Global Markets Weekly Quick Wrap: Daily Recap, Market Movers... What's Driving The Rebound

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 |  Includes: DIA, FXE, IWM, QQQ, SPY, UDN, UUP
by: Cliff Wachtel

A day by day summary of global stock market price action & what caused it in Asia, Europe and the US- to help investors and traders of forex, stocks, indexes etc., get back into context for the week ahead in global financial markets

The following is a partial summary of the conclusions from the fxempire.com weekly analysts' meeting in which we share thoughts about what's driving major global asset markets. The focus is on global stock indexes as these are the best barometer of overall risk appetite and what drives it, and thus of what's moving forex, commodities, and bond markets.

It's a quick summary of last week's international stock market action and what drove it. It's our starting point for our follow up articles on:

Monday: Asia Up on Friday Follow-Up, US, Europe Steady On Caution Ahead of Yellin Testimony

ASIA

Asian indexes closed mixed on a day with no meaningful news, most were modestly higher [Japan +1.8%, Hong Kong -0.3%, China +2%, India -0.2% , Australia +1%, Korea +0.04%] on follow up from the higher US close Friday in the wake of the US jobs report which was deemed overall bullish - not bad enough to mean much yet not good enough to risk an acceleration of the taper.

There were no major news events

EUROPE

European indexes were mostly flat-to-lower as investors stayed cautious ahead of Yellin's testimony Tuesday and Thursday before Congress for an update on the direction of Fed policy under her leadership, particularly on the pace at which the U.S. Federal Reserve plans to further trim stimulus.

Yellin's testimony was seen as the biggest potential market moving event of the week. See our post on lessons for the coming week, due out Sunday or early Monday for a detailed look at how this moved markets and may do so this week. You can find it here.

US

As in Europe, caution ruled in US stock markets ahead of Yelllin's testimony, the only difference was that US indexes closed modestly higher [Dow +0.05%, S&P +0.15%, Nasdaq +0.54%].

Tuesday: Yellin Testimony Assures Dovish Policy To Continue, Boosts Markets

ASIA

Asian indexes were solidly higher overall [Japan closed. Hong Kong +1.8%, China +0.8%, India +0.1%, Australia +0.59%, Korea +0.46%, Singapore +0.39%] on optimism that Yellin's Congressional testimony would reveal nothing bearish and provide a bit of a relief bounce from the removal of uncertainty about her policy views.

EUROPE

Stocks strongly higher [UK/FTSE 100 +1.23%, Germany +2.03%, France +1.09%, Spain +1.09%, STOXX50 +1.27%, FTSEurofirst 300 +1.3%] as Yellin's testimony eased market uncertainty by emphasizing continuity in Fed policy and outlook.

Markets got an additional bullish boost from US Republican party leaders when they surrendered the fight against raising the US debt ceiling and agreed to support legislation raising Washington's borrowing power without additional measures attached.

These developments helped overcome concerns about the impact of the EM crisis and currency depreciation on European firms with high EM exposure, as well as Barclay's announcing12,000 jobs to be cut

US

US shares responded just like their European counterparts, soaring [Dow +1.20%, S&P +1.10%, Nasdaq +1.03%] on reassurances of continued overall dovish policy and on relief that Washington avoided another debt ceiling battle and all that could come from it.

Effects include temporary shutdowns, delays in assorted benefits programs' payments, and a small US debt default threat.

Wednesday: Overall Higher On Asia Follow Up, European Bank Earnings

ASIA

Asian indexes followed their US counterparts higher [Japan +0.6%, Hong Kong +1.5%, China +0.3%, India +0.4%, Australia +1%, Korea +0.20%] for the same reasons.

Better than expected Chinese trade data might have helped a bit. However, it was so much better than expected that many doubted its accuracy, as the sharp rise in demand was inconsistent with declines in PMI data. It's suspected that, as in the past, the trade figures may have been inflated by false transactions (aka "over-invoicing") used to secretly bring money into China now that the PBOC has cut liquidity.

See our post on lessons for the coming week, due out Sunday or early Monday for a detailed look at the latest on China, how it moved markets and may do so this week. You can find it here.

EUROPE

European stocks extended their week-long rally [UK FSTE 100 +0.04%, Germany +0.65%, France +0.52%, Spain -0.11%, STOXX50 +0.81%], with banking sector leading the way higher after relatively strong earnings results raised hopes for rising dividends in the sector.

