Market Summary: March 2016
After hitting a low of $30 oil prices are rising ending March at $36.63. This new trend follows hopes that the main oil producing countries will agree to cut production levels. Although the cuts are uncertain since Iran is bolstering its export since economic sanctions were lifted.
In the US, stock markets are on the rise due to positive economic growth and business climate. A rising oil price also contributed with financial pressure on oil companies and banks heavily exposed to this industry. Banks are also benefiting from the expected upwards trend in interest rates.
The Federal Reserve did not raise interest rates and announced it will raise them gradually according to economic developments in the US and abroad. As a result the US dollar resumed its decline against other major currencies finishing at 1.1393 against the Euro and 111.63 against the Yen. The fall was even sharper against the currencies of commodities exporting countries.
In Brazil the political turmoil is impacting the national currency which has been sliding against the dollar although the stock market recorded a notable rise. The country is sinking into a recession that is expected to continue well into 2016.
Unemployment fell in Germany and in the Euro area as a whole. Most other indicators were positively trending for the German economy such the business climate and price indices.
However speculations about the British exit from the European Union are bringing doubts about the stability of the region economically speaking. Such an exit might have negative effects on London's prominent place in the financial markets. Such concerns were voiced by Citi bank executive who clearly stated that a number of its investment bankers would be moved to Paris if the exit materializes.
Deutsche Boerse takes another shot at acquiring the London Stock Exchange after multiple failed attempts in the past notably in 2000 and 2007. This deal will eventually attract other bidders including competitors US CME and ICE which currently are two of the biggest exchange groups in the world. If successful the operation will a European champion and enter the big three world podium.
Russia has been hit hard by economic sanctions following its intervention in Ukraine. While The country is flexing its muscles in Syria in a show of force the reality remains that the impact of low oil prices is obvious on the economy and the government's budget which was calibrated based on a much higher oil price.
In Japan, all economic indicators were in the red this month apart from household spending which rose 1.2% against a negative forecast. Moreover the central bank insisted on pursuing its current monetary policy with negative interest rates until economic conditions get better.
Taiwanese electronic components manufacturer Foxconn was in the news over of a possible acquisition of Japanese mobile phone screen maker Sharp. The deal was first denied by the former then acknowledged, canceled and confirmed again. Foxconn is the main assembler of iPhones and through this deal it would further control the assembly line by providing screens also. It will now control two thirds of Sharp for $3.5 billion. The deal come as a test to economic reform of the closed Japanese economy and as a life saver to the loss making company.
China has seen its credit rating slashed to AA- with a negative outlook due to slowing growth and slower economic rebalancing. The country has been pursuing a shift from an export only economy to a consumption based economy. Chinese firms have also experiencing harder economic conditions and financial hardships.
Australia is facing new challenges with an impact on the country's export of raw material following China's focus on domestic demand. The slower global economy and the excessive steel production capacities world wide are depressing prices and affecting Australia's capacity to maintain the same levels of outputs and exports for iron ore.