Daily Global Market Update

Daily Global Market Update
9 March, 2015
Week ahead: ECB begins bond buying this week
Shares were mixed in Europe and the Asia Pacific regions. However, US stocks tumbled after
February employment rose more than expected.
United States
The strong employment report shook up the market Friday. Employment was up 295,000 in
February. At the same time, the unemployment rate declined to 5.5%. The results raised the
likelihood that the Federal Reserve would raise interest rates sooner than expected. The dollar
surged, Treasuries dropped and the market logged its worst day in two months. The Dow Jones
industrials were down 1.5%, the S&P retreated 1.4% and the Nasdaq was 1.1% lower. The three
indices were down 1.5%, 1.6% and 0.7% on the week.
Stocks that pay good dividends such as utilities, telecommunication companies and real estate
investment companies slumped the most. These stocks have been popular while interest rates on
bonds remained low. If interest rates on bonds rise, they become less attractive by comparison.
Some investors said that the sharp sell-off was an overreaction. Traders said the flow of money
out of the market was largely driven by hedge funds and other big investors who make decisions
based on broad economic trends rather than the outlooks for individual companies.
Apple eked out a small gain. The company will replace AT&T in the Dow Jones industrial average
on March 19. Bank of America advanced after the bank’s positive stress test results exceeded
investor expectations. Gap declined after it reported a 4% drop in February same store sales at
its namesake stores. Foot Locker added 4.1% after the sportswear retailer posted better than
expected results in its holiday quarter.
Gold at the afternoon London fixing dropped US$26.25 to US$1,175.75. Copper futures were
down 1.5% to US$2.61. WTI spot crude was down 98 US cents to US$49.78. Dated Brent spot
crude was down 69 US cents to US$59.79. The US dollar was up against all of its major
counterparts including the euro, yen, pound, Swiss franc and the Canadian and Australian
dollars. The Dollar Index gained 1.8%. The yields on both the US Treasury 30 year bond and 10
year note were up 13 basis points to 2.84% and 2.24% respectively.
Europe
Markets were mixed Friday following the release of the better than expected February US jobs
report. The report added to concerns that the Federal Reserve would increase interest rates in
the near future. The euro added to its recent weakness against the dollar. The FTSE was down
0.7% on the day (down 0.5% on the week), the CAC was virtually unchanged (up 0.3%), the DAX
added 0.4% (up 1.3%) and the SMI gained 0.5% (up 0.7%).
On Friday, Greece repaid the first €310 million tranche of a loan from the International Monetary
Fund that was due in March. The repayment was due Friday and the country has to pay a total
€1.5 billion to the IMF over the next two weeks as the government led by Prime Minister Alexis
Tsipras struggles to raise funding amid a cash crunch. Reports also said that the Greek
government has sent a fresh list of reforms to Brussels ahead of a meeting of Eurozone finance
ministers on Monday. The list apparently contains specifics of measures announced already and
also some new reforms.
Air Berlin increased after it issued its traffic data for February. RWE and E.ON both declined.
ThyssenKrupp climbed as did Lanxess. Volkswagen, BMW, Daimler, Renault and Peugeot
gained. Crédit Agricole and Société Générale advanced. Weir Group climbed following a report
that the company may be a takeover target. Thomas Cook surged after China's Fosun
International Limited agreed to acquire a 5% stake in the tour operator. AstraZeneca finished
lower after the drug maker said it is evolving its financial reporting in line with the evolving
business model. Mining stocks were under pressure due to falling commodity prices.
Asia Pacific
Stock markets in the region were mixed after the European Central Bank raised its economic
growth forecasts for the Eurozone and laid out its plans for bond purchases to combat deflation.
ECB President Mario Draghi on Thursday said the ECB would purchase €60 billion of public and
private sector assets each and every month until September 2016 or beyond if necessary to put
the Eurozone back on track for sustained growth. The bond buying stimulus program begins
March 9. Investors also were waiting for US jobs data due later in the global market day.
The Shanghai Composite was down 0.2% while the Hang Seng slipped 0.1%. On the week, they
lost 2.1% and 2.7% respectively. Chinese Finance Minister Lou Jiwei told the legislature that
China will pursue an expansionary fiscal policy this year to withstand the downward pressure on
the economy.
The Nikkei rallied 1.2% to its highest since April 2000 buoyed by encouraging comments from the
European Central Bank on the outlook for Eurozone growth and inflation. The index was up 0.9%
on the week. Seven & I Holdings, Yamaha, Sumco, Olympus and Ajniomoto climbed. Sumitomo
Dainippon Pharma jumped on a brokerage upgrade. Exporter shares closed mostly higher.
Both S&P/ASX and All Ordinaries slipped 0.1%. Miners declined after iron ore prices sank below
the US$60 a ton threshold overnight to hit a near six year low amid skepticism about the strength
of Chinese demand. The indices both lost 0.5% on the week.
The Kospi was up 0.7% and was up 1.4% on the week aided by sustained buying by foreign
funds. Foreign investors extended their buying streak to a 10th consecutive session with
purchase of shares worth a net 287 billion won.
