7th August 2014 - Global Markets Update
Globally the markets took a step back yesterday with Europe feeling the pinch mainly due to renewed tensions in the Ukraine and Moscow's introduction of sanctions. Today, more of the same is expected, all be it, probably on a lesser scale for the many of the European indexes.
Asian markets followed on from Europe with only the Nikkei posting significant gains. The Japanese market posted losses in early trading but news that pension funds will increase their allocation in stock spurred the market to rally to 0.5% gains at the close. Japan is has been dealing with substantial social care costs as their aging population start to cause a draw on the economy. The measure imposed so far have been seen as possible ineffective and many feel a more robust set of stimulus programs is required to turn the economy around.
Later today the ECB will make its comments after another meeting which was probably dominated by the crisis in the Ukraine. With Russia starting to implement its own sanctions to those who had targeted her and economic data suggesting that the crisis is already starting to have an effect on some EU member economies it will be an important day to placate investors in the Eurozone. Vladimir Putin will finalize Moscow's sanctions today and it is reportedly targeting US and European food imports for the next year. The EU exports roughly €2bn of fruits and vegetables to Russia per year and the US exports around €1bn of food products. This will probably be the first measures we will see as further pressure by Switzerland as they impose sanctions taken by the EU on Russia also. 87 individuals and 20 companies will be targeted by the Swiss. In an effort to stay as impartial as possible they have avoided drafting their own list. Both Italy and Germany reported slowdowns in their economies, both possibly related to the tension. German Industrial Orders were down 3.2% in June, the steepest drop since September 2011 and a stark contrast to the previous months 1.0% rise. Italy reported a drop in GDP by 0.2% for the 2nd quarter of 2014, making any new policy change from the ECB later today very unlikely as they will need to see how far the crisis in the Ukraine will reach before making any decisions.
US markets leveled out yesterday as the news from Russia drew less concern and more positivity was seen as the Trade Deficit was seen down 7% on May. Coming in at $41.5bn for June the reduction will be seen as a positive step and adds weight to the fact that the economy is expanding. Exports were up, $195.9bn and Imports were down to $237.4bn. All making the case that the economy may have expanded more than the reported 4% for the 2nd quarter of 2014. If the US economy keeps showing this type of expansion, the markets may well get back to record highs and even if there is some profit taking over the next few days, the data is pointing to strength which is not being affected by the EU economic woes.
Major Indexes as of 7th August:
Index % Change Close/
DOW Jones (+0.00%) 16,443.34
FTSE 100 (-0.69%)
CAC 40 (-0.61%)
Nikkei 225 (+0.48%)
Hang Seng (-0.76%)
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