On 03 May, 2016 – Stocks tumbled on global growth fears

Shares were mixed in Asia but sank in Europe and the US.
United States
More weakness in Chinese manufacturing weighed on US financial markets Tuesday, renewing concerns that the Chinese economy is slowing down. Those fears were compounded after European officials cut back their growth forecasts for that region’s struggling economy. The Dow Jones industrials were down 0.8 percent, the S&P retreated 0.9 percent and the Nasdaq lost 1.1 percent wiping out Monday’s gains. Both energy and bank shares dragged down the indices.
China’s April manufacturing PMI declined to 49.4 last month from 49.7 in March. A number below 50 indicates that manufacturing is contracting. Worries about China were largely responsible for a bout of turmoil in global financial markets early this year.
Chevron declined along with JPMorgan Chase and Goldman Sachs. Pfizer advanced after the company reported solid first-quarter earnings that beat estimates. Pfizer saw big sales gains in some of its newest drugs, including Lyrica and the vaccine Prevnar 13. CVS Health also announced profits above expectations. Energy companies including Chesapeake Energy and Marathon Oil were dragged lower by the sliding price of oil. Apple advanced, snapping its longest losing streak since 1998.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$8.35 to US$1,294.00. Copper futures were down 2.3 percent to US$2.21. WTI spot crude was down US$1.07 to US$43.71. Dated Brent spot crude was down 77 US cents to US$45.06. The US dollar was up against the euro, pound and the Canadian and Australian dollars. However, it declined against the Swiss franc and was virtually unchanged against the yen. The Dollar Index was up 0.5 percent. The yield on US Treasury 30 year bond was down 6 basis points to 2.66 percent while the yield on the 10 year note declined 7 basis points to 1.80 percent.
Europe
Stocks dropped Tuesday thanks to weaker than expected Chinese manufacturing data that soured the mood among investors and weighed heavily on mining and resource stocks. Financial stocks were also under pressure after disappointing earnings reports. The FTSE was down 0.9 percent, the CAC and SMI both dropped 1.6 percent and the DAX tumbled 1.9 percent.
The executive arm of the EU cut the euro area growth forecast for this year to 1.6 percent from 1.7 percent in its spring 2016 Economic Forecast. The growth projection for the EU for this year was reduced to 1.8 percent from 1.9 percent. The outlook for the next year was cut to 1.9 percent from 2 percent. Eurozone growth and inflation are expected to be less than what was projected earlier as high debt levels and insufficient structural reforms on a domestic level and the deteriorating global environment could hurt the economic prospects. The inflation forecast for this year was lowered to 0.2 percent from 0.5 percent. The outlook for the next year was cut to 1.4 percent from 1.5 percent.
Commerzbank sank after its first-quarter net profit more than halved in the wake of ultralow interest rates and sluggish activity in capital markets. Infineon Technologies was down after lowering its full-year profit margin guidance. Deutsche Lufthansa dropped after trimming its capacity growth plans. BMW retreated after it confirmed its full-year targets despite posting a decline in first-quarter operating profit. BNP Paribas closed lower after the lender reported a 10.1 percent rise in first quarter net profit despite difficult markets, as lower provisions for bad loans helped offset a slump in trading revenue.
Both Technip and Total declined. In London, HSBC Holdings was down after it reported a smaller-than-expected 14 percent decline in first-quarter pretax profit amid tough conditions in the banking sector at the start of 2016. RSA Insurance climbed on a broker upgrade. Mining stocks including Anglo American, Glencore, Antofagasta, Rio Tinto, BHP Billiton and Fresnillo were under intense pressure following the release of the disappointing Chinese manufacturing report. UBS declined in Zurich after its first quarter profit plunged 64 percent from a year earlier, with all divisions reporting a drop in earnings.
Asia Pacific
Stocks were mixed Tuesday as markets in Hong Kong, Malaysia, Singapore and Taiwan returned from a long holiday weekend. While oil prices rose in Asia after overnight losses, iron ore prices retreated in China in the wake of disappointing manufacturing data. Investors shrugged off continued strength in the yen — Japanese markets remained closed until Friday for the Golden Week holidays.
The Shanghai Composite added 1.8 percent in thin trading following the holiday weekend after President Xi Jinping pledged to maintain the healthy development of the stock market. Investors in the region shrugged off the latest manufacturing PMI survey from Caixin, which revealed that activity unexpectedly declined further in April despite government stimulus. The manufacturing PMI fell to 49.4 from 49.7 in March. The Hang Seng retreated 1.9 percent.
Australian shares hit their highest level in over 6 months after the Reserve Bank of Australia cut its cash rate to a record low of 1.75 percent to fight deflation and building approvals figures for March beat forecasts. The S&P/ASX climbed 2.1 percent while the All Ordinaries gained 1.9 percent. ANZ Banking Group reversed early losses to end higher. The bank cut its interim dividend for the first time since the global financial crisis after reporting a 24 percent decline in cash profit for six months to March 31. Commonwealth, NAB and Westpac rallied. BHP Billiton and Rio Tinto were down after steel and iron ore futures in China fell more than 4 percent on data showing slowing momentum in China’s manufacturing sector. Online action sports retailer Surfstitch plunged after a profit warning.
The Kospi was up 0.4 percent after offshore investors turned net buyers for the day. The Sensex tumbled 0.8 percent in chopping trading.
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*
China and India services PMIs for April will be released. Composite PMIs will be reported for France, Germany and the Eurozone. The Eurozone will also post March retail sales while France will release March merchandise trade balance. Canada and the US post March international trade. The US reports first quarter productivity and costs and the April ADP private payrolls. March factory orders, the April ISM nonmanufacturing index and weekly petroleum status report will also be released.

Source: Fidelity

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