Market Comments: U.S. and European markets ended the week similar to where they began. The S&P fell 0.4 per cent and the FTSE Eurofirst 300 index fell 0.10 per cent. The optimism evident last week after Central Bank policy and Fed action seemed to wane, as investors again began to feel concern over the future of the global economy. That being said, increasing investment in global equities through equity funds increased, as weekly flows into equity funds hit four-year high of $17 billion.
Good news on U.S. housing was revealed on Wednesday. From The Globe and Mail: “Sales rose 7.8 per cent month-over-month, to 4.82 million, blowing past expectations. Perhaps even better, the percentage of so-called distressed sales—homes that have been foreclosed—accounted for 22 per cent of sales. That’s down from 24 per cent in July and 31 per cent last August.”
In terms of commodities, crude prices fell US $4 per barrel on Monday before rebounding. This flash change suggests a trading error, especially given no effect on share prices of commodity producers. That being said, there are “a lot of things influencing commodity prices, from drought in America to China’s growth prospects, but what pops out in this image [below, showing four commodity indexes] is the overwhelming influence of perceptions of the euro-area crisis,” reads a Sept. 19 article from The Economist.
“A sustained rise begins in late 2011 on the heels of the European Central Bank’s announcement of a plan to prevent a banking system meltdown, via €1 trillion in short-term bank loans. Prices reverse beginning in March, as peripheral yields begin rising again, then plummet in May as Greece’s election raises the possibility of an imminent break-up.”
Company News: The S&P stated last week that it is considering changing the Dow index. The Dow is supposed to gauge industrial companies, and is often used as a testament of the economy’s health. Yet, it does not include Apple, Google or Berkshire Hathaway. As the Dow is weighted by price, the three companies would dominate. Last week’s round up mentioned that Apple’s rise in value is throwing some index funds off, as the company accounts for almost 20 per cent of certain indexes.
FedEx is the most recent company to warn investors of poor earnings, citing global slowdown. From The Globe and Mail: “Because FedEx is a global shipping company, it is seen as having an on-the-ground view of how the global economy is functioning, and without any significant time lag. As an economic forecaster, the company is worth listening to. The company is also cutting its global economic outlook. It now sees the global economy growing just 2.7 per cent next year, down from an earlier estimate of 3 per cent.”
International News: Japan launched a fresh round of monetary stimulus, worth 10 trillion Yen (US $126.7 billion). This increased its buying programme to 80 trillion Yen. It had little effect, likely because of low demand. Stimulus was expected, but this amount seemed to catch some traders off guard, and it had a positive impact on global markets Wednesday.
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