On 03 June, 2015 – European markets rose as the central bank maintained its growth forecasts for the region

Stocks retreated in the Asia Pacific but advanced in Europe and the US on hopes of a breakthrough in the Greek situation.
United States
Stocks closed higher on Wednesday as investors welcomed some encouraging economic news. The buying here follows an increase in European markets amid hopes of a breakthrough in Greece’s protracted discussions with its creditors. The Dow Jones industrials were up 0.4%, the S&P gained 0.2% and the Nasdaq added 0.5%.
In economic news, ADP reported that US businesses added 201,000 jobs last month, up from just 165,000 in the previous month. The US trade deficit declined sharply as exports posted a modest gain and imports declined. A surge in the deficit in the first three months of the year cut economic growth by nearly two percentage points thanks in large part to the West Coast dock strike that contributed to the first quarter GDP contraction. The ISM manufacturing report indicated that service firms grew in May at the slowest pace in a year as growth in both new orders and hiring slipped.
The Federal Reserve published its Beige Book of anecdotal evidence in preparation for its June 16 and 17 FOMC meeting. It indicates that overall economic activity “expanded” from early April to late May, as consumer spending rose from the prior reporting period and as demand for auto loans picked up across several districts. Four of 12 Fed districts reported “moderate” growth, and three others described the expansion as “modest.” Elsewhere, the pace of growth varied from “mixed” to “slight.” Growth slowed in the Dallas Fed district. A stronger dollar crimped industries including steel, with Fed banks in Boston, Cleveland, Chicago, Minneapolis and Dallas noting the currency’s negative impact on export sales and on capital investment in segments with significant overseas exposure. Employment levels “were up slightly across districts” while slight growth in wages was reported by most districts. Most districts reported an increase in retail spending with retailers expecting continued sales growth in 2015.
Gold at the afternoon London fixing was down US$2.80 to US$1,190.00. Copper futures were down 0.4% to US$2.73. WTI spot crude was down US$1.61 to US$59.65. Dated Brent spot crude was down US$1.65 to US$63.84. The US dollar was up against the yen, pound, Swiss franc and the Canadian dollar. However, it declined against the euro and the Australian dollar. The Dollar Index fell 0.8%. The yield on US Treasury 30 year bond was up 9 basis points to 3.11% while the yield on the 10 year note added 11 basis points to 2.37%.
Europe
Stocks were mostly higher Wednesday as the European Central Bank stuck to its growth forecasts for the Eurozone for both this year and next while sounding more optimistic about the outlook for inflation. However, the markets pared their gains in late trading because of a sell-off in European bonds. The bond sell-off drove the yield on German Bunds sharply higher, adding to Tuesday’s sharp move. The FTSE was up 0.3%, the CAC gained 0.6%, the DAX advanced 0.8% and the SMI was 0.5% higher.
The situation in Greece remains in focus as debt negotiations continue. Greek Prime Minister Alexis Tsipras is to meet European Commission President Jean-Claude Juncker on Wednesday in Brussels and will be presented with what is dubbed “the final offer” from creditors — the European Union, the European Central Bank and the International Monetary Fund. The Greek government, meanwhile, claimed that Tsipras will be discussing its own plan in Brussels, which was sent to creditors on Monday.
The European Central Bank made no changes to interest rates or its bond buying program at today’s governing council meeting. It left its key interest rates unchanged at a record low for a seventh consecutive meeting amid expectations that Greece and creditors will reach a deal later in the day, providing some relief from days of uncertainty. The refinancing rate remains at a record low 0.05%. The ECB also held the deposit rate unchanged at minus 0.20% and the marginal lending rate at 0.30%. The European Central Bank’s asset purchases are proceeding as planned and will continue until there is a sustained shift in the inflation path according to ECB President Mario Draghi. He also reaffirmed the ECB’s view that Greece should remain in the euro area.
Banks including Commerzbank, Deutsche Bank, BNP Paribas and Société Générale advanced. RWE and E.ON gained. Fresenius Medical Care and Fresenius were up. EDF was down amid speculation that the electric utility might withdraw from a £25 billion project in Somerset if Britain left the European Union. BHP Billiton dropped after the mining giant’s chief executive officer warned that oversupply would keep metal prices in check for some time. CRH, J Sainsbury and WM Morrison Supermarkets advanced. Supermarket chain Ahold climbed in Amsterdam and Delhaize jumped in Brussels amid reports of progress in merger talks between the two companies.
Eurozone retail sales increased 0.7% on the month in April reversing a 0.6% drop in March. The euro area jobless rate dropped to the lowest level in more than three years in April. The unemployment rate was 11.1% from the revised 11.2% in March. This was the lowest rate since February 2012 when it was 10.9%.
Asia Pacific
Most Asian stock markets retreated Wednesday in cautious trading, as worries about rising bond yields globally, uncertainty over the future of Greece and the US economy’s recent disappointing performance sapped investors’ appetite for risk before some key upcoming events this week, including the European Central Bank’s policy meeting that was due later in the global market day and the US employment report which will be released Friday.
The Shanghai Composite was virtually unchanged on the day (it slipped 0.55 points) while the Hang Seng index added 0.7%. While China’s manufacturing industry remains stuck in neutral, activity in China’s services sector grew at a faster rate in May, with a PMI reading of 53.5, up from 52.9 in April as new business rose at the fastest pace in three years.
The Nikkei lost 0.3% as investors locked in recent gains after the recent strong 12-day rally that finally came to an end on Tuesday. Rate sensitive realty stocks among the worst hit after European and US long dated Treasury debt yields jumped overnight. Chubu Electric Power, Mitsubishi Estate and Mitsui Fudosan declined. Canon, Honda Motor and Mazda Motor gained despite a stronger yen. Construction machinery maker Komatsu and Mitsubishi Heavy Industries advanced after data showed activity in China’s services sector accelerated in May.
Australian shares retreated for a third day despite the release of better than expected March quarter GDP report and an uptick in iron ore prices overnight. Both the S&P/ASX and All Ordinaries dropped 0.9%. While the big four banks declined, miners BHP Billiton, Rio Tinto and Fortescue Metals Group gained on the day. Australia’s gross domestic product expanded 0.9% in the March quarter and 2.3% when compared with the same quarter a year ago.
The Kospi declined for a third straight session, weighed down by concerns over slowing exports and the rapidly expanding Middle East Respiratory Syndrome (MERS) in the country. The index lost 0.7%. The Sensex dropped 1.3% as concerns around a below normal monsoon and expectations that the Reserve Bank of India will have limited room to cut interest rates in the coming months kept markets under severe selling pressure for a second consecutive 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*
April merchandise trade and retail sales will be released for Australia. The Bank of England announces its monetary policy decision. France posts first quarter unemployment. In the US, first quarter productivity & costs will be posted along with weekly jobless claims, money supply and Fed balance sheet.
*Note — all releases are listed in local time.