Market Buzz: Stocks down on Fed news, China’s flash PMI indicates contraction
Russian stocks started Thursday in the red following news yesterday from the US that the Fed has not yet come to a consensus on ending its stimulus program. Weak Chinese PMI data also contributed to the decline.
On Wednesday, Russian stocks ended the trading session with significant gains after Federal Reserve Chair Ben Bernanke’s testimony. By the end of the day on May 22, Russia’s MICEX had added 1.79 percent to close at 1448.42 and the RTS advanced 2.02 percent to 1461.93.
Wednesday’s main financial news was Bernank’s indication during a Q&A that the US central bank could begin phasing out its $85 billion-per-month bond-buying program at one of its "next few meetings."
However, later in the session the Fed released minutes from the May FOMC meeting that were less optimistic: There is not yet a firm consensus on when to begin drawing down the stimulus program. The decision will likely be significantly influenced by the trajectory of the economy in the coming months.
The news spooked US investors, with major indices reacting immediately and posting steep losses throughout the day. The Dow Jones Industrial Average fell 0.52 percent to 15,307, the S&P 500 slipped 0.83 percent to 1,655 and the tech-centric Nasdaq dropped by 1.11 percent to 3,463.
US home sales saw a moderate uptick in April, but failed to meet the forecasted 4.98 million. On Thursday, the US will publish its weekly report on initial jobless claims and official data on new home sales.
European stocks closed higher on Wednesday after Bernanke spoke of the Fed’s intention to "maintain highly accommodative monetary policy as long as needed." The UK's FTSE 100 rose 0.53 percent to 6,840.27 – a 13-year high – while in Germany the DAX 30 set a new record, climbing 0.69 percent to 8,530.89 points. In Paris, the CAC 40 rose 0.37 percent to 4,051.11, a two-year high.
On Thursday, European Central Bank President Mario Draghi will make a hotly anticipated speech in London. Draghi is expected to comment on further ECB cuts and potential negative deposit rates.
Also on Thursday, the Eurozone, Germany and France will each release preliminary data on manufacturing and service sector activity, and Spain will hold 10-year government bonds auction. The UK will release official data on retail sales, revised data on Q1 economic growth and a report on business investment.
Stocks in Asia have mostly declined on Thursday after China released weak flash PMI data. The flash HSBC Purchasing Managers' Index for May fell to 49.6, sliding below the 50-point mark demarcating expansion and contraction for the first since October. Investors fear that the economic recovery in the world's second-biggest economy may have stalled.
Japan's Nikkei 225 index has fallen 2.4 percent to 15,256.56, Hong Kong's Hang Seng is down 1.6 percent to 22,879.74, South Korea's Kospi lost 0.7 percent to 1,980.42 and Australia's S&P/ASX 200 dropped 1.7 percent to 5,081.40. Benchmarks in Singapore, Thailand and Taiwan also fell.
Oil is continuing its downward slide, with Brent losing 0.9 percent to trade at $101.6 and WTI down 1.1 percent to $93.4.
