Here's a quick breakdown of what moved markets in each of the three trading sessions each day.
It's a reminder of what were the key market movers last week, and of what's likely to move markets in the coming week. Use this to either draw your own conclusions about lessons for the coming week, or as a preparation for understanding the companion article on this week's market movers.
Monday: Disappointing Asian, US Manufacturing data, Profit Taking Ahead Of BOJ Meeting
Most Asian indexes closed modestly lower as a cautious Tankan survey along with a weak Korean export report also pressured Japanese and other Asian stocks and outweighed good manufacturing data from Korea, China, Taiwan, Vietnam and Indonesia .
Japan was down hard 2.25% on profit taking ahead of the BoJ meeting and rate statement. This is the most anticipated meeting in recent years because it's the first with the new BoJ Governor in charge, who is expected to announce radical new easing measures. The profit taking is due to fears that his new actions might disappoint markets.
Many Asian markets were closed for the Easter holiday.
Virtually all major European markets were closed for the Easter holiday. Perhaps that was good timing, given that Spiegel online had a long article out that day on how the Cyprus bail-in of depositors could indeed become a model of future bank rescues. That would raise the risk of keeping money in GIIPS-CS (GIIPS plus Cyprus and Slovenia) banks and could spark a capital flight that by itself could cause a new crisis as banks are bled dry.
All US indexes were solidly lower due to poor data, including disappointing US and ISM manufacturing PMI surveys, as well as the poor Japanese and China reports noted above.
Tuesday: Caution On BOJ Easing Hopes Pressure Japan, Europe, US Up For No Obvious Reasons
Asian indexes were again mixed with modest moves up or down. However once again Japan was down hard, this time on a combination of weak US data from the prior day, and PM Abe's cautious remarks about how it might take a long time to beat deflation. Those words had the JPY soaring, while Japanese and related stocks fell over 1%.
European indexes were all up between 1-2%, which was quite mysterious given that EU data was poor (PMIs and unemployment worsening) and there were no obvious headlines other than talk of increased M&A activity, particularly concerning Vodafone. Apparently short term speculation about possible M&A deals can override data that shows ongoing deterioration of European economies including falling EZ, Spain, Italy and German PMI reports, as well as reports that both French and Cypriot finance ministers could be implicated in financial scandals.
Meanwhile, the major US indexes were all solidly higher (0.5% or more), and both the DJIA and S&P 500 closed at all time highs despite overall tepid second tier data like a modest rise in factory orders and auto sales. Still, Tuesday was another demonstration that the rally has continued resilience as stimulus and its related low yields continue to drive cash into US stocks even at the current decade highs (and history of deep pullbacks that occurred the past two times US stocks attained these lofty heights).
Wednesday: Optimism On BOJ Easing Lifts Japan & Related, Poor US Data Sinks Europe and US
Asian indexes were mixed, but Japan soared about 3% on speculation that the BoJ meeting will announce open ended new easing that pleases markets.
European indexes were mostly lower 0.5% to 1.3% in response to weak US monthly service PMI and jobs data. This early possible indicator of the big monthly US jobs report this Friday sent the USD lower on fears that Friday's official BLS job reports will be poor. That would hurt the USD at a particularly sensitive time. It's believed that the Fed will reduce its dollar -devaluing easing if it gets 6 months of 200k or more increases in jobs. Last month's report was well over 200k. Another month of close to 200k new jobs would make be the second of 6 and could start raising expectations for reductions in QE 3, and that would boost the USD. If jobs growth falls short, that would likely have the opposite effect and send the USD lower.
US indexes were all solidly lower, about 1% overall, on that same bad service sector and jobs data. Rising tensions with North Korea didn't help.
Thursday: Central Banks Rule The Day
Asian indexes were almost all lower on weak US data Wednesday, particularly South Korea, as threats from the North begin to exert influence on the chance that these might be more than just the usual empty bluster.
BOJ Lifts Nikkei And Related Stocks
The big exception was Japan's Nikkei, which soared on (what else?) announcement of new stimulus measures from the new BOJ Governor that pleased investors and promised a flood of new cash to boost asset prices. See part 2, our Conclusions and Lessons section of this article, for details.
ECB Depresses European Indexes
Meanwhile European stocks fell hard on dampened hopes for stimulus from the ECB. Many had hoped that the continued economic deterioration and elevated risk of bank runs after the Cyprus mess would cause the ECB to announce new easing or at hint at future easing. It didn't, hence the selloff in Europe, and, to some extent, in the US too. Worth noting, Draghi said that the original Cyprus plan to hit all depositors was "not smart," however he didn't voice any objections to the stealing deposits over the insured 100k euro amount. Again, see part 2, our Conclusions and Lessons section of this article, for more on this just how much the Cyprus bank rescue is a precedent for future ones.
US indexes finished modestly higher despite Europe's selloff and a disappointing spike in US weekly new jobless claims. That lowered expectations for Friday's big US monthly jobs reports. Perhaps this news wasn't so bad for stocks because if US employment growth remains sluggish, then stocks can continue to rise as QE 3 continues indefinitely. So maybe we have a case of bad news being good news.
Indeed, if markets see continued QE 3 as more beneficial to asset prices than improved employment, improving job figures may cause selloffs, especially if they show only modest improvement that doesn't suggest enough spending to replace lost QE 3 funds.
Friday: Bullish BoJ Stimulus, Bearish Bird Flu, US Jobs Reports, Korean Bluster, Technical Resistance
Asian indexes were mixed but Japan was again soaring, up over 1.5% on the BOJ's aggressive new stimulus program. Korea was down hard due to military threats from the North, and Hong Kong was down hard on concerns about the new outbreak of Asian bird flu hurting growth, and also about recent official moves to cool property prices and limit liquidity from the unofficial banking sector.
All European indexes fell hard 1.5-2% on profit taking prompted by growth worries after a week of bad data from the EU and US was capped by a very disappointing US jobs report. The US gained only 88k jobs versus an expected nearly 200k. Adding to the temptation to take profits was the fact that stocks face strong technical resistance that has sent past rallies in 2000 and 2007 falling back hard to lose about half their value. Tensions on the Korean Peninsula added to the temptation to take profits.
US indexes also fell hard on the same combination of bearish factors:
- Overall bad data in Europe and the US, capped by a miserable US jobs report.
- Intimidating decade old resistance that has only been bent but not broken on the major US indexes.
- Continued belligerence from North Korea.
However once again US stocks managed to bounce and recover well off those European-like lows to close with only half the percentage declines seen in Europe. The bright side of the blatantly bad US jobs figure was that it insured QE 3 continues to push cash and yield starved investors into stocks and other risk assets like the suddenly booming US property market. The Fed is believed to want to see 6 months of over 200k new jobs. It got that last month, but this month's miserable reading resets that counter back to zero and confirms the Fed's pessimistic view of the weak US recovery and hence its dovish policy approach.
Disclosure/disclaimer: No positions. The above is for informational purposes only. All trade decisions are solely the responsibility of the reader.