On 17 June, 2015 – Greece woes weighed on European markets

Global stocks were mostly lower as investors waited for the US Federal Reserve monetary policy announcement and news about the dire Greek situation. US stocks advanced and its currency dropped after the Fed announcement.
United States
Stocks turned slightly higher after the Federal Reserve said it was seeing some improvement in the economy but not enough to begin raising interest rates as yet. The Dow Jones industrials, S&P and Nasdaq all were up 0.2% each.
FedEx shares slumped after the company reported quarterly results that were below expectations and gave a mildly disappointing outlook for the next fiscal year. Kythera Biopharmaceuticals surged on news that Botox maker Allergan has agreed to buy the California drug maker for about US$2.1 billion. The deal would add an injection that reduces “double chin” to Dublin-based Allergan’s portfolio of products. Hill-Rom Holdings climbed after it agreed to buy privately held rival Welch Allyn for about US$2.05 billion in a cash-and-stock deal. Oracle slid in after-hours trading after it said profits fell by nearly a quarter to US$2.8 billion as a strengthening dollar cut into sales.
The Federal Reserve said that it wanted to see further gains before raising interest rates. The Fed said that although the economy had strengthened after a slump in the first quarter, it also said it plans to wait to see more gains in employment before raising interest rates above their historically low levels. The Fed did not provide a timetable for when it would begin raising rates, but it said it expects the economy’s gains to pick up later in the year.
The Federal Reserve once again left its fed funds rate range at zero to 0.25% where it has been since December 2008. The FOMC’s 2015 growth tendency forecast was cut to 1.8% to 2.0%, but the forecasts were about the same for 2016 and 2017. And the 2015 unemployment tendency moved up to 5.2 to 5.3% from 5.0 to 5.2%.
Among the details, the statement said growth is expanding moderately after stalling in the first quarter and that the labor market is in fact picking up. The consumer sector is described as moderate with housing improving. Business investment and exports continue to be soft. There was no change in the inflation assessment that continues to be below target with inflation expectations stable. The FOMC continues to see inflation rising gradually to its 2% target. It says risks to the economy and labor market remains balanced.
Gold at the afternoon London fixing was up 25 US cents to US$1,178.00. Copper futures were up 0.2% to US$2.63. WTI spot crude was down 13 US cents to US$59.84. Dated Brent spot crude was up 1 US cent to US$63.71. The US dollar was down against the euro, pound, Swiss franc and the Canadian dollar. It was virtually unchanged against the yen and Australian dollar. The Dollar Index dropped 0.9%. The yield on US Treasury 30 year bond was up 4 basis points to 3.09% while the yield on the 10 year note slipped 1 basis point to 2.31%.
Europe
European markets retreated Wednesday. With the impasse between Greece and its international creditors remaining unresolved, Eurozone finance ministers will meet in Luxembourg Thursday. But it is currently unclear if any progress will be made there. Greek Prime Minister Alexis Tsipras said the government cannot accept deeper austerity demands. Greece’s central bank warned Wednesday that failure to clinch a deal with international creditors on its future funding needs could lead the country into an “uncontrollable crisis,” describing the issue as being of historical significance for the nation. The FTSE was down 0.4%, the CAC lost 1.0%, the DAX retreated 0.6% and the SMI was 0.7% lower.
In the minutes of the most recent Bank of England’s Monetary Policy Committee meeting, the Bank unanimously voted to maintain its key interest rate at 0.5% and quantitative easing ceiling at £375 billion. The Ifo institute upgraded its German growth projection for this year as private consumption remains strong underpinned by the labor market improvement. The economy will expand 1.9% this year and 1.8% in 2016. The outlook for 2015 was revised up from 1.5%. UK ILO unemployment rate was unchanged at 5.5% for the three months to April. Average earnings for the three months to April including bonuses were up 2.7% from the same period a year ago.
Linde, Lanxess and Deutsche Telekom all advanced. Deutsche Lufthansa and Continental were down along with Henkel. Vivendi increased after a report said that it may increase its stake in Telecom Italia to 15%. Telecom Italia also climbed. Rémy Cointreau gained after it reported full year results. Peugeot and Renault retreated. Berkeley Group Holdings advanced after it reported increase in pre-tax profit for the year. Tesco, J Sainsbury and Wm Morrison Supermarkets declined after broker downgrades.
Asia Pacific
Most share indices were higher Wednesday. Chinese stocks regained momentum and investors waited for the Federal Reserve’s policy announcement and Fed Chair Janet Yellen’s post-meeting news conference later in the global market day. While the Federal Reserve isn’t expected to begin raising rates, economists and investors will parse the policy statement to see whether the economy is improving enough to warrant a rate increase later this year. The Fed has not raised interest rates since July 2006. The focus also remained on Greece as EU officials prepared the ground for Thursday’s Eurogroup meeting, seen as the last chance for Athens to hammer out a deal before its current bailout package expires at the end of the month.
The Shanghai Composite index ended a choppy session up 1.6% after plunging 3.5% on Tuesday amid worries about margin tightening and the supply of new shares coming to the market. Banks led the gains after China’s cabinet allowed Bank of Communications to pursue a market based reform plan as part of Beijing’s financial reforms to improve efficiency at state-owned companies. The Hang Seng added 0.7% as lawmakers began a debate on a contentious electoral reform package backed by Beijing.
The Nikkei slipped 0.2%. May’s merchandise trade deficit narrowed sharply from a year earlier due to a drop in energy and slowing exports as demand softened in China. Exports climbed only 2.4% from a year earlier, the slowest pace in nine months. Among the worst performers were Suzuki Motor, Fuji Electric, Mitsumi Electric, Sumitomo Heavy Industries, Mitsubishi Materials, Tokyo Electric Power and Sumco. Toyota Motor declined after announcing an additional recall of 1.37 million vehicles due to faulty Takata air bags. Softbank was down on news it is setting up a robotics focused joint venture with Taiwan’s Foxconn Technology.
The S&P/ASX rebounded 1.1% and the All Ordinaries by 1.0%. The big four banks gained. Miners BHP Billiton and Rio Tinto advanced despite an overnight fall in commodity prices. The Kospi was up 0.3% after recording an eleven week low hit in the previous session after South Korea’s financial regulator said it would develop measures for the country’s stock market to be included in MSCI’s developed markets index. The Sensex added 0.9% as investors waited for the FOMC announcement. A pickup in monsoon rains and news of the Asian Development Bank expanding its sovereign and non-sovereign lending to India boosted morale.
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 Swiss National Bank publishes its quarterly monetary policy assessment report. The UK posts May retail sales. The US releases May consumer prices, June Philadelphia Fed survey and weekly jobless claims, money supply and Fed balance sheet data.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday