Asian markets continued their retreat but European markets rebounded while US markets were mixed. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

Stocks were mixed at the close on Wednesday with traders assessing remarks from Federal Reserve Chair Janet Yellen that the Fed would be cautious about raising interest rates. Health care and technology stocks were among the biggest gainers. However, the Dow Jones industrials retreated 0.6 percent while the S&P was virtually unchanged (down 0.35 point) and the Nasdaq added 0.35 percent.

Akamai Technologies surged 22.5. Staples advanced after the retailer received European approval for its buyout of Office Depot. In exchange for the approval, Staples said it would split off some operations in Europe to allay regulatory concerns. The $6.3 billion deal still needs approval in Canada and in the United States. Several big media companies retreated. Disney shares dropped a day after it reported that its ESPN network had hit a soft patch. Time Warner shares were down after its revenue fell short of forecasts.

Cisco Systems reported a 2 percent increase in quarterly revenue and said it would add $15 billion to its share buyback program. Net income rose to $3.1 billion or 62 US cents per share in the second quarter ended January 23 from $2.40 billion or 46 US cents per share a year earlier. Revenue rose to $11.8 billion from $11.6 billion, excluding revenue from the customer premises equipment portion of the service provider video connected devices business that was divested.

Federal Reserve Chair Janet Yellen gave the first day of her semi-annual testimony to the House of Representative’s Financial Services Committee. Ms Yellen offered no surprises in her prepared remarks. She highlighted the strength of the labor market, describing “solid improvement” over the last half year. The unemployment rate fell to 4.9 percent in January, from 5.7 percent in January 2015, and the economy added an average of 222,000 jobs a month over the previous year. She also suggested, ever so gently, that investors were not behaving rationally, suggesting that markets might rebound. While global economic and financial conditions have taken a turn for the worse, “we have not seen shifts that seem significant enough to have driven the sharp moves that we have seen in markets,” she said.

The Fed has emphasized that it is focusing on job growth in determining how quickly to raise interest rates. Ms Yellen and most members of the FOMC expect that continued job growth will lead to faster inflation, and they argue that they must raise rates ahead of time to prevent inflation from rising too quickly. Ms Yellen noted that growth slowed “sharply” in the final months of 2015, but reiterated the Fed’s expectation that moderate growth would resume in 2016. Inflation, however, remains sluggish. Ms. Yellen noted that prices rose just 0.5 percent during 2015, well below the 2 percent annual pace the Fed regards as optimal. Moreover, expectations of future inflation have also been falling, a problem for the Fed because expectations tend to influence actual inflation.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$1.00 to US$1,190.00. Copper futures were down 2.2 percent to US$2.01. WTI spot crude was down 54 US cents to US$27.40. Dated Brent spot crude was up 59 US cents to US$30.91. The US dollar was up against the Swiss franc and Canadian dollar. It was unchanged against the euro. However, it declined against the yen, pound and Australian dollar. The Dollar Index was down 0.4 percent. The yields on both the US Treasury 30 year bond and the 10 year note slipped 3 basis points to 2.53 percent and 1.70 percent respectively.

 

 

 

           Europe

 

 

Stocks rebounded Wednesday from Tuesday’s lows. A strong bounce in bank stocks propelled markets higher with investors buying European banks at low prices. Bank stocks endured sharp losses in recent days. The FTSE was up 0.7 percent, the CAC and DAX added 1.6 percent and the SMI jumped 2.0 percent.

Crude oil prices are attempting to stabilize on reports that Iran is ready to talk with Saudi Arabia over the current conditions in international oil markets. According to the weekly US EIA report there was an unexpected decrease in crude oil inventories last week.

Investors were also monitoring the question and answer portion of Fed Chair Janet Yellen's testimony before the House Financial Services Committee. In prepared remarks, Yellen stressed that monetary policy is not on a preset course and reiterated the oft-repeated statement that the path of the federal funds rate was data dependent.

Deutsche Bank surged on a report that the lender is considering buying back several billion euros of its debt. Commerzbank also jumped. In Paris, Société Générale, BNP Paribas and Crédit Agricole finished higher. Heidelberger Druckmaschinen advanced after the printing machines maker reported a net profit of €7 million for the third quarter compared to a net loss of €53 million last year. Fresenius and Fresenius Medical Care advanced. RWE and E.ON declined. Technip and Total retreated.

In London, Hikma Pharmaceuticals was down. The company announced revised terms for its previously announced acquisition of Roxane Laboratories. The upfront gross cash consideration will be reduced by $535 million following the receipt of new information on Roxane's financial performance in 2015. Tullow Oil sank after it reported a loss from continuing activities before tax of $1.3 billion for the year ended 31 December 2015, compared to a loss of $2.1 billion, a year ago. ARM Holdings weakened after the chipmaker reported that its fourth quarter profit before tax on IFRS basis was £113.7 million, 24 percent higher than last year's £91.4 million.

French industrial output declined the most in 19 months in December. Industrial production dropped 1.6 percent on the month after declining 0.9 percent in November. Italy's industrial production decreased for the second straight month in December. Industrial production fell a seasonally adjusted 0.7 percent on the month after a 0.5 percent drop in November. UK industrial production declined at a faster pace in December, rendering the quarterly performance the worst in nearly three years. Industrial production was down 1.1 percent on the month after November's 0.8 percent drop.

The National Institute of Economic and Social Research (NIESR) estimated that Britain's economy grew at a quarterly rate of 0.4 percent in the three months to January, down from 0.5 percent in the last three months of 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia Pacific

 

The sell-off in Asian stock markets deepened Wednesday as the collapse of oil prices and fresh worries that a new banking crisis could erupt in a fragile global economy added to the risk-off mood. Shares declined across the region despite oil prices seeking some rebound from overnight losses on news that Iran is ready to talk with Saudi Arabia over the current conditions in international oil markets. Federal Reserve Chair Janet Yellen’s Congressional testimony occurred after markets here were close for the day.

Japanese shares hit a 15-month low as the dollar slid from the lower ¥115 range to the mid-¥114 zone on concerns over global market volatility and worries over financial institutions in Europe and the US. The Nikkei dropped 2.3 percent to its lowest since October 2014 after closing 5.4 percent lower the previous day. Export oriented shares such as Canon, Sony, Mazda Motor and Sharp plummeted. Banks Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Financial retreated a day after the interest rate on Japanese 10-year bonds sank below zero for the first time. Inpex, JX Holdings and Japan Petroleum dropped. Fanuc gained after announcing a share buyback plan. Silicon wafer maker Sumco rallied after reporting stronger than expected annual results.

The S&P/ASX dropped 1.2 percent to enter a technical bear market despite a slew of solid earnings reports and positive economic data. The index fell as much as 2.6 percent before closing at a 31-month low. The All Ordinaries closed 1.1 percent lower. Commonwealth Bank rallied after posting a modest two percent rise in first-half net profit. However, Westpac, ANZ and NAB were lower on the day. Energy stocks Woodside Petroleum, Oil Search, Origin Energy and Santos dropped while mining giants BHP Billiton and Rio Tinto ended lower as well. The Sensex lost 1.1 percent.

 

 

 

 

 

 

Looking forward

 

 

In the US, weekly jobless claims, money supply and Fed balance sheet will be reported. Fed Chair Janet Yellen gives her second day of testimony to the Senate Banking Committee.

 

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.