On 02 March, 2016 – March off to a positive start
Global stocks were mostly higher thanks to recovering energy prices.
United States
After opening lower, stocks eventually gained to end in positive territory for the day. The Dow Jones industrials were up 0.2 percent, the S&P added 0.4 percent while Nasdaq was 0.3 percent higher.
Monsanto retreated after the company cut its annual profit forecast because of the strong US dollar, competition from lower-cost generic products and lower commodity prices, which are hurting its customers. Brown-Forman, whose brands include Jack Daniels, was down after the company lowered its profit estimates. The company makes 60 percent of its sales overseas and is being affected by the strong dollar, cutbacks in travel and weak economies in some emerging markets. Energy stocks rallied even though energy prices didn’t change much. Marathon Oil and Murphy Oil gained. Verizon and AT&T climbed.
Online games maker Zynga rose after the company named a new chief executive. Zynga has struggled to follow up on its early hit games like FarmVille and Clumsy Ninja. Big 5 Sporting Goods dropped after the company offered a weak profit forecast and a competing retailer, Sports Authority, said it would file for Chapter 11 bankruptcy protection. Sports Authority said it planned to close or sell about 140 stores, or almost a third of its locations. Everyday Health soared after a strong quarterly report. The insurance software company Guidewire Software advanced after it reported profit and sales that surpassed expectations.
The Federal Reserve published its Beige Book in preparation for the FOMC meeting on March 15 and 16. The report on current economic conditions indicated that overall economic activity increased albeit more slowly than previously in most regions. Contributors pointed to weaker global growth and the strong US currency as key issues as challenges to manufacturing. Manufacturing activity was described as flat, with most districts citing weak demand in the energy sector as a “significant headwind.” However, “consumer spending increased in most districts, in line with the robust January retail sales report.” Housing activity was positive and non-residential real estate indicated a net increase in sales as well. Labor markets continued to show improvement.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$2.70 to US$1,239.20. Copper futures were up 2.3 percent to US$2.19. WTI spot crude was up 49 US cents to US$34.89. Dated Brent spot crude was up 34 US cents to US$37.15. The US dollar was up against the Canadian dollar. The currency declined against the yen, pound and Australian dollar. It was virtually unchanged against the euro and Swiss franc. The Dollar Index was down 0.2 percent. The yield on US Treasury 30 year bond was down 2 basis points to 2.68 percent while the yield on the 10 year note was up 2 basis points to 1.84 percent.
Europe
Most European stock indices advanced Wednesday, although they finished off their session highs. Financial and resource stocks were among the best performers Wednesday. Stocks pared some early gains in response to mixed regional data. The FTSE slipped 0.1 percent while the CAC added 0.4 percent, the DAX was up 0.6 percent and the SMI was 1.0 percent higher.
Policymakers are exploring ways to mitigate the adverse effects that negative interest rates can have on bank profitability, European Central Bank Executive Board member Benoit Coeure said Wednesday, as euro area rate-setters prepare to unveil fresh stimulus next week that may include a deposit rate cut. Acknowledging the concern that negative deposit rate could squeeze banks' net interest margins, Coeure said, "We are well aware of this issue." "We are monitoring it on a regular basis and we are studying carefully the schemes used in other jurisdictions to mitigate possible adverse consequences for the bank lending channel," the policymaker said in a speech in Frankfurt.
Automakers all climbed after releasing their February sales figures. Deutsche Bank and Commerzbank advanced. Société Générale, BNP Paribas and Crédit Agricole finished higher. MorphoSys jumped after reporting better than expected full-year earnings. In Paris, BioMérieux plunged after reporting net income for fiscal year 2015 of €110 million, down from €136 million in 2014. In London, broadcaster ITV retreated after warning advertising revenue would be flat over the next few months. Pearson weakened after a broker downgrade. Mining stocks climbed on rising metal prices. BHP Billiton, Anglo American, Antofagasta, Rio Tinto and Glencore gained. Standard Chartered, Barclays, HSBC and Royal Bank of Scotland were up on the day.
The producer price index decreased 2.9 percent on the year following a 3 percent slump in December. British construction activity expanded at the weakest pace in ten months in February. The Markit/CIPS UK construction PMI slid to 54.2 in February from 55.0 in the previous month. The Swiss economy recovered at a faster than expected pace in the fourth quarter, helped by domestic spending, suggesting that the region weathered headwinds from the appreciation of the franc and the resultant weakness in exports. Fourth quarter gross domestic product advanced 0.4 percent on the quarter, reversing the revised 0.1 percent contraction in the third quarter.
Asia Pacific
Indices rallied Wednesday as overnight gains in oil prices and signs of improvement in the US economy helped ease investor worries about slowing global growth. Expectations of further support from major central banks in Asia and Europe also boosted risk appetite.
The Nikkei vaulted 4.1 percent as the yen's retreat from a three-year high thanks to upbeat US data boosted exporters' shares. Sony and Panasonic climbed as did automakers Honda Motor, Toyota, Mazda and Nissan. Component supplier Alps Electric soared after Apple shares rose above $100. Banks Mizuho Financial, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial rallied. Energy explorer Inpex, JX Holdings and Japan Petroleum climbed.
The Shanghai Composite climbed 4.3 percent led by gains in realty and commodity-related shares on hopes that Beijing will unveil mores steps to boost flagging economic growth. The Hang Seng finished 3.1 percent higher. Chinese shares rose sharply even as Moody's Investors Service lowered the outlook on China's credit rating to 'negative' from 'stable', citing a weakening of fiscal metrics, a fall in reserve buffers and uncertainty about the government's ability to implement reforms. China’s parliamentary sessions, kicking off later this week, also lifted sentiment. Some investors expect authorities to deliver outlines on further reform plans.
The S&P/ASX was up 2.0 percent while the All Ordinaries gained 1.9 percent after data showed the economy grew at its fastest pace in almost two years in the fourth quarter of 2015. Australia's GDP grew by 0.6 percent in the December quarter and by 3.0 percent in the year to December. Big banks and miners advanced. The Kospi was 1.6 percent higher after overnight gains in the US. The Sensex was up 1.9 percent.
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*
Australia posts January merchandise trade. China reports February general services PMI. February Composite PMIs will be released for Japan, India, Eurozone, France and Germany. February services PMIs will be posted for the UK and US. The Eurozone reports January retail sales. In the US, fourth quarter productivity & costs, February ISM nonmanufacturing, January factory orders and the weekly jobless claims, EIA natural gas, money supply and Fed balance sheet will all be released.
*Note — all releases are listed in local time.