On 14 December, 2015 – US stocks advanced but those in Europe and the Asia Pacific were mixed

Global stocks were mixed as a combination of weak crude prices and the looming FOMC meeting weighed on investors.

United States

US markets rallied late Monday afternoon, bouncing back from its biggest weekly decline since the summer. The price of natural gas slumped as temperatures remained unusually warm. Traders were looking ahead to the Federal Reserve’s policy meeting Tuesday and Wednesday, at which the Fed is expected to raise interest rates for the first time in nine years. The Dow Jones industrials were up 0.5 percent, the S&P gained 0.4 percent and the Nasdaq added 0.6 percent.

Mild temperatures have cooled demand for natural gas, sending the price of natural gas down sharply. Natural gas is used to heat more than half of US households, according to the American Petroleum Institute. But with temperatures unseasonably warm, there is less demand for it. Temperatures in Chicago, Detroit, New York and Washington have been as much as 25 degrees above normal in the past five days.

Jarden Brands gained after it agreed to be acquired by Newell Rubbermaid. The $13.2 billion deal would create a conglomerate that owns brands like Paper Mate, Sharpie, Elmer’s, Rubbermaid and Calphalon. Mattel advanced after a broker upgrade. The broker said Mattel shares have reached a low point and could be at the start of a strong run. The firm also praised Mattel’s management and increased its price target.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$4.25 to US$1,068.25. Copper futures were down 0.6 percent to US$2.10. WTI spot crude was up 57 US cents to US$36.19. Dated Brent spot crude was down 20 US cents to US$37.73. The US dollar was up against the pound, yen and Swiss franc. It was virtually unchanged against the euro and Canadian dollar. However, it declined against the Australian dollar. The Dollar Index was down 0.25 percent. The yield on US Treasury 30 year bond was up 9 basis points to 2.96 percent while the yield on the 10 year note was up 10 basis points to 2.23 percent.

Europe

The European markets were up in early trading Monday but reversed direction and once again declined. Earlier, investor sentiment was boosted from the better than expected Chinese data released over the weekend and the faster than expected recovery in Eurozone industrial production. However, continued weakness in crude oil prices pulled the markets down. Investors also exercised caution before the Federal Reserve policy announcement Wednesday. The FTSE was down 1.3 percent, the CAC declined 1.7 percent, the DAX dropped 1.9 percent and the SMI was 1.5 percent lower.

RWE and E.ON declined. Automakers including Volkswagen, BMW, Daimler, Peugeot and Renault were lower. Both Total and Technip were down. In London, insurer Old Mutual climbed after South Africa got a new finance minister. The insurer generates most of its revenue in South Africa. BG Group slipped after its proposed combination with Royal Dutch Shell gained anti-trust approval in China. BP, Royal Dutch Shell and Tullow Oil weakened. Mining stocks were also under pressure due to falling commodity prices. Glencore, Antofagasta and BHP Billiton were lower. Anglo American declined after S&P put the outlook on its rating to CreditWatch Negative.

European Central Bank President Mario Draghi said inflation is expected to return to target without undue delay. If the ECB had to intensify the use of its instruments to ensure that it achieves its price stability mandate, it would do so.

Eurozone industrial production advanced 0.6 percent on the month in October, reversing a 0.3 percent fall in September. This was the first increase in three months.

Asia Pacific

Shares were mixed thanks to plunging oil prices and concerns over the yuan's slump that drove investors into the safety of US government bonds. With the crucial FOMC announcement just two days away, investors waited for the FOMC’s language on the inflation outlook and the frequency of follow-up rate increases. Chinese shares however, advanced after upbeat retail sales and industrial production data.

The Shanghai Composite climbed 2.5 percent — the most in a month. Early in the day, the index dropped as much as 0.9 percent on yuan worries. Underlying sentiment was supported by upbeat data released over the weekend. November industrial output grew 6.2 percent from a year ago while retail sales jumped 11.2 percent, offering some respite for markets worried about the economy. The yuan traded nearly flat against the dollar after Beijing late on Friday launched a new trade weighted yuan exchange rate index in a bid to discourage investors from exclusively tracking the currency's fluctuations against the greenback. The Hang Seng declined 0.7 percent.

The Nikkei tumbled 1.8 percent as the yen strengthened amid risk aversion. The Bank of Japan's quarterly Tankan survey of business sentiment came in stronger than expected suggesting that the Bank of Japan will leave the pace of asset purchases unchanged when it meets at the end of this week. Inpex and JX Holdings dropped. Trading houses Mitsui & Co and Mitsubishi retreated due to the continuous slide in oil and other commodity prices. Exporters Canon, Panasonic, Honda Motor and Fanuc also were lower.

The S&P/ASX and All Ordinaries lost 2.0 percent and 1.9 percent respectively as the selloff continued. The big four banks tumbled while general insurance provider Suncorp Group plummeted after a profit downgrade. The Kospi lost 1.1 percent on worries the sharp fall in the price of oil and other commodities is a sign of weakness in the global economy. The Sensex gained 0.4 percent despite mixed economic data. India's industrial output growth accelerated to its highest level in more than five years in October, while rising pricing pressures suggested that the rate cutting cycle has come to an end.

Looking forward

The UK releases November data for both consumer and producer prices. Germany’s December ZEW survey will be released. In the US, November consumer prices and December Empire State manufacturing survey will be reported along with the housing market index. FOMC begins its two day meeting.

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.