expiry of April series derivative contracts on Thursday and a holiday on Friday (Maharashtra Day).
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*
The Bank of Japan announces its latest monetary policy decision. Japan posts March industrial production data. Germany releases March retail sales and April unemployment. France reports March consumer spending of manufactured goods and the producer price index. The Eurozone releases April flash harmonized index of consumer prices and March unemployment. Italy posts March producer price index and April consumer price index. In the US, March personal income and expenditures and first quarter employment cost index are on tap. April Chicago PMI and Kansas City Fed survey will be released along with weekly jobless claims, money supply and Fed balance sheet.
*Note — all releases are listed in local time.