Recently, the market has been
pretty stable and underwent a week of gains. A bigger-than-expected rise in
February nonfarm payrolls extended the weekly winning streak. The U.S. economy
generated 175,000 jobs in February, and analysts say that although we are not
seeing a boom quite yet, the underlying trend in the labor market is fairly
good. This raised the unemployment rate, because analysts say that usually,
people thinking that more jobs are available leads to more people searching for
them. This lead to U.S. equities ending mostly higher. On Friday, March 7th,
the S&P 500 reached record territory.
However, on Monday, March 10, 2014,
the U.S. stock market opened significantly lower as caution prevailed following
a surprise drop in Chinese exports on Friday. A very much-delayed report from
China was released that showed its exports unexpectedly skidded 18.1% in
February 2013, which has been over a year ago. Economists had expected an
increase of 5%, so this news was extreme and the opposite of what was expected.
This swung China’s trade balance into a deficit and added to fears of a
worldwide economic slowdown, since China has the world’s second-largest
economy. China’s CSI300 index slid to its lowest in nearly nine months, and
Hong Kong’s Hang Sen Index shed 1.8%. Back home, U.S. stock futures fell 0.4%
on Monday from their record closing high on Friday. Fortunately, the caution
prevailed in the US was more intense than reality. Stocks recovered most of
their losses but still finished Monday generally lower, with S&P 500 ending
the day less than a point lower, DJIA closing 0.2% lower, and Nasdaq closing
down 1.77 points. Furthermore, this unexpected news caused a decrease in copper
prices because China was the largest importer of copper. The now lower demand
for copper lead to a price decline of that commodity.
Tensions and elevated violence in
Ukraine have led to lower stock prices in world markets, higher energy prices,
slower growth of European economies, higher gold prices, and lower US Treasury
yields. Short-term traders in gold have been hurt since expectations were not
met; both spot and futures increased. European markets fell because of
geopolitical uncertainty and reliance on Russian resources for energy. The
price floor for crude oil has risen, as well as volatility among most
commodities. Russia’s markets, which have been poor over the past few months,
decreased abruptly following the outbreak of violence in Ukraine, and the
ruble’s devaluation continued to the point that interest rates were raised
1.5%. Pending sanctions on Russia will have a negative impact to be seen in the
near future; however the entire market situation is unpredictable. Asian,
Russian, European, and US markets have all seen considerable downturns in the
past week.
In addition to Chinese data
releases and the Ukraine conflict, other current events have had smaller market
impacts. The missing Malaysian flight has had a negative impact on Boeing stock
and thus a negative impact on international stock markets. This blow, in
conjunction with the aforementioned factors, has be mediated by various mergers
among industries, such as the banana merger between Chiquita and Irish company
Fyffes.
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