Global Stock Market Recap
End
2014
Mar 4
Mar 5
Daily
Change
Dow
NASDAQ
S&P 500
S&P/TSX Comp**
16576.7
18097.0
17856.8
-278.9
-1.5
0.2
8.5
4176.6
4967.1
4927.4
-55.4
-1.1
4.0
13.6
1848.4
2098.5
2071.3
-29.8
-1.4
0.6
10.3
13621.6
15082.8
14952.5
-150.6
-1.0
2.2
4.6
FTSE 100
CAC
XETRA DAX
MIB
Ibex 35
OMX Stockholm
30
SMI
6749.1
6919.2
6911.8
-49.3
-0.7
5.3
3.0
4296.0
4917.4
4964.4
0.8
0.0
16.2
13.7
Index
North America
United States
Canada
Europe
UK
France
Germany
Italy
Spain
Sweden
Switzerland
Asia/Pacific
Australia
All Ordinaries
Japan
Nikkei 225
Hong Kong
Hang Seng
S. Korea
Kospi
Singapore
STI
China
Shanghai Comp
India
Sensex 30
Data Source — Haver Analytics
2015
Percent Change
Daily
2015
Yr/Yr
9552.2
11390.4
11551.0
47.0
0.4
17.8
23.5
18967.7
22131.1
22436.1
36.0
0.2
18.0
8.7
9916.7
11051.3
11091.9
-32.5
-0.3
7.9
9.1
1333.0
1664.5
1662.6
-7.0
-0.4
13.5
22.4
8203.0
8992.5
9080.0
45.4
0.5
1.1
8.4
5353.1
5871.5
5868.6
-5.1
-0.1
8.9
7.1
16291.3
18703.6
18971.0
219.2
1.2
8.7
24.2
23306.4
24465.4
24164.0
-29.0
-0.1
2.4
6.6
2011.3
1998.3
2012.9
14.6
0.7
5.1
1.9
3167.4
3415.5
3417.5
22.2
0.7
1.6
9.0
2116.0
3279.5
3241.2
-7.3
-0.2
0.2
57.5
21170.7
29380.7
*
*
*
*
*
Looking forward*
Monday — Germany posts January merchandise trade balance. Canada posts February housing
starts.
Tuesday — China releases February consumer and producer price indices. France and Italy post
January industrial output. In the US, February NFIB small business optimism index and January
JOLTS and wholesale trade will be posted.
Wednesday — China posts February industrial output and retail sales. Japan releases January
machine orders and February producer price index. Australia reports January home loans. The
UK posts January industrial production. The US posts February Treasury budget.
Thursday — Australia releases February labour force survey. India reports February consumer
prices and January industrial production. Germany and France post February consumer price
indices. Eurozone releases January industrial production. The US releases February retail sales
and import/export price indices and January business inventories along with the weekly jobless
claims, Fed balance sheet and money supply data.
Friday — Canada posts February labour force survey. The US reports February producer price
indices and preliminary March consumer sentiment.
*Note — all releases are listed in local time.
The Longer-Term Perspective
The table below demonstrates that while we may experience some short-term weakness in
markets, the longer-term performance remains encouraging.
Equity markets as at 06/03/2015
Market
% change
12 mths to
06/03/2015
Source: Datastream, Price Index Returns in local currency
% change
12 mths to
06/03/2014
% change
12 mths to
06/03/2013
% change
12 mths to
06/03/2012
% change
12 mths to
06/03/2011
US: Dow Jones
8.74
14.87
12.05
4.84
15.18
US: S&P 500
10.35
21.77
14.75
1.68
16.02
US: NASDAQ
13.22
35.06
10.72
4.51
19.70
MSCI Europe
10.04
12.69
13.92
-10.20
5.53
UK: FTSE All Share
2.01
7.92
13.42
-3.95
8.68
UK: FTSE 100
1.82
5.61
11.48
-3.75
6.98
Germany: DAX
21.04
20.50
19.39
-7.60
22.14
France: CAC 40
12.39
17.05
12.23
-16.36
2.81
Netherlands: All Share
21.40
13.83
7.56
-13.32
9.09
Italy: S&P MIB
7.67
31.06
-1.96
-26.74
-0.63
Switzerland: SMI
7.02
10.20
27.30
-7.40
-4.63
Spain: IBEX 35
7.65
23.27
2.35
-22.21
-4.73
Sweden: OMX
20.97
13.73
14.26
-4.93
11.45
Japan: Nikkei
25.35
26.84
23.81
-9.88
3.13
MSCI Asia Pacific ex Japan
9.93
1.58
11.03
-8.09
10.50
Hong Kong: Hang Seng
6.44
-0.33
9.48
-11.12
12.61
Australia: S&P/ASX 200
8.32
6.43
21.69
-13.56
2.04
China: Shanghai Shenzhen
300
60.03
-17.98
1.11
-19.86
0.33
Anne D Picker
Chief Economist
Econoday
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