Julex Market Weekly 03-24-2013 | US Stocks Ended the Week Lower and Emerging Markets Continued to Slump

Top Stories Last Week

• US Stocks Ended the Week Lower and Emerging Markets Continued to Slump

The US and emerging market stocks ended the week lower on the uncertainty about the Cyprus bailout negotiation. The S&P 500 Index dropped by 0.1%, and MSCI EAFE index declined 0.9%. The MSCI Emerging Market Index continued to slump by 1.9%. Gold price was up slightly by 1.0%. The SPGC commodity index dropped 1.2%. The bond markets gained as the stock markets declined. Barclays US Treasury index rose 0.6% while US high yield bonds lost 0.1%.

• Cyprus Bailout Negotiations Continued

Negotiations for a bailout of Cyprus continued, leaving investors uncertain as to whether Cyprus would agree to a bailout package of its banking system that averts further turmoil in global markets. Monday is the deadline for Cyprus to reach a deal. Cyprus will have to raise 5.8 billion euros ($7.5 billion) so that it can receive a €10 billion rescue package from international creditors. The Cyprus economy could collapse without an agreement. The country took some steps in the right direction, passing legislation to impose capital controls and set up a “solidarity fund” to help raise the money. New reports suggest Cyprus was considering a 25% tax on savings accounts over 100,000 euros.

• FOMC Kept Monetary Policy Unchanged

The Federal Open Market Committee indicated that it has no intentions of taking the monetary accommodation off the table yet. They left interest rates unchanged and indicated they will continue with a program to buy $85 billion in Treasury and mortgage-backed securities monthly, so-called quantitative easing. The Fed’s benchmark overnight rate effectively has been at zero since the 2008 financial crisis.

• Chinese Manufacturing Activities Improved

Manufacturing activities in China improved in March after expanding at its slowest pace in four months in February. The HSBC’s preliminary purchasing managers’ index (PMI) came in at 51.7 for the month, from a final 50.4 in February, which was the lowest reading since October. The improvement in March PMI was bolstered by stronger new orders and production growth. The number lifted hopes for a pick-up in the world’s number-two economy.

• US Housing Market Continued to Improve

Existing home sales grew last month to the highest level in more than three years, signs the improving housing market will lift the economy. Existing-home sales increased 0.8% in February from a month earlier to a seasonally adjusted annual rate of 4.98 million. Sales were 10.2% above the same month a year earlier, the 20th straight month of year-over year gains. The inventory of previously owned homes listed for sale at the end of February increased 9.6% from January to 1.94 million.

Top Stories to Watch This Week

• Cyprus in the Spotlight

Monday is the deadline for Cyprus to reach a deal on how it will raise 5.8 billion euros ($7.5 billion) so that it can receive a €10 billion rescue package from international creditors.

• US Durable Goods

The durable goods orders are expected rise by 2.5% in February.

• US New Home Sales

US new home sales data is expected to show continued improvement in the housing markets.

• Japanese New Central Bank Governor Promised to Fight Deflation

The new Governor of the Bank of Japan, Haruhiko Kuroda took up his job as Bank of Japan governor this week. He promised to make all efforts to fight deflation with aggressive measures and to achieve results soon.