Market Recap - Week Ending 02/06/2015

Bryan Dooley, CFA
[email protected]
www.lom.com
441-292-5000
Weekly Global Market Commentary
February 9th, 2015
Risk Markets Bounce as Central Banks Cut – By Bryan Dooley, CFA
Last week risk markets staged a welcome rebound from the prior week’s sell off on improving employment data and
strong corporate earnings reports. Over in Europe, investor concern about Greece abated somewhat on hopes for a
debt deal and early signs of regional stabilization as German manufacturing improved. For the week as a whole, the
S&P 500 rose 3.12% and the MSCI World Stock Index gained 2.62%. Bonds fell over the period as the benchmark 10
-year U.S. Treasury yield rose from 1.64% to 1.96%.
Markets continue to bounce around this year as many global central banks contemplate more aggressive actions
calculated to spur their local economies. On Tuesday, the Reserve Bank of Australia (RBA) announced a cut in its
key interest rate by 25 basis points to an all-time low of 2.25%. This reduction was the first from the central bank in
18 months although the action had been expected by financial markets.
In reaction to the move, the benchmark S&P/ASX 200 hit a seven-year high, while the Australian dollar slumped to a
six-year low of $0.76. The RBA is the latest central bank to loosen monetary policy to boost growth amid falling oil
and commodity prices. It follows China, Canada, Singapore, Korea and India that have all cut interest rates in recent
months.
Following the lead of other central banks around the globe The Danish central bank on Thursday cut interest rates for
the fourth time in three weeks, taking the main deposit rate to -0.75% from -0.5%. The Danmarks Nationalbank has
been cutting rates as it attempts to defend the krone's peg against the euro. Denmark is the last European currency
still maintaining its peg as part of the European Exchange Rate Mechanism. Last month, currency markets were sent
into turmoil after the Swiss National Bank unexpectedly abandoned its own peg against the euro. The interest rate
reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market.
Also last Thursday, Pfizer Inc. announced a $17 billion bid for Hospira, the largest provider of injectable drugs and
infusion technology. Both companies advanced on the news and the deal shows that M&A is alive and well,
continuing to reduce the amount of large, publically-traded stock issues. Also on the day, America’s Labor
Department reported a lower-than-expected number of weekly jobless claims being filed. The four-week moving
average of claims remains under 300k down to its lowest level in eight years, underscoring the improving U.S.
employment situation.
In Europe, the European Central Bank (ECB) indicated it will no longer accept junk-rated collateral from Greece,
citing doubt over the new government’s commitment to previous reform pledges. The decision will force the
country’s lenders to seek more-expensive emergency funding from their own central bank.
On Friday, economists cheered the much-anticipated U.S. employment report which ended up confirming other
government data pointing to ongoing employment gains. The report showed employers in the U.S. added more jobs
than forecast in January, capping the biggest three-month gain in 17 years, while workers’ earnings finally showed
signs of improvement. The 257,000 advance in payrolls last month followed a 329,000 gain in December that was
larger than previously reported. The median forecast in a Bloomberg survey of economists called for a 228,000
increase. The unemployment rate climbed to 5.7% as the improving job market lured more Americans into the labor
force.
This commentary is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The
information contained herein, has been compiled from sources believed to be reliable, but no representation or warrant, express or implied , is made by Lines Overseas Management Limited
or any of its affiliates or representatives, as to its accuracy, completeness or correctness. Readers should consult with their Brokers if such information and or opinions would be in their best
interest when making investment decisions. This commentary is intended for the recipient only and must not be reproduced or forwarded to any other person without the prior [written]
consent of LOM. LOM is licensed to conduct investment business by the Bermuda Monetary Authority.
LOM Securities (Bermuda) Limited • The LOM Building • 27 Reid Street • Hamilton HM 11, Bermuda
Friday’s jobs reported clearly bucked the typical January underperformance trend. Importantly, hourly earnings more
than corrected last month’s 0.2% decline with a respectable 0.5% gain. The rebound to 5.7% in the unemployment rate
came amid a 759,000 gain in employment as labor force participation improved to 62.9% from 62.7%.
