Yoga on Stone outcroppingInvestors around the world breathed a sigh of relief last week.

It wafted many markets higher. The NASDAQ jumped by more than 4 percent. The Standard & Poor’s 500 Index gained 2.4 percent. France’s national benchmark index rose 4.5 percent, Germany’s was up 3.2 percent, Italy’s increased by 3.6 percent, and China’s Shanghai Composite was up 2.1 percent. So, what happened?

Global markets stabilized.

First, the Chinese stock market staunched its wounds and recovered some value, which eased investors’ worries. According to Barron’s, by the end of the week, the Shanghai Composite Index was up 13 percent from its early July low. The market’s recovery owed much to Chinese government intervention. BloombergBusiness explained:

“Chinese policy makers have gone to unprecedented lengths to put a floor under the market as they seek to bolster consumer confidence and prevent soured loans backed by equities from infecting the financial system. Over the past few weeks, they’ve banned large shareholders from selling stakes, ordered state-run institutions to buy shares, and let more than half of the companies on mainland exchanges halt trading.”

Investors also were appreciative when Greece reached an agreement with its creditors. It accepted austerity measures, which voters had soundly rejected with a ‘no’ vote on July 5 to forge a bailout agreement with European Union (EU) leaders.

That doesn’t mean the Greek debt debacle is over. Late last week, the International Monetary Fund issued a memo indicating it would not support a bailout for Greece unless significant debt relief was involved. Neither the EU nor the European Central Bank is interested in forgiving Greek debt. In fact, that was one of the main reasons negotiations with creditors failed the first time around.


Data as of 7/17/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

2.4%

3.3%

8.6%

16.0%

14.7%

5.7%

Dow Jones Global ex-U.S.

1.7

3.9

-5.3

8.1

4.7

3.1

10-year Treasury Note (Yield Only)

2.4

NA

2.5

1.5

3.0

4.2

Gold (per ounce)

-2.3

-5.5

-13.0

-10.6

-0.8

10.4

Bloomberg Commodity Index

-1.8

-6.5

-25.0

-11.6

-5.1

-4.7

DJ Equity All REIT Total Return Index

0.9

-1.4

7.5

9.3

14.5

7.1

S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  You cannot invest directly in this index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* “Sigh of Relief Raises Markets”

 

Sources:

http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on U.S. & Intl Recaps, International