On 05 January, 2016 – Global stock indices steadied

Shares in Asia declined while those in Europe rebounded. US stocks hovered around the breakeven point.

United States

US stocks stabilized in choppy trading with both the S&P and Dow Jones industrials edging higher while the Nasdaq slipped. The Dow edged up 0.1 percent, the S&P added 0.2 percent but the Nasdaq was 0.2 percent lower. US stocks staged an afternoon comeback in a bid to rebound from their worst start to a year since 2001 after China intervened to stabilize its financial markets. The lack of major US economic data kept many traders on the sidelines ahead of the release of key economic reports in the coming days.

A drop in Apple weighed on all three major indexes, while a fall in crude oil prices and a stronger dollar contributed to the year's shaky start. Apple shares were down after the Nikkei reported that the iPhone maker was expected to cut production of its 6S and 6S Plus models. Gilead Sciences advanced. Wal-Mart Stores also were up. Eli Lilly gained after the drug maker said its diabetes treatment grabbed market share in the fourth quarter. First Solar advanced on a broker upgrade. Shares of gun makers rose as President Barack Obama announced tighter gun-control measures, a move which could encourage consumers to buy before the measures take effect, analysts said. Twitter declined — a person familiar with the matter said the social media company was planning to increase its 140-character limit on tweets to as many as 10,000.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$5.25 to US$1,077.00. Copper futures were up 0.7 percent to US$2.09. WTI spot crude was down 88 US cents to US$35.88. Dated Brent spot crude was down 87 US cents to US$36.35. The US dollar was up against the euro, pound, Swiss franc and the Canadian and Australian dollars. However, it declined against the yen. The Dollar Index was up 0.7 percent. The yield on US Treasury 30 year bond was up 3 basis points to 3.01 percent while the yield on the 10 year note was up 1 basis point at 2.25 percent.

Europe

Stocks rebounded Tuesday from Monday’s steep losses. However, the markets lacked direction Tuesday, fluctuating between gains and losses over the course of the trading day as investors remained cautious. They continued to be wary of the situation in China. Energy stocks were under pressure today despite the rising tensions between Saudi Arabia and Iran. The FTSE added 0.7 percent, the SMI gained 0.5 percent and both the CAC and DAX were 0.3 percent higher.

Volkswagen declined after the US Department of Justice, on behalf of the Environmental Protection Agency, filed a civil complaint against the company in federal court. The DoJ is reportedly seeking billions of dollars in penalties in the wake of an emissions cheating crisis. Fresenius Medical Care and Merck advanced. Both RWE and E.ON were up. In Paris, Bouygues announced that preliminary discussions have started with Orange to look at possible options. Both were up on the day. Technip and Total retreated.

In London, retailer Next sank after reporting weak holiday sales. Burberry and Marks & Spencer also declined. Supermarket major J Sainsbury confirmed an approach in November to Home Retail Group for a possible offer in the form of Sainsbury's shares and cash. The approach was rejected by Home Retail Group. Home Retail surged but J Sainsbury declined. Both Tesco and Travis Perkins gained on broker upgrades. In Switzerland, Novartis, Roche and Nestle all gained.

According to flash data, the harmonized index of consumer prices edged up 0.2 percent from a year ago in December, unchanged from November. Unemployment in Germany declined more than expected in December and the rate held steady at the lowest level since reunification, signaling strength in the labor market despite the huge influx of migrants. The jobless rate was 6.3 percent in December, unchanged from the previous month.

Asia Pacific

Asian markets declined Tuesday as shares in China extended Monday's losses and a diplomatic row between Saudi Arabia and Iran deepened with a number of Saudi Arabia's allies curbing their diplomatic links with Iran.

The Shanghai Composite ended a rollercoaster session down 0.3 percent despite state controlled funds stepping in to help prop up the market. The securities regulator signaled that a ban on share sales will remain beyond this week's expiration date. The Hang Seng erased early gains to end the session down 0.6 percent. Chinese authorities announced measures to support investor sentiment, including a liquidity boost by the People’s Bank of China and more steps to regularize stock selling by major shareholders after stock markets endured a massive sell-off Monday. The PBoC injected 100 billion yuan ($15.3 billion) into domestic markets and the yuan firmed against the dollar on suspected intervention by the central bank, helping to limit overall losses to some extent.

The Nikkei lost 0.4 percent after swinging between gains and losses before closing lower for a second day running. Exporters including Nissan Motor, Sharp, Fanuc, Toyota, Honda Motor and Mazda Motor declined after the yen rose against the dollar and euro in early Asian trading. Sumitomo Chemical tumbled on concerns the expansion of its PetroRabigh project, a joint venture between the company and Saudi Aramco, might be affected due to rising tensions in the Middle East. Mobile carrier NTT DoCoMo rallied on a broker upgrade.

Australian shares dropped after the steep declines in the US and European markets overnight. The S&P/ASX and All Ordinaries both lost 1.6 percent. BHP Billiton, Rio Tinto, Santos, Woodside Petroleum and Origin Energy retreated after crude oil prices failed to sustain early gains on Monday despite brimming tensions in the Middle East. The four big banks also declined.

However, the Kospi rebounded on bargain hunting even as foreign investors extended their selling streak for a 22nd consecutive session. Investor sentiment improved a little bit after South Korea downplayed the impact of China's stock market crash on its domestic financial market, saying stability will soon return. The Kospi added 0.6 percent. The Sensex slipped 0.2 percent after losing 2.1 percent Monday.

Looking forward

December composite PMIs will be reported for China, Japan, the Eurozone, Germany and France. Services PMIs will be released for India, the UK and US. Canada and the US post November international trade. In the US, November factory orders and December ISM nonmanufacturing index will also be released. The Federal Reserve publishes minutes from its December FOMC 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.