Market In Review – Continued QE Support Dissolves Greece Concerns
■ Athens stock exchange drops 14.1% during week, but most E.U. equity sees little change
■ Earnings season in U.S. markets fails to translate to equity indices' bottom line
■ Oil Prices surge 8.3% on Friday, leading to 5.8% weekly gain
■ EURUSD gains on signs of E.U. stability and a Dovish Fed
Markets started last week's session with fear, rather than greed setting the tone. Much of this was attributed to assessment that a SYRIZA victory on Sunday's elections would lead to a Greek departure from the Eurozone, and the instability associated with such a move. The Athens Stock Exchange dragged equity down at the first half of the week, as it lost 3.2% on Monday, 3.7% on Tuesday and 9.2% on Wednesday.
The negative sentiment was less evident in other European Indices as those continued to gain support from the previous week's announcement of the ECB asset purchase program. This included the DAX, which experienced a rather turbulent time in these three days, but managed to conclude them with a 0.6% gain. Investors in the French CAC40 index were less fortunate, with a -0.6% decrease between Monday and Wednesday. The rest of the week didn't have E.U. equities going significantly in any specific direction, as the DAX concluded the week with a 0.4% gain, the CAC 40 with a -0.8% loss and the FTSE 100 -1.2% lower.
Positive U.S. earning reports fail to push markets up
U.S. equity markets entered last week's session with quite a lot of downside risks. Some of those materialized. Namely Microsoft dropped some 8.5% at lower the open of Tuesday's session, following weaker earnings and downgrades from JPM, Citi and Nomura. Alternatively, Apple reported its best quarter in a while, sending the stock 5.7% upwards on Wednesday. Likewise Amazon added 13.5% during the week after reporting its first quarterly profit in three quarters, beating analyst expectations.
The release of the Fed's rate decision, on Wednesday, was a native attraction of investor attention. Same as previous times, nobody expected a rate hike, Draghi's recent announcement of the ECB's asset purchase program made this even clearer.
The Fed's statement itself failed to promise a more imminent rate hike, or rather succeeded in avoiding it, as it repeated that the Federal Open Market Committee can be patient in starting to raise rates. The Fed's outlook for the economy seems to be somewhat better off, when it was said to be "expanding at a solid pace". Likewise the outlook for the labor market also appears to be better, citing "strong job gains" and a lower unemployment rate. Pushing away from the Fed's mandate, inflation was said to be running lower, "largely reflecting decline in oil prices". It was also anticipated to decline further in the near term.
In spite of the positive reports and the Fed managing to avoid tightening indications, U.S. equity markets recorded a negative week, with the S&P500 losing 2.8%, the Nasdaq Composite decreasing by 2.6% and the Dow Jones 2.9% lower.
Oil prices proved, last week, that swift developments to the upside are still possible. Oil gained 8.3% on Friday, most of it at a short sprint from around USD 45.4 per bbl, to over USD 48. On a weekly perspective, the black gold added 5.8%.
The aforementioned dovish Fed, and stability through most of the Eurozone have helped strengthen the Euro, with EURUSD gaining 0.8%, during the week. Likewise, EURJPY added 0.5%.
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