Stock markets around the world reacted to concerns that the U.S. Federal Reserve could begin to wind down its economic stimulus programs. Federal Reserve stimulus, largely in the form of massive asset purchases, has helped support the recent equity market rally and the U.S. and global economies. Investors are concerned that withdrawal of stimulus could remove a key support element for the stock market and contribute to economic uncertainty. Although the Fed has not announced a timetable for winding down stimulus, it has hinted that the process could begin toward the end of this year. Tepid economic data, including a report of stagnating U.S. manufacturing and easing U.S. consumer confidence, also helped keep a lid on share prices. In Canada, factory sales slumped 2.4% in April, the steepest monthly decline in almost four years. Although North American equity markets declined, they fared better than markets in Asia and Europe. Asian markets were among the worst performers as Japan’s stock market slide continued amid concerns over the efficacy of government and Bank of Japan’s recently announced programs to stimulate the economy. Japan’s Nikkei index has fallen more than 20% since mid-May, after gaining 80% in about six months. European markets were pressured by stimulus worries, as well as by concerns that the recent rally might have gotten ahead of itself and the eurozone’s continuing recession. Canada’s equity market also retreated on concerns about Federal Reserve policy and continued pressure on commodities prices. Concerns over global growth, particularly in China, have kept commodities prices in check and affected Canada’s key material and energy sectors. In other news this week: U.S. retail sales increased by a more-than-expected 0.6% in May, easing fears of an economic slowdown. The yield on 10-year U.S. Treasuries hit a 14-month high this week on Federal Reserve policy concerns. (Yields and prices move in opposite directions.) The Bank of Canada warned that housing prices could face “a sharper correction” than the “soft-landing” currently underway. However, Statistics Canada reported that new house prices rose 0.2% per cent in April. What’s ahead next week: Canada Consumer price index. Retail sales. CREA home sales U.S. Federal Reserve interest rate announcement. House sales, house prices, building permits. Markit Flash Manufacturing PMI.
Posted on: Sat, 15 Jun 2013 14:19:30 +0000
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