This commentary is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The
information contained herein, has been compiled from sources believed to be reliable, but no representation or warrant, express or implied , is made by Lines Overseas Management Limited
or any of its affiliates or representatives, as to its accuracy, completeness or correctness. Readers should consult with their Brokers if such information and or opinions would be in their best
interest when making investment decisions. This commentary is intended for the recipient only and must not be reproduced or forwarded to any other person without the prior [written]
consent of LOM. LOM is licensed to conduct investment business by the Bermuda Monetary Authority.
LOM Securities (Bermuda) Limited • The LOM Building • 27 Reid Street • Hamilton HM 11, Bermuda
Stock Market Performance
DJIA
S&P 500
MSCI
World
Month
ago
Year
ago
EUR
$1.13
$1.19
$1.36
GBP
$1.52
$1.52
$1.63
W-o-W
M-o-M
Y-o-Y
Currencies
17,824
3.8%
2.6%
14.0%
2,055
3.0%
2.6%
15.9%
2.6%
4.0%
8.0%
15,084
2.8%
5.9%
10.0%
BSX
1,375
0.8%
0.8%
6.3%
FTSE100
6,853
1.5%
7.6%
4.5%
DAX
10,846
1.4%
14.5%
17.2%
CAC
4,691
1.9%
14.9%
12.0%
Nikkei
17,649
-0.1%
4.5%
24.7%
Hang Seng
24,679
0.7%
5.1%
15.2%
Shanghai
2/6/2015
2/6/2015
1,721
S&P/TSX
Key Rates and Prices
3,076
-4.2%
-8.2%
51.3%
JPY
¥119.12
¥118.39
¥102.11
CAD
$0.80
$0.84
$0.90
CHF
$1.08
$0.99
$1.11
AUD
$0.78
$0.81
$0.90
3M LIBOR
0.26
0.25
0.24
3M Treasury Bill
0.02
0.03
0.07
2Yr Treasury Note
0.65
0.63
0.32
10Yr Treasury Note
1.96
1.94
2.70
Fed Funds Rate
0.25
0.25
0.25
Gold/oz.
1,233.92
1,218.45
1,258.19
Silver/oz.
16.71
16.53
19.97
Copper/lb.
Oil
2.56
51.69
2.79
47.93
3.23
97.84
Fixed Income
Commodities
Global Economic Calendar (February 9th - February 13th)
Mon: Housing Starts (CAD), Consumer Price Index, Producer Price Index (CH), Merchandise Trade (GER)
Tue: Industrial Production (FR), JOLTS (US), Industrial Production (GB), Consumer Price Index (SWISS)
Wed: EIA Petroleum Status Report, Treasury Budget (US), Machine Orders, Producer Price Index (JAP)
Thurs: CPI (GER), Industrial Production (EMU), Jobless Claims, Retail Sales, Business Inventories (US)
Fri: GDP Flash (GER), Producer & Import Price Index (SWISS), GDP Flash, Merchandise Trade (EMU), Import & Export Prices, Consumer
Sentiment (US), Manufacturing Sales (CAD)
This commentary is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The
information contained herein, has been compiled from sources believed to be reliable, but no representation or warrant, express or implied , is made by Lines Overseas Management Limited
or any of its affiliates or representatives, as to its accuracy, completeness or correctness. Readers should consult with their Brokers if such information and or opinions would be in their best
interest when making investment decisions. This commentary is intended for the recipient only and must not be reproduced or forwarded to any other person without the prior [written]
consent of LOM. LOM is licensed to conduct investment business by the Bermuda Monetary Authority.
LOM Securities (Bermuda) Limited • The LOM Building • 27 Reid Street • Hamilton HM 11, Bermuda