Global Equities: US, EU, Chinese Equities Fall, India Equities Rise
US equities fall last week
The US equities market (SPY) fell 0.15% in the week ended September 18, 2015. The fall was due mainly to the Fed’s decision to not hike the interest rate, which indicated a weakness in the global markets. Emerging market (EEM) equities rose and European equities (EFA) fell during the week.
The Fed decided not to raise the interest rate mainly due to weakness in international markets led by China. However, analysts expect the Fed to hike interest rates before the end of the year. The expected hike is 0.25%–0.50%.
Fed chair Janet Yellen gave reasons of recent global economic and financial developments and highly uncertain global markets for the decision. Yellen also cited low inflation as the reason for the “no rate hike.”
The US Consumer Price Index fell 0.1% in August. Over the past one year, it has increased by just 0.2%. Declining oil prices (USO) have led to energy costs dropping 15% over the past year.
Corporate announcements
There have also been some interesting corporate announcements. FedEx (FDX) reported its August 2015 quarterly results with higher revenues and earnings. Revenues increased 29% in ground shipments but fell 4% in the express segment. The company slightly lowered earnings estimates for the fiscal year ending May 2016, mainly due to weak demand in its freight business and higher costs in its ground segment.
On the technology front, Hewlett-Packard (HPQ) announced cuts of 33,300 jobs in the next three years. The company is targeting a reduction of 10% in its workforce in order to restructure its computing business, which is facing tough competition from Apple (AAPL) and Lenovo.
Stock market performance is a key driver of asset managers’ revenue. The performance flows directly to earnings and share prices. Major asset managers like State Street (STT), BlackRock (BLK), Franklin Resources (BEN), Morgan Stanley (MS), T. Rowe Price (TROW), and Berkshire Hathaway (BRK-B) are affected by the performance of US equities.
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