French lender Societe Generale were up 4.7% to a 3 year high after swinging to a Q4 profit and saying it would return more cash to shareholders in 2014.Dutch financial services group ING saw its shares rose 3.6% after beating earnings forecasts and saying it would consider early repayment of its final tranche of state aid. That raised hopes of a coming restoration of its dividend, which was eliminated in 2008.

US

US stocks went nowhere [Dow -0.20%, S&P -0.03%, Nasdaq +0.24%] as the Yellin/debt-no debt ceiling fight based relief rally took a break on a light US news day

Thursday: Asia- Caution Ahead of US Retail Sales, Europe- Calming On Italy, US- Focus On Positives

ASIA

Asian indexes fell [Japan -1.8%, Hong Kong -0.5%, China -0.55%, India -1.25%, Australia -0.02%, Korea -0.46%] on a combination of caution ahead of the big US retail sales report and a 2-3 day win streak that tempted some to book profits

EUROPE

Europe closed mixed [UK FTSE 100 -0.23%, Germany +0.6%, France +0.17%, Spain+0.17%, STOXX50 -0.11%] on caution ahead of US retail sales (released after Europe closed) and Italian shares recovered most of their early losses as fears about political uncertainty faded (after all they're used to them)

Analysts remained upbeat on the European stock market's outlook in the medium to longer term, but warned that European stocks might struggle in the coming weeks for a number of reasons, including mediocre overall earnings performance. As we note in out weekly report on lessons for the coming week, per most recent data US, Asian and EM stocks have seen fund outflows, while European equity funds had minor net inflows.

US

Stocks finished solidly higher[Dow +0.38%, S&P +0.57%, Nasdaq +0.94%] despite weak U.S. economic reports (core retail, retail, weekly unemployment and business inventories all came in below forecasts), as investors continued to attribute bad data to bad winter weather.

How? They focused on the positive, with upbeat earnings reports (Goodyear (NASDAQ:GT) rallied 11.5% after reporting a strong Q4) and deal news (Time Warner Cable to be acquired by Comcast for ~$45.2B in stock ) providing support.

Friday: Bullish Momentum Tempts Markets To Test Higher Towards Resistance Despite Little News

ASIA

Asian indexes followed up on last night's strong US close [Japan -1.5%, Hong Kong +0.6%, China +0.8%, India +0.9%, Australia +0.91%, Korea +0.69%], as they often do when there is no major news event that contradicts it. The big exception was Japan, weighed down by a stronger JPY, as the Nikkei continues to fall along with the USDJPY as both completed a 7 week downtrend.

EUROPE

Most European stock markets closed solidly higher Friday [UK/FTSE 100 +0.06%, Germany +0.68%, France +0.63%, Spain +0.35% STOXX50 +0.51%]. The main drivers were positive reactions to Rome's likely new prime minister and signs of economic growth in Germany and France.

As we note in our weekly lessons for the coming, the past week showed a continued contrast between:

· The increasingly positive view financial markets are taking towards the EU, with funds continuing to flow into European stocks (as they flow out of US and EM stock funds) and mildly improving economic data.

· The continued signs that the EU lacks popular support needed to save itself.

See here for details. The post should be out some time Sunday or very early Monday

US

Stocks closed higher [Dow +0.79%, S&P +0.48%, Nasdaq +0.08%] despite mixed economic data, concluding the S&P 500's biggest week in 2014 and the Nasdaq at its highest level since July 2000.

The bearish effects of a surprise drop in January industrial production was balanced somewhat by the better than expected preliminary consumer sentiment number for February.

Recent weak US labor market and retail sales data have been blamed on bad weather, the implied bullish message in that view is that the coming months' results will benefit from the delayed demand. Emerging markets, which were a source of concern in January, have stabilized, and that has also fed optimism, as leading indexes are at or nearing their pre-EM selloff multi-year highs.

To confirm the returning optimism, the USD and US treasuries both fell (typical behavior for these safe-haven assets).

Index

% Change

YTD %

DJIA

2.3

-2.5

Nasdaq

2.9

1.6

S&P 500

2.3

-0.5

Russell 2000

2.9

-1.2

Click to enlarge

Conclusion

After a pullback lasting a few weeks for most indexes, they're now back near their recent multi-year or all-time highs. With calming on the EMs, investors seeking yield realize they're still stuck with few options.

Now that you're back into context, it's time to look at the significant lessons we learned last week about what's shaping this week and beyond, as well as related risks and opportunities. See here for our coming posts on lessons for the coming week, and related special features.

As always, we look forward to your thoughts and input.

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Disclosure/disclaimer: No positions. The above is for informational purposes only. All trade decisions are solely the responsibility of the reader.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.