MARKET SUMMARY WEEK ENDING 18 SEPTEMBER 2015
21st September 2015
Yellen Pause Ups Pressure on Draghi as Global Pessimism Mounts. After the Federal Reserve chair held off from a U.S. interest-rate increase amid concerns that world growth will weaken, her counterpart at the ECB may give clues on the need for further stimulus for the euro area.
Goldman Sachs says the euro may fall up to 10 U.S. cents as the ECB is set to increase currency-weakening stimulus to meet its inflation target. The investment bank predicts the ECB will maintain quantitative easing of 60 billion euros a month through the end of 2016, an extension of the plan that was intended to run until September 2016, and only end it completely in mid-2017.
Commodities in Review
Oil Speculators Most Bullish in Two Months as OPEC Calls for $80. Hedge funds slashed their bets on falling oil prices, leaving them the most bullish in two months as OPEC called for a return to $80 crude.
Gold held near the highest level in more than two weeks as global share markets extended their decline, spurring demand for a haven. The price climbed on Friday to $1,141.84, the highest level since Sept. 2, after the Federal Reserve’s decision to keep interest rates unchanged. Silver added as much as 0.5%.
Power Goes Out on S&P 500 Rally as China Crashes Fed Celebration. Janet Yellen killed the week’s equity rally by bringing front and center the very things investors had hoped to get past: murkiness over the global economy and interest rates. The S&P 500 Index jumped 2.7% in the five days before the Fed decision and on Thursday topped 2,000 on an intraday basis for the first time since Aug. 21. It didn’t stay there for long, as the Fed’s decision sparked a two-day rout of 1.9% that wiped out the index’s gain for the week. It closed at 1,958.03, in line with its September average.
Shire Leads Britain's Stocks Higher for First Gain in Three Days. U.K. stocks rebounded after a two-day drop, with Shire Plc climbing the most. Shares of the health-care company rose 3.3% after it got European Commission approval for a drug attention deficit hyperactivity disorder in children and adolescents. Foxtons Group Plc rose 2.7% as U.K. house prices jumped to a record. The FTSE 100 Index added 0.5% at 8:23 a.m. in London after falling 2% in the past two days. The broader FTSE All-Share Index gained 0.4%, and Ireland’s ISEQ Index added 0.2%.
European stocks swung between gains and losses as Volkswagen tumbled and Shire led health-care shares higher. The Federal Reserve held off raising borrowing costs last week, leaving investors with questions about global growth prospects. Stocks fell 1.8% on Friday as the Fed’s decision also boosted the euro and sent exporters lower. The U.S. decision adds pressure on ECB President Mario Draghi to act. He and other Governing Council members will make public appearances this week, while data releases will show whether the region is succumbing to, or shaking off, the gloom.
Chinese Stocks Advance for Second Day Before Xi's Visit to U.S. China’s stocks rose for a second day, led by industrial and technology companies, as President Xi Jinping headed to the U.S. for his first state visit. The Shanghai Composite Index gained 1.9 percent to 3,156.54 at the close, reversing a drop of 1.2 percent as volatility hovered near the 18-year highs reached last week and trading volumes slumped 36 percent from the 30-day average.
Emerging Stocks Decline With Currencies Amid Global Growth Risks. Emerging-market stocks retreated from a one-month high as concerns about slowing global economic growth and higher U.S. interest rates damped demand for riskier assets. The MSCI Emerging Markets Index tumbled 1.6 percent to 816.88 at 9:10 a.m. in London, the most since Sept. 4. Federal Reserve Chair Janet Yellen highlighted China’s slowing economy and financial market turmoil when she left borrowing costs near zero last week. MSCI’s developing-markets index has fallen 15 percent this year and trades at 10.8 times projected 12-month earnings, a 28 percent discount to the MSCI World Index, according to data compiled by Bloomberg.
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