Global equities retreat on growth concerns : 06.04.2016 by IFC Markets
US stocks fell on Tuesday as concerns about slowing economic growth weighed on market sentiment. The dollar weakened, hitting 17 month low against the yen as investors sold off riskier assets opting for the safety of haven assets. According to live dollar index data the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, edged up 0.09% to 94.63. The Dow Jones Industrial Average fell 0.8% settling at 17603.32. Losses in stocks of Cisco Systems, UnitedHealth Group and Walt Disney outweighed gains in Pfizer and Boeing. The S&P 500 closed 1% lower at 2045.17, led by 1.9% and 1.4% declines in utilities and financial sectors respectively. The Nasdaq Composite Index closed 1% lower at 4843.93. Investors took profits ahead of earnings season with analysts’ estimates indicating corporate earnings in the first quarter will record the fourth year-over-year decline in a row. The economic data were not particularly encouraging either: the US trade deficit climbed 2.6% to $47.1 billion in February due to higher imports. The rise in deficit was slightly higher than expected, prompting economists to cut their first-quarter GDP estimates 0.5% to as low as a 0.4% annualized rate, the slowest growth in two years. On the positive side, the Institute for Supply Management Nonmanufacturing Index rose to 54.5% in March from 53.4% in February. This indicates the economy is still expanding at a moderate pace as a reading over 50% signals more businesses are expanding instead of contracting in an important sector of economy such as services. Investors will be watching closely the Federal Reserve March meeting minutes which will be released at 20:00 CET today. At 13:00 CET Mortgage Applications will be released in US. At 18:20 CET Federal Reserve Bank of Cleveland Loretta Mester will speak on economic outlook in Cleveland.
European stocks sold off on Tuesday as disappointing economic reports and worries about global growth undermined investor confidence. The euro edged lower against the dollar. The Stoxx Europe 600 index sank 1.9%. Germany’s DAX 30 tumbled 2.6% to 9563.36 after data showed orders in Germany’s manufacturing sector fell 1.2% in February instead of an expected small gain. Other economic reports were mixed. The final reading of Services PMI for euro-zone was revised downward to 53.1 for March from the flash estimate of 54. The Composite PMI was also lowered to 53.1 from the flash estimate of 53.7. On the positive side retail sales in euro-zone rose 0.2% in February while no growth was expected, recording the fourth straight monthly gain. France’s CAC 40 dropped 2.2% and UK’s FTSE 100 also lost 1.2%. Today at 10:10 CET March Retail PMIs will be released for Germany, France, Italy and euro-zone.
Nikkei fell 0.1% today with yen little changed from 17 month high against the dollar hurting earnings prospects of Japanese companies which rely on exports to generate most of their revenues. Prime Minister Shinzo Abe’s comments on Tuesday that countries should avoid currency devaluation seeking to weaken their currencies with "arbitrary intervention" indicate lower likelihood of a possible currency intervention by the Japanese authorities to stop the yen's rise as many anticipated.
Oil futures prices are rising today after closing higher on Tuesday supported by a comment from Kuwaiti governor for the Organization of the Petroleum Exporting Countries indicating possibility of an output freeze agreement at a producer meeting scheduled for April 17 in Qatar. June Brent crude oil rose 0.5% to $37.87 a barrel on London’s ICE Futures exchange on Tuesday. The American Petroleum Institute industry trade group on Tuesday reported that US inventories of crude oil fell by 4.3 million barrels in the latest week. Today at 16:30 CET US Crude Inventories will be released by Energy Information Administration.