On 26 August, 2015 – Stocks mixed as markets remain fragile

Stocks were mixed in Asia, down in Europe but up in the US as investors continued to react to the situation in China.
United States
Stocks reversed Tuesday’s last hour’s selloff and rallied strongly into Wednesday’s close. The final hour of trading on Wednesday proved to be the opposite of what traders watched unfold on Tuesday, when markets lost steam and ended the day lower. The S&P snapped a six day losing streak to post its biggest one day gain since November 2011. The rally in the S&P was led by technology stocks with all 10 sectors advancing. The S&P was 3.9% higher, the Dow Jones industrials added 4.0% and the Nasdaq rallied 4.2%.
NY Fed President William Dudley (a permanent member of the FOMC) captured the markets attention when he said that from his perspective, the case for a September fed funds rate increase had grown less compelling. This reassured investors that the Fed is paying attention to the markets’ woes and just perhaps might postpone what many expected to be a September rate hike. Mr. Dudley reiterated the position that any decision would be data dependent. He said that it could take time for any fallout from the market turmoil to appear in the indicators scrutinized by the Fed. He added that the US economy is performing “quite well.”
July durable goods orders surprised with a 2% increase compared with analysts’ average forecast of a 0.4% decline. Orders for core capital goods, a proxy for business investment, were up 2.2% in the biggest gain in 13 months.
Apple jumped. Google surged on a broker upgrade. Cameron International soared after Schlumberger said it would buy the oilfield equipment maker in a US$14.8 billion deal. Schlumberger however, retreated.
Gold at the afternoon London fixing dropped US$16.75 to US$1,120.75. Copper futures were down 2.3% to US$2.25. WTI spot crude was down 33 US cents to US$38.98. Dated Brent spot crude was up 38 US cents to US$43.59. The US dollar was up against the euro, yen, pound, Swiss franc and the Australian dollar. It was virtually unchanged against the Canadian dollar. The Dollar Index jumped 1.6%. The yield on US Treasury 30 year bond was up 10 basis points to 2.94% while the yield on the 10 year note added 11 basis points to 2.18%.
Europe
The European markets retreated Wednesday as concerns over China’s economic growth persisted. The pullback came despite continued efforts by the People’s Bank of China to boost its economy. The PBoC injected 140 billion yuan into the financial system through its short-term liquidity operations facility after having lowered interest rates for a fifth time in nine months on Tuesday. The European markets briefly turned positive ahead of the open of US markets but slipped back into negative territory after early US gains began to erode. The FTSE declined 1.7%, the CAC was down 1.4%, the DAX lost 1.3% and the SMI tumbled 2.4%.
RWE and E.ON weakened. Fresenius Medical Care and Bayer both were lower. Automakers BMW, Daimler and Volkswagen retreated. In Paris, Total sank but Technip gained. L’Oréal declined. In London, bookmaker Paddy Power surged and online sports betting firm Betfair Group soared after the two decided to merge to create Paddy Power Betfair Plc. WPP after the company reported first half results. Burberry dropped due to concerns over China. The fall in gold prices weighed on mining stocks — Fresnillo, Randgold Resources, Glencore and Antofagasta were down. Syngenta dropped after Monsanto announced that it will no longer pursue a takeover of the company. Support services firm Carillion declined despite saying it was on track for an increase in revenue this year after it posted a strong first half, boosted by contracts won in 2014 and orders secured in 2015.
Asia Pacific
Share indices were mixed Wednesday as they reacted to the People’s Bank of China’s decision Tuesday to cut interest rates. However, Chinese shares continued to decline for a fifth straight day after a volatile session. The Shanghai Composite finished 1.3% lower but had been as much as 3.9% lower during the morning session and 4.3% higher in afternoon trade. This is their first five-day losing streak since early February. In the past five sessions, the Shanghai Composite has fallen 22.8% and suffered with some of its biggest one day declines on record on Monday and Tuesday. From its June 12 peak, the Shanghai Composite is now down 43.3%. The Hang Seng lost 1.5%.
Tuesday’s late selloff in the US and uncertainty over whether the Federal Reserve will start increasing interest rates next month also kept investors on edge as world central bankers gather in Jackson Hole, Wyoming to deliver comments on inflation.
The Nikkei however, jumped 3.2% as investors went bargain hunting. The US dollar pushed higher against the euro and the yen, helping underpin sentiment. Export oriented stocks got a lift including Honda Motor, Sony, Sharp, Mazda Motor and Panasonic. Fast Retailing and Fanuc advanced while Softbank retreated. China related Komatsu dropped as did Hitachi Construction Machinery. Banks were broadly higher.
Australian shares swung back into positive territory after falling sharply in early trading. The S&P/ASX dropped around 1.5% before reversing direction to end up 0.7%, buoyed by intraday recovery in Chinese stocks. The All Ordinaries also added 0.7%. The big four banks advanced. BHP Billiton gained after the miner pledged to cut spending and protect its progressive dividend policy after reporting its worst full-year profit in a decade. Rio Tinto gained but both Newcrest Mining and Evolution Mining tumbled on declining gold prices.
Reserve Bank of Australia Governor Glenn Stevens told the National Reform Summit in Sydney that Australia needs to focus on economic and tax reform debate in order to boost growth instead of discussing surplus and income distribution. Stevens emphasized that desirable economic growth could be achieved through more sustainable sources instead of interest rate adjustments by the central bank or short-term fiscal initiatives.
The Kospi rallied 2.6% after Finance Minister Choi Kyung-hwan said the government will strengthen its monitoring of financial markets and that investors should take a long-term view on the markets. The Sensex retreated 1.2% as concerns over China’s stock market crisis and growing fears that Chinese growth is weakening continued to haunt investors. The derivatives expiry due on Thursday also added to volatility.
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*
Australia’s second quarter private new capital expenditures will be released. Swiss and US second quarter gross domestic product will be posted. Eurozone M3 money supply will be released. Also in the US, second quarter corporate profits and July pending home sales along with the weekly jobless claims, money supply and Fed balance sheet will be reported. Jackson Hole, Wyoming central bankers’ meeting takes place through Saturday August 29, 2015.
*Note — all releases are listed in local time.