On 29 March, 2016 – Global stocks were mixed
Investors returned from their long holiday weekend and listened to Fed Chair Janet Yellen’s important policy speech.
United States
Stocks advanced after Federal Reserve Chair Janet Yellen said the Fed should proceed “cautiously” on raising interest rates. The Dow Jones industrials gained 0.6 percent, the S&P added 0.9 percent and the Nasdaq jumped 1.7 percent. The S&P is now positive for the year.
Energy prices dragged down shares of drilling company Transocean, Hess and Chevron. Apple climbed after the FBI dropped its legal effort to force Apple to break into the iPhone used by the San Bernardino, California killings in December. Microsoft was up. The information technology company SAIC advanced after its fourth-quarter profit was far larger than analysts expected.
March consumer confidence climbed to 96.2 from an upwardly revised 94.0 in February.
Fed Chair Janet Yellen said in her speech to the Economic Club of New York today that the FOMC needs to proceed with caution in increasing interest rates given unfavorable market conditions, weaker than expected overseas growth and an uncertain inflation outlook. She said that recent declines in market expectations for interest rate increases had helped cushion the US economy from adverse developments overseas, describing the moves as an “automatic stabilizer”.
Ms Yellen’s text substantially repeated her remarks at a recent news conference after the most recent meeting of the FOMC. She did not directly address the timing of the next increase in the fed funds rate. Ms Yellen attributed that deceleration to the weakness of the global economy. She described a dynamic in which slower growth in other nations, which tends to drag on domestic growth, has been offset by a loosening of financial conditions as investors have accepted lower interest rates.
That is the way monetary policy is supposed to work — markets anticipated the Fed’s reaction to a weaker economic outlook and provided an offsetting stimulus. The Fed then confirmed the market’s expectations this month, when it announced after its March meeting that it expected to raise its benchmark interest rate more slowly.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$5.00 to US$1,226.00. Copper futures were down 1.6 percent to US$2.21. WTI spot crude was down 87 US cents to US$38.52. Dated Brent spot crude was down 91 US cents to US$39.36. The US dollar was down against all of its major counterparts including the yen euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was dropped 1.1 percent. The yield on US Treasury 30 year bond was down 5 basis points to 2.60 percent while the yield on the 10 year note slipped 8 basis points to 1.80 percent.
Europe
Stocks mostly advanced as investors returned from their long Easter weekend. The markets got off to a positive start, but slipped into negative territory around midday before rallying in afternoon trading. Investors here were cautious ahead of a highly anticipated speech from Fed Chair Janet Yellen. The CAD added 0.9 percent, the DAX advanced 0.4 percent and the SMI was 0.3 percent higher. The FTSE was virtually unchanged (down 0.58 point).
The referendum on the United Kingdom’s membership in the EU is the most significant near-term domestic risks to financial stability according to the Financial Policy Committee of the Bank of England. The FPC judged that the outlook for financial stability has deteriorated since it last met in November 2015. The bank today published the record of the FPC meeting held on March 23. Risks associated with domestic credit are no longer subdued, and global risks, which can also affect UK exposures indirectly, are heightened.
Deutsche Bank retreated amid reports the lender is hiring 100 people in a bid to boost its equities trading business. Commerzbank also was lower. Drug maker Sanofi gained after announcing the appointment of Yong-Jun Liu as Head of Research Global R&D, effective April 1. Both Technip and Total were lower. RSA Insurance Group and easyJet climbed after broker upgrades. Glencore, Rio Tinto, Anglo American, BHP Billiton and Antofagasta all declined. Nestle, SGS, Sika and Givaudan gained in Switzerland.
Asia Pacific
Shares were mixed as investors waited to hear what Federal Reserve Chair Janet Yellen would say about the US interest rate outlook. With several Fed officials taking a hawkish stance on interest rates recently, it is believed that Yellen’s speech could provide more clarity on the macro-economic environment. While the dollar advanced against the euro and yen, oil prices extended overnight losses on speculation the recent rally may be overdone.
The Nikkei was 0.2 percent lower as traders avoided making big bets before the fiscal year ends on March 31. Mixed economic data and speculation over Bank of Japan policy also kept investors on the sidelines. While household spending for February topped expectations, retail sales showed continued signs of weakness and the jobless rate inched up to 3.3 percent, keeping the yen under pressure. NTT Data advanced after it signed an agreement to acquire Dell’s information technology services business for $3.05 billion.
Australian shares hit one-month lows as trading resumed after the Easter break. The S&P/ASX declined 1.6 percent while the All Ordinaries dropped 1.5 percent. The big four banks dropped to extend last Thursday’s losses on concerns over rising bad debts. Miners BHP Billiton and Rio Tinto also slid as iron ore futures in China hit a three week low.
The Shanghai Composite dropped 1.3 percent while the Hang Seng edged up 0.1 percent. The Kospi added 0.6 percent aided by foreign investor flow into equities. The Sensex lost 0.3 percent.
Many money managers are also expected to adjust portfolios before the first quarter ends Thursday. Large Asian stock markets, including Japan, China and Hong Kong, are down for the three months ending March. Smaller markets in Thailand, Indonesia and the Philippines, look set to book gains for the quarter.
Global Stock Markets
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 reports February industrial production. The Eurozone posts March EC economic sentiment. The US posts March ADP private employment report and weekly EIA petroleum status report.
*Note — all releases are listed in local time.
Source: Fidelity
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