On 30 September, 2015 – Stocks recover, but fail to reverse the month’s decline
Shares rallied globally to end the quarter and month on a positive note. However, most indices retreated both for the month of September and the third quarter.
United States
Stocks rallied on the last day of the month and third quarter but too late to rescue indices from sharp declines. Most of the stock benchmarks globally also lost ground in the third quarter, weighed down by weak growth in major economies and the prospect of higher interest rates in the United States. The Dow Jones industrials were up 1.1% on the day, the S&P added 1.4% and the Nasdaq advanced 1.9%.
Investors targeted their buying in some of the third quarter’s most battered stocks. Energy, raw-material and healthcare shares were among the leaders of the S&P’s 10 main groups after falling the most since June. All 10 industries in the benchmark advanced Wednesday, while a gauge of volatility had its steepest decline in more than a week. Worries over Greece’s debt, a slowing Chinese economy, plunging emerging market currencies and a scary slide in commodity prices have sent US stock prices lower over the past three months. Mixed messages on Federal Reserve interest rate policy also played a role.
Ralph Lauren jumped after the company named a new chief executive to succeed its founder. The new chief, Stefan Larsson, will leave his current job as global president of Gap’s Old Navy chain. Gap shares retreated. Western Digital surged after the digital storage company agreed to a US$3.8 billion investment from China’s Unisplendour Corporation. Chesapeake Energy gained after it said it would cut 15% of its work force.
Gold at the afternoon London fixing dropped US$18.10 to US$1,114.00. Copper futures were up 4.0% to US$2.34. WTI spot crude was up 14 US cents to US$45.37. Dated Brent spot crude was up 28 US cents to US$48.51. The US dollar was up against the euro, yen, pound and Swiss franc. However, it declined against the Canadian and Australian dollars. The Dollar Index was up 0.6%. The yield on US Treasury 30 year bond was up 1 basis point to 2.87% while the yield on the 10 year note was unchanged at 2.05%.
Europe
European markets rebounded Wednesday following two weak days. Mining stocks bounced back after Glencore, which has endured turbulent sessions of late, reassured investors that it has taken proactive steps to position the company to withstand current commodity market conditions. Healthcare and pharma stocks also rebounded from recent weakness. A stronger than expected September US private sector employment growth estimate also provided support to the markets. The FTSE and CAC each added 2.6%, the DAX advanced 2.2% and the SMI gained 2.3%. The indices were down for the second consecutive month and for the quarter.
BASF was up after the company lifted the force majeure declaration for Polyamide 6.6 compounds. Merck increased after it pre-announced the launch of a new product across almost the entire Latin American region in 2016. Lufthansa jumped on a broker upgrade. Both E.ON and RWE climbed. In Paris, Peugeot and Renault were up. LVMH, Kering and L’Oréal were higher on the day. In London, J Sainsbury surged after stating that it expects underlying profit before tax for the year to be above its own estimates. WM Morrison Supermarkets and Tesco advanced. Glencore jumped after it reassured investors that it has taken proactive steps to position the company to withstand current commodity market conditions. Rio Tinto advanced after it reached a binding agreement for the sale of its 40% interest in the Bengalla coal stake to New Hope Corporation Limited for US$606 million. Anglo American and BHP Billiton increased along with Antofagasta. Fiat Chrysler climbed in Milan, even as the National Highway Traffic Safety Administration said the automaker did not fully report death and injury claims for an unspecified time period in its early warning report data that the company must to submit to regulators under federal law.
August euro area unemployment rate remained unchanged at an elevated level as businesses generated fewer jobs amid weak economic growth. The jobless rate held steady at 11%. September harmonized index of consumer prices retreated 0.1% on the year, offsetting the 0.1% increase in August. German unemployment increased unexpectedly in September — the number of unemployed increased by 2,000 from August. However, the unemployment rate remained at 6.4%. The final estimate of UK second quarter remained at 0.7% on the quarter.
Asia Pacific
Stocks advanced Wednesday after sliding to 3-1/2-year lows the day before on concerns over a weak outlook for commodities amid slowing economic growth in China. Glencore reassured investors about its financial strength and commodities such as oil and copper saw some reprieve after recent steep losses. Only the Kospi managed to increase for the month but retreated on the quarter.
The Shanghai Composite was up 0.5% ahead of the Golden Week holidays and PMI factory numbers on Thursday. Automakers rallied after China halved the sales tax on small cars. The Hang Seng was up 1.4%. Hong Kong markets will be closed on October 1.
The Nikkei rebounded 2.7% after the previous day’s plunge, with a weaker yen and window dressing buying at the end of the first half of fiscal 2015 underpinning investor sentiment. Weak data also boosted hopes that the Bank of Japan will be forced to unveil more stimulus to support economic recovery. Industrial output declined for the second straight month in August and retail sales showed no improvement from July, while housing starts increased for the sixth consecutive month in August, offering some respite to investors worried about deflation and sluggish growth. Investors are waiting for the Bank of Japan’s Tankan survey on Thursday and household spending on Friday to determine whether the BoJ will step up monetary policy easing at its October 30 policy meeting.
The S&P/ASX rebounded 2.1% while the All Ordinaries added 2.0%. Banks and miners paced the gains. BHP Billiton and Fortescue Metals Group soared after commodities trader and mining giant Glencore assured markets its business remained robust. Rio Tinto climbed after the company said it had agreed to sell its 40% stake in the Bengalla open cut coal mine in New South Wales to New Hope for AUS$865 million. Newcrest Mining advanced even though gold extended declines for a third consecutive session.
The Kospi added 1.0%. The Sensex was 1.5% higher thanks to a dovish outlook by the Reserve Bank of India, a firming trend in rupee and positive global cues underpinning investor sentiment. With the RBI announcing a bigger than expected 50 basis points rate cut, the government said it would undertake a review of the small savings rate to ensure effective transmission in rates by banks.
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 third quarter Tankan and final September manufacturing PMI. China releases CFLP and Caixin PMIs. India, the Eurozone, Germany, France, UK and US post final September manufacturing PMI, In the US, September ISM manufacturing survey, August construction spending along with weekly jobless claims, money supply and Fed balance sheet will be reported.
*Note — all releases are listed in local time.