This Great Graphic was composed on Bloomberg and it shows how performance of the MSCI Emerging Market equity index (white line) and the MSCI World Index of developed markets (yellow line). The two time series are indexed so they start this year at 100.
When the Federal Reserve issues its statement that tends to be the main highlight of the trading session. However, with expectations running fairly low for a significant shift in the stance or forward guidance, developments elsewhere, especially Europe, are overshadowing it.
Many investors appear to have lost their bearings. It is as if the proverbial rug has been pulled from beneath their feet. Last week’s bolt from the blue by the Swiss National Bank is simply the latest in a string of significant surprises.
2015 has been designated the International Year of Light and the International Year of Soils by the United Nations. Marsala is the official pantone color of the year. On the Chinese calendar, 2015 is the year of the goat. What will 2015 mean for the world of global trade and supply chain? Here are four trends to watch:
Whatever order there was in the global capital markets has broken down. They did not stabilize in Asia, but there is an attempt underway in Europe. Asian shares were mostly lower, with the MSCI Asia-Pacific Index off more 1.1%, though China’s Shanghai Composite recouped much of yesterday’s loss, rising almost 3% today. European stocks are higher. The Dow Jones Stoxx 600 is up about 0.5% near midday in London.
The dollar is mixed against the majors. The euro and pound were little changed, at $1.2730 and $1.6130. The dollar is outperforming against the Scandies, especially the Norwegian krone, but it is flat against the yen at ¥108.10. The Canadian dollar and Australian dollar are outperforming on the day. In the EM space, Brazil closed 2.5% stronger yesterday, while most EM currencies are trading today with a stronger tone, notably TRY and IDR. On the other side of spectrum, RUB continues to underperform. The MSCI Asia Pacific index gained 1.3%, while EuroStoxx is up about 0.5% near midday.
The global markets are struggling to regain some semblance of stability. The US dollar is consolidating yesterday’s losses and is modestly firmer. US 10-year Treasury yields have slipped back to near 2.0%, while the 10-year German bund yield has slipped to new record lows, below 75 bp. Peripheral bond yields are sharply higher (14-18 bp), though Greek bonds remain under sharp pressure, and the 10-year yield has jumped another 85 bp, which brings the five-session increase to almost 200 bp.
Stocks are having their worst month in three years as the Federal Reserve ends its quantitative easing program, which expanded the supply of money and helped stocks rise 30% in 2013.
A sudden cease-fire in the Ukrainian conflict has caused European and U.S. stocks to rally in early morning trading as fears of geopolitical instability ease.
Russian President Vladimir Putin met with Ukraine President Petro Poroshenko to agree on a cease-fire that may become permanent. Russian spokesman Dmitry Peskov said that a “cease-fire regime” had been agreed upon after a conversation between the two. Peskov also said a mutual understanding between Ukrainian and Russian sides had been reached about the future of the Crimean region.
