Calm Returns to World Markets, Brazil in Recession

Nichole Harper
28 Aug, 2015
New York City

Calm returned to world financial markets after seven days of volatile trading that saw major indexes swing wildly and plunge as much as 10%. Crude oil jumped for the second day in a row. Brazil entered technical recession after second quarterly contraction.

[R]5:25 PM New York City, New York – Calm returned to world financial markets after seven days of volatile trading that saw major indexes swing wildly and plunge as much as 10%. Crude oil jumped for the second day in a row. Brazil entered technical recession after second quarterly contraction.[/R]

Stocks and market indexes struggled on Wall Street after calm returned to financial markets around the world.

Indexes on Wall Street and in Europe lacked direction of three days of rebound following wild swings in six previous sessions. Crude oil extended 2-day gains and commodities generally traded higher.

On the economic front, the U.S. personal income in July increased 0.4% and disposable personal income rose 0.5%. Personal consumption expenditure grew 0.3% in the month, the Department of Commerce said.

On Wall Street, Tollbooth Strategy Index slid 14.91 to 10,456.76.

S&P 500 index fell 7.94 or 0.4% to 1,979.51 and the Nasdaq Composite Index slid 13.58 or 0.3% to 4,798.19.

Crude oil in New York jumped $3.19 to $45.75 a barrel and gold gained $11.80 to $1,134.10 an ounce.

Brazil government’s statistics bureau said gross domestic product contracted for the second quarter in a row. The back-to-back quarterly contraction sent the largest economy in South America into a technical recession.

The economy shrank 1.9% in the second quarter from the first quarter when the economy contracted by 0.7%. Construction output fell 8.4% and household spending declined 2.1%.

U.S. Movers

Celgene Corporation rose 46 cents to $123.50 after the biopharmaceutical company said completed the acquisition of Receptos Inc for about $7.2 billion or $232 a share in cash.

Neogen Corporation ((NEOG)) slid 2 cents to $52.10 after the diagnostic test kits maker agreed to acquire U.K.-based rival Lab M Holdings for undisclosed terms.

Ulta Salon, Cosmetics & Fragrance, Inc ((ULTA)) slipped 80 cents to $159.55 after the beauty retailer reported net sales in the second-quarter ending on August 1 soared 19.4% from a year ago to $877 million.

Comparable store sales in the quarter surged 10.1% and retail comparable sales jumped 8.9%, including salon comparable sales advanced 10.1%.

Net income in the quarter increased 22% to $74.2 million or $1.15 per diluted share compared to $60.8 million or 94 cents from the same quarter last year.

European Markets

In the second estimate, the U.K. second-quarter GDP growth was left unchanged at 0.7% from the increase of 0.4% in the first-quarter but declined 2.6% from year ago period, Office of the National Statistics reported.

Separately, the department said the seasonally adjusted U.K. service sector index jumped 3% in June from a year ago month.

Kier Group Plc jumped 3% to 1,499 pence after the U.K.-based residential construction services provider secured contracts worth about £1.5 billion from an environment specialist Scape Group for construction and maintenance work over the next four years.

Asian Markets

Market indexes in Japan soared following a similar rebound in overnight trading in New York after the latest data offered a brighter view of the U.S. economic growth.

However, caution prevailed and short selling ratio in Tokyo shot up to a record high of 39.8%.

Nikkei average in Tokyo jumped following brighter view on the U.S. economy and export-focused companies led the gainers. Also, Shanghai market index jumped in Asia-wide rebound, helping the trading sentiment.

Market indexes opened sharply higher in Tokyo after the U.S. economic growth in the second quarter was revised higher to 3.7% from 2.3% largely on the higher buildup in inventories.

Yesterday, the government said retail sales in July rose 1.6% followed by 1% increase in June, according to the Ministry of Economy, Trade and Industry.

The consumer price index in July increased 0.2% after decreasing 0.4% in June, the Ministry of Internal Affairs and Communications said.

Separately, the ministry said seasonally adjusted unemployment rate in July was unchanged at 3.3% compared to previous month.

For the year, the number of unemployed in July declined 260,000 to 2.22 million, a decrease of 10.5% from a year ago month.

In another report, the same ministry reported average household expense in July dropped 0.2% to 280,471 yen, followed by a 2% decline in June.

The average monthly income per household soared 5.4% to 587,156 yen and average consumption expenditures per household increased 0.7% to 314,788 yen.

The Nikkei 225 Stock Average soared 561.88 or 3% to 19,136.32 and the broader Topix index jumped 49.39 or 3.3% to 1,549.80.

For the week, Nikkei 225 slipped 1.6%

The yen strengthened to 120.90 against a dollar.

Stocks in Mumbai rebounded but the rupee struggled and investors are increasingly questioning the lack of action from the Reserve Bank. Bharti is looking to sell 6,500 telecom towers in Sri Lanka and Bangladesh.[/R]

Stocks advanced in Mumbai and market indexes powered ahead after a volatile week that saw benchmark index plunge as much as 6% in one day.

Stocks rebounded but rupee continued to struggle following the weakness in other emerging market currencies.

However, the selling in rupee is overdone and the currency has declined nearly 10% in the year despite the 30% plunge in crude oil price.

Crude oil is the largest imported commodity and the largest contributor to the trade deficit of India.

Rupee weakened 10 paisa to 66.14 against one U.S. dollar.

The Sensex Index increased 161.19 or 0.6% to close at 26,392.38. The CNX Nifty rose 53 or 0.7% to 7,001.95.

For the week, Sensex Index and CNX Nifty plunged 3.6%.