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Global Wrap - We Call The S&P/ASX 200 Up 7 European stocks edged higher Friday, reversing a stiff sell-off over the prior two sessions. The session was largely unremarkable following the less than stellar weeks’ performance based on renewed geopolitical concerns in the Middle East and a string of softer data out of the U.S. in recent times. The EuroStoxx600 rose a modest +0.25 on the day for a loss of 2.10% on the week. The performance of U.S. stocks on Friday, and indeed on the week, was almost identical to that of Europe’s with the S&P500 up 0.24% on the day for a loss of 2.23% on the week. Fridays gentle gains stopped a 4 day losing streak but was not enough to stop the week from being the worst since late January. During the past week stocks have been weighed down by disappointing U.S. economic data, such as a drop in durable goods orders in February, worries about first-quarter earnings and fears of overvalued sectors of the market, such as biotech stocks and what a strong dollar may do to earnings. Federal Reserve Chair Janet Yellen said interest rates will probably be raised in 2015 and made the case for a cautious approach to subsequent increases that will keep borrowing costs low for years to come. In a speech in San Francisco on Friday, she emphasized that the coming tightening cycle will be unlike any other in recent times, as the U.S. economy continues to heal from the worst recession since the Great Depression. “The actual path of policy will evolve as economic conditions evolve, and policy tightening could speed up, slow down, pause, or even reverse course depending on actual and expected developments in real activity and inflation,” The market has now all but priced out a June hike and appears less than enthusiastic about the Fed’s hiking call. The final revision of U.S. GDP for the 4th quarter came in unchanged from the prior reading at 2.2%. The market had anticipated a lift to 2.4%. We would stress that undoubtedly healthy result is rather historical now and we suspect that growth in the current 1st quarter result will be a lot slower. Much, much slower. Indeed, one recent overlay we have seen from the Atlanta Federal Reserve, suggests Q1 growth could be as slow as +0.3%. A mixed result from the University of Michigan’s consumer sentiment survey. The final March sentiment index registered at 93.0, up from the preliminary reading of 91.2 but below the final February reading of 95.4. Highlighting ever increasing concerns over income disparity, the report noted the final variation from that expected, came from lower-income households, whose budgets are more sensitive to higher utility costs and disruptions in work hours. By contrast, middle- and upper-income households registered gains in confidence in the March survey. Crude oil prices plunged Friday, dropping by a hefty 5% and reversing almost all of Thursday’s large lift on the Yemen conflict. In what was a volatile week for crude the benchmark WTI contract ended up 4.94% on the week. Market players have been paying close attention to the shrinking U.S. rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market. However, total U.S. crude oil inventories stood at 466.7 million barrels as of last week, the most in at least 80 years, indicating that cheap prices have yet to affect output. No surprise then that the commodity currency complex underperformed, what with the oil decline, and indeed the latest slump in iron ore prices. The widely watched China average (62% fines) import price fell 4% as well Friday. |
