On 04 June, 2015 – Most global markets declined as the Greek situation once again depressed sentiment.
Investors were also cautious ahead of the US employment situation report, which will be released during the Friday global market day.
United States
US stocks closed lower after shares in Europe tumbled as Greece remains at an impasse with its creditors. The Dow Jones industrials and S&P both slid 0.9% while the Nasdaq lost 0.8%. Energy shares were down as the price of crude oil declined and investors were wary before Friday’s meeting of OPEC.
JM Smucker dropped after the food and coffee maker reported a loss in its latest quarter. Dish Network and T-Mobile climbed sharply after it was reported that the two companies are considering a merger. Opko Health agreed to acquire gene-sequencing diagnostics company Bio-Reference Laboratories in a stock deal valued at US$1.47 billion. Opko shares dropped while those of Bio-Reference advanced.
A meeting between Greece’s Prime Minister, Alexis Tsipras, and the head of the European Union’s executive arm failed to yield an agreement to release vital loans. Later in the day, the International Monetary Fund confirmed a report that Athens has informed the fund that it will not make a €300 million loan repayment Friday (June 5) and will instead use a rarely-used IMF rule that will allow Greece to bundle all €1.6 billion it owes in June and pay at the end of the month (June 30). Under an Executive Board decision adopted in the late 1970s, country members can ask to bundle together multiple principal payments falling due in a calendar month (payments of interest cannot be included in the bundle). The decision was intended to address the administrative difficulty of making multiple payments in a short period.
The debate over when the Federal Reserve will begin to raise short-term rates continued to dominate financial markets. The Fed has held short-term rates near zero since December 2008. The International Monetary Fund on Thursday called for the Federal Reserve to hold off on its first rate increase until 2016 as it slashed its forecasts for US economic growth.
Gold at the afternoon London fixing was down US$14.00 to US$1,176.00. Copper futures were down 1.45% to US$2.69. WTI spot crude was down US$1.51 to US$58.13. Dated Brent spot crude was up US$1.60 to US$62.20. The US dollar was up against the euro, yen and the Canadian and Australian dollars. However, it declined against the pound and the Swiss franc. The Dollar Index was up 0.15%. The yield on US Treasury 30 year bond was down 7 basis points to 3.04% while the yield on the 10 year note declined 6 basis points to 2.31%.
Europe
Stocks retreated Thursday as investors continue to fret over the situation in Greece after the country failed to come to an agreement with its international creditors. The recent sell-off in European bonds also continued Thursday, driving yields even higher. The FTSE dropped 1.3%, the CAC declined 0.9%, the DAX lost 0.7% and the SMI retreated 0.2%.
Greece and its creditors failed to reach an agreement after crucial talks in Brussels late Wednesday, though both Athens and the European Union claimed to have made progress towards a solution and apparently hope to wrap up the deal by the middle of the month. Greek Prime Minister Alexis Tsipras held talks with European Commission President Jean-Claude Juncker and Eurogroup Chairman Jeroen Dijsselbloem in Brussels in a bid to strike a deal that would pave the way for unlocking funds of about €7.2 billion from the existing bailout package.
The Bank of England left its Bank Rate at 0.5% and its asset purchase program at £375 amid mixed signals about the economic momentum. The rate has been at a historic low since March 2009. The previous change in quantitative easing was an increase of £50 billion in July 2012.
Deutsche Telecom climbed on reports that Dish Network is involved in merger talks with T-Mobile US. Deutsche Telecom is the majority owner of T-Mobile. RWE and E.ON retreated. Technip and Total were down along with oil prices. Renault and Peugeot were lower. Johnson Matthey dropped after the specialty chemicals company reported lower full-year revenues, despite profit growth. Royal Mail retreated after Chancellor George Osborne said Thursday that the UK government will sell its remaining 30% stake in the company. Mining stocks were weak thanks to falling prices for precious metals. Anglo American, Randgold Resources, BHP Billiton and Fresnillo declined. Kingfisher gained on a broker upgrade. EasyJet was higher after reporting traffic data for May. Ericsson climbed on a broker upgrade.
Asia Pacific
Asian stocks were mixed Thursday. Chinese stocks reversed early steep losses and investors remained optimistic about Greece reaching a debt deal with its creditors. Japanese shares ended little changed and Australian shares succumbed to selling pressure due to weak retail sales and merchandise trade data that rattled investor confidence. Worries about the impact of a weak monsoon on inflation continued to exert downward pressure on Indian shares.
The Shanghai Composite was up 0.8% to its highest since January 2008 after a volatile session in which the index dropped over 5% in early trading before reversing direction. The early-selloff was attributed to the tightening of margin financing requirements to ChiNext stocks by brokerage Golden Sun Securities. The Hang Seng however, retreated 0.4%.
The Nikkei edged up 0.1% after positive developments in the euro area led the euro to rise against the yen. Nomura Holdings, Nisshin Steel, T & D Holdings and Dai-ichi Life Insurance climbed while shipping lines Nippon Yusen KK and Nippon Suisan Kaisha declined. Banks were mostly higher. Softbank declined after the telecom company said it would invest US$1 billion in South Korean e-commerce giant Forward Ventures, which operates the online shopping service Coupang. E-commerce giant Rakuten slumped on equity dilution worries after unveiling plans to raise ¥200 billion through a public offering of 100 million new shares.
Both the S&P/ASX and All Ordinaries dropped 1.4%, extending losses for a fourth consecutive session in response to disappointing trade and retail sales data. Australia’s trade deficit more than tripled to A$3.9 billion in April, wider than the A$1.2 billion revised shortfall in March, as imports exceeded exports by nearly $3.9 billion. Another report showed that retail sales were unchanged in April on the month and missing forecasts for an increase of 0.3%. National Australia Bank was down on reports that it is in talks with Nippon Life to hive off its life insurance division. ANZ, Commonwealth and Westpac also were lower. Mining stocks declined even though iron ore prices advanced to a three-month high Wednesday amid reports of dwindling stockpiles at Chinese ports and signs of a pick-up in demand in the seaborne iron ore market.
The Kospi added 0.5% after three days of losses as revised central bank data showed South Korea’s economy expanded 0.8% in the first quarter over the previous three months. The Sensex slipped 0.1% as growing fears that a drought this year would weigh on growth and spur inflation kept investors nervous for the third 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*
Germany reports April manufacturers’ orders. The Eurozone posts revised first quarter gross domestic product. Canada releases May labour force survey. The US reports the May employment situation.
*Note — all releases are listed in local time.