On 15 July, 2015 – Global markets were mixed ahead of Janet Yellen’s statement and Greece developments

Stocks were mixed Wednesday as investors waited for Greek parliamentary action on the agreement with its creditors. Investors were also eager to hear what Fed Chair Janet Yellen would say in her first day of semi-annual testimony to the US Congress.
United States
Stocks slipped Wednesday afternoon as investors assessed deal news and comments from Federal Reserve Chair Janet Yellen. The Dow Jones industrials were virtually unchanged while both the S&P and Nasdaq slipped 0.1%.
Traders said stocks turned lower after reports of clashes between protesters and police in Athens ahead of a crucial vote in Parliament, underscoring the uncertainty surrounding Greece’s future in the Eurozone. Greece and its creditors reached a bailout deal Monday, but the fresh aid is contingent on the country implementing deep austerity and economic overhauls. The Greek Parliament is expected to approve the measures on Wednesday. The International Monetary Fund, one of the country’s creditors, criticized the terms of the recent deal. The IMF says that Greece’s debt can only be made more sustainable through more expansive debt relief measures than Europe is currently offering.
The Federal Reserve published its Beige Book in preparation for the FOMC meeting on July 29. It indicated that overall economic activity has expanded and that all 12 districts reported growth. Ten districts saw either “moderate” or “modest” growth during the reporting period compared with seven in the last report. Inflation is not an issue with muted pressures from wages. There are pockets of labor market tightness in four districts with lending activity and real estate generally climbing through most districts as are auto sales and tourism. Weakness in the energy sector was concentrated in four districts including Dallas, while general export weakness is tied to the rising dollar.
Fed Chair Janet Yellen began her semi-annual Congressional testimony at the House of Representatives Financial Services Committee. Her prepared testimony mirrored many of her comments in a speech given last Friday. In today’s remarks she pointed to continuing slack in the labor market and repeated that monetary policy, even after liftoff, will remain accommodative for some time ahead. She also cited uncertainty over the status of Greece and uncertainty over China, where growth is slowing, as wildcards. However, she was definitely upbeat on the fundamentals of the US economy which she believes is gaining strength. She repeated that Fed policy is data dependent on a meeting-by-meeting basis and that liftoff is likely to happen sometime later this year.
The Bank of Canada cut its key interest rate Wednesday as it slashed its economic outlook and predicted a pullback in the second quarter due to the impact of lower oil prices and weaker demand for exports. The BoC cut its target for the overnight rate by 25 basis points to 0.5%. For 2015, the Bank is now forecasting growth of 1.1%, down from its earlier forecast of 1.9%, while 2016 is expected to see growth of 2.3%, down from 2.5%.
Gold at the afternoon London fixing dropped US$10.00 to US$1,147.40. Copper futures were down 0.5% to US$2.52. WTI spot crude was down US$1.66 to US$51.38. Dated Brent spot crude was up US$1.47 to US$57.04. The US dollar was up against the euro, yen, Swiss franc and the Canadian and Australian dollars. It was virtually unchanged against the pound. The Dollar Index was up 0.8%. The yield on US Treasury 30 year bond was down 6 basis points to 3.14% while the yield on the 10 year note retreated 5 basis points to 2.35%.
Europe
Stocks mostly advanced Wednesday. While the FTSE was unchanged on the day, the CAC, DAX and SMI added 0.3%, 0.2% and 0.1% respectively.
The Greek parliament is expected to vote on the deal agreed by Eurozone leaders later in the global market day in exchange for a new bailout. The deal needs to be approved by the other 18 national parliaments of the euro area before starting fresh negotiations. Eurozone finance ministers will hold a conference call to discuss the Greek situation.
The International Monetary Fund said Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far. In a report released Tuesday, the IMF said the closure of banks and imposition of capital controls exacted a “heavy toll” on the banking system and the economy and further deteriorated debt sustainability. The financing need through the end-2018 is now estimated at €85 billion and debt is expected to peak at close to 200% of GDP in the next two years, provided that there is an early agreement on a program. This amount was around €25 billion more than what was projected by the IMF two weeks ago.
Volkswagen, BMW and Daimler retreated. Commerzbank and Deutsche Bank advanced. Lafarge increased following the debut of LafargeHolcim. EDF and Airbus Group gained. However, in London, BHP Billiton finished lower after it said it expects to write down the value of its onshore US assets by about US$2 billion post-tax in its financial results for fiscal 2015. Anglo American advanced on a broker upgrade as did Travis Perkins. Burberry retreated after it issued a first quarter trading update. Vodafone decreased after a broker downgrade.
UK jobless claims increased unexpectedly in June — the first increase since October 2012. At the same time, the claimant count rate held steady at 2.3%. On the ILO measure, unemployment increased and employment declined in the three months to May. At the same time, wages grew at the fastest pace in more than five years.
Asia Pacific
Shares were mixed Wednesday as fears of a Grexit receded and a historic nuclear deal was announced between Iran and major world powers. A raft of upbeat Chinese data also helped spur appetite for risk ahead of Federal Reserve Chair Janet Yellen’s semiannual testimony on monetary policy to the US House of Representatives later in the day. Greece remained in spotlight ahead of a critical Greek parliamentary vote on the widely unpopular measures.
The Shanghai Composite dropped 3.0% while the Hang Seng lost 0.3%. The trading resumption this week of hundreds of mainland firms, which had been suspended to avoid the market downturn, contributed to losses in the rest of the market. About a quarter of the number of firms listed on Shanghai and Shenzhen remain halted as of Wednesday, down from more than half at the height of the freeze on June 11. China’s second quarter gross domestic product grew 7.0% when compared with the previous year, slightly beating forecasts for an increase of 6.9%. Data on industrial production, retail sales and fixed asset investment also exceeded forecasts.
The Nikkei was up 0.4% with easing uncertainties surrounding Greece and Iran underpinning investor sentiment. The yen was mixed against rivals after the Bank of Japan left its monetary policy unchanged and cut its annual growth and inflation forecasts for 2015. Advantest, Asahi Glass, Canon, Daiichi Sankyo, Inpex, Japan Tobacco, Mitsumi Electric and Pacific Metals advanced while Softbank pared early gains to end largely unchanged.
The S&P/ASX was up 1.1% and the All Ordinaries added 1.0% thanks to the stronger than anticipated Chinese data. Financial shares posted broad based gains. BHP Billiton dropped after the mining giant said that it expects to write down the value of its onshore US assets by about US$2 billion post-tax in its financial results for fiscal 2015. Fortescue Metals Group retreated while Rio Tinto closed marginally higher. The Kospi added 0.7% while the Sensex was 1.0% higher.
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*
Italy and the Eurozone release May merchandise trade data. The Eurozone also posts final June harmonized index of consumer prices. The European Central Bank announces its monetary policy decision followed by President Mario Draghi’s press conference. In the US, July Philadelphia Fed business outlook survey and housing market index along with weekly jobless claims, money supply and Fed balance sheet will be released. Fed Chair Janet Yellen gives her second day of testimony, this time to the Senate Banking Committee.
*Note — all releases are listed in local time.