On 08 July, 2015 – European markets rose on renewed hopes for a Greek debt deal
Stocks retreated in Asia and the US. Investors were unnerved by the developments with China’s share markets and the continuing tensions with Greece. A shutdown of the NYSE for over three hours did not appear to disrupt trading.
United States
Stocks opened lower and continued to decline throughout the session. Traders were spooked by a renewed sell-off in China, anxiety over Greece and an outage on the New York Stock Exchange that forced the venue to halt trading on two of its bourses for more than three hours. The Dow Jones industrials were down 1.5%, the S&P declined 1.7% and the Nasdaq retreated 1.8%. Volatility as measured by the CBOE’s VIX jumped 21% to 19.66, just shy of the 20 barrier, above which is considered a sign of investor worry.
The New York Stock Exchange was shut for over three and a half hours due to a technical glitch. Investors were already unnerved by the meltdown in Chinese stocks earlier in the global market day. Trading resumed after 3 PM US EDT. Because trading had been diverted elsewhere, the NYSE was able to avoid having to reestablish its own prices through auctions. NYSE’s halt will go down as the biggest interruption to US stock trading in two years.
Alcoa said it earned US$140 million or 10 US cents per share in the second quarter compared with US$138 million or 12 US cents per share a year ago. Adjusted for one-time items, the aluminum producer earned 19 US cents per share, up 16% from a year ago. Sales were US$5.9 billion, up slightly from US$5.84 billion a year ago. The company kept its forecast of aluminum demand growth at 6.5% this year.
The Federal Reserve published minutes of its June 16 to 17 FOMC meeting. At that meeting FOMC members decided that they wanted to see more evidence that the economy is strengthening before increasing the fed funds rate. Some participants listed the Greek standoff and the potential for a Chinese slowdown among the risks to the outlook. The minutes were positive about developments in the US economy, highlighting stronger consumer spending, corporate hiring, housing market activity and signs of wage growth. However, the minutes revealed a committee that remained divided over when conditions would be right to increase rates from their current near-zero levels. But in the end, most members wanted to see greater employment growth and upward pressure on inflation. Members cited uncertain risks tied to Greece and China, risks that since the June meeting have grown. Projections by the committee showed a shallower path of tightening in the coming years than previously forecast. The FOMC was divided over whether there should be one, two or indeed no rate moves this year.
Gold at the afternoon London fixing was up US$2.25 to US$1,158.50. Copper futures were up 1.4% to US$2.48. WTI spot crude was down 51 US cents to US$51.82. Dated Brent spot crude was up 42 US cents to US$57.27. The US dollar was up against the pound and the Canadian and Australian dollars. However, it declined against the euro, yen and the Swiss franc. The Dollar Index dropped 0.7%. The yields on both the US Treasury 30 year bond and the 10 year note were down 5 basis points to 2.99% and 2.21% respectively.
Europe
Stocks advanced Wednesday on renewed hopes for a Greek debt deal after the nation requested a three year bailout program. Eurozone leaders have set Sunday, July 12 to be the final deadline for the country to submit a new plan for financial assistance. Greek Prime Minister Alexis Tsipras failed to present EU leaders with a detailed reform blueprint at a meeting of finance ministers on Tuesday. The FTSE was up 0.9%, the SMI added 1.0% and both the CAC and DAX advanced 0.7%. The hard hit Italian MIB was 2.6% higher after retreating 4.0% Monday and 3.0% Tuesday.
At the special Euro summit, leaders agreed to examine how to set-up a new financial assistance program for Greece and to assess the viability of new Greek proposals for a comprehensive and specific reform agenda. The 28 heads of state or government of the European Union will meet on July 12 to reach a final agreement.
In the Summer Budget, UK Chancellor of the Exchequer George Osborne said that the government will run a surplus in 2019-20. He said the budget deficit is estimated to fall to 2.2% 2016-17, then to 1.2% the year after that. It will move into a surplus in 2019-20, with a positive balance of 0.4%. In this Budget, Osborne said the Office for Budget Responsibility revised borrowing down this year to £69.5 billion. Borrowing then falls to £43.1 billion next year, £24.3 billion in 2017/18 and down to just £6.4 billion the year after that. Economic growth is expected to be 2.4% this year, down from 2.5% estimated in March.
Automakers Volkswagen, BMW lost 1.90%, Daimler, Peugeot and Renault retreated. Both ThyssenKrupp and Salzgitter advanced. In London, Barclays jumped by 2.04% after it announced the departure of its CEO Antony Jenkins. Housing stocks were under pressure, following some comments made by the British Chancellor. Barratt Developments, Persimmon and Taylor Wimpey retreated. Standard Chartered closed lower. The Asia focused lender came under pressure after Chinese stocks plunged, with the country’s securities regulator warning that investors were in the grip of “panic sentiment”.
Asia Pacific
Stocks here dropped across the board amid risk aversion as Chinese stocks hit four-month lows despite a series of market-stabilizing measures by authorities. Around half of China’s roughly 2,800 listed firms announced trading halts as increasing signs of deleveraging drove stocks lower. There were fears that a prolonged slump would cause systematic risk for the country’s financial and banking system. While concerns about an already slowing Chinese economy hit commodity prices, the euro held steady against the dollar after all 28 European Union leaders agreed to meet next Sunday to find a solution to the Greek debt crisis. Greek Prime Minister Alexis Tsipras has told the EU Parliament that his government would work for a socially just and economically sustainable solution to the debt crisis.
Chinese shares plunged once again despite policymakers unveiling more measures to stabilize the market. The Shanghai Composite closed down 5.90% after plummeting as much as 8.20% early in the day. The Hang Seng dropped 5.8%. Before the market open, China’s insurance regulator said it would raise the limit for qualified insurers to invest in blue-chip stocks by 10%. The country’s securities regulator said its state-backed margin finance firm will provide adequate liquidity for brokerages to help ease the “panic sentiment” in the market.
The Nikkei tumbled 3.1% to a level not seen since May 15. Among the worst performers were Komatsu, Dai-ichi Life Insurance, Sumitomo Chemical, Nissan Motor, Mitsui Chemicals and Itochu. Amid the major sell-off across the board, investors took little comfort from data that showed Japan posted a current account surplus for the 11th straight month in May.
The S&P/ASX sank 2.0% while the All Ordinaries dropped 1.9% as steep declines in commodity prices and the continued uncertainty over the resolution of Greece’s debt deal and the plunge in Chinese stocks unnerved investors. BHP Billiton, Rio Tinto and Fortescue Metals tumbled after iron ore prices plunged below US$50 a ton overnight for the first time in nearly three months. Gold miner Newcrest Mining and l Evolution Mining dropped as gold hovered near a four month low, weighed down by a surging US dollar. The four big banks also declined.
The Kospi dropped 1.2% as concerns about a slowdown in China and the Greek debt crisis kept investors on edge ahead of the Bank of Korea’s rate setting meeting Thursday. Most economists expect the central bank to freeze its benchmark interest rate at 1.5% after cutting rates in a pre-emptive move in June. The Sensex was 1.7% lower on the 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*
Japan posts May machine orders. Australia reports its June labour force survey. China releases June consumer and producer price indices. Germany reports May merchandise trade balance. The Bank of England announces its monetary policy decision. The US posts weekly jobless claims, money supply and Fed balance sheet.
*Note — all releases are listed in local time.