Disappointing economic data and bouts with volatility kept U.S. markets down this week. Analysts cast a theme of blaming the dollar’s rise for keeping corporate profitability low for the foreseeable future. Stocks gave up their gains for the years except for the Nasdaq thanks to Apple’s strong first quarter.
After last weeks surprising jobs number the Federal Funds futures market priced in a 70% probability that the first interest rate hike will come in June. Commentators believe that the prospect of rate increases is also keeping equity markets down.
Japan issued a sharp revision to its 2.2% GDP release for Q4. The new growth rate of 1.5% brought further attention to the economy’s domestic weakness. The Nikkei hit a 15 year high on Friday.
China issued a series of weak economic data this week. Retail sales, producer prices and industrial production figures continue to disappoint. The Shanghai’s rise this week is rumored to be due to rising expectations of monetary easing.
South Korea surprised markets on Thursday with an interest rate cut citing concerns about low inflation. Only 2 economists polled by Bloomberg were expecting the cut.
S&P lowered the expected earnings set for U.S. corporations in 2015. The agency sees lower earnings growth for the first half of the year due largely to the fall in energy shares and the dollar’s strength.
The Federal Reserve released results for the second round of its stress test, which detailed the central bank’s approval for the capital plans of 31 banks. The U.S. units of Deutsche Bank and Santander failed while all other banks passed, though several posted results lower than expected. Several banks announced increased dividends and buybacks upon passing.
The ECB launched its QE program this week purchasing roughly €9 billion the first few days. The central bank has pledged to purchase €60 billion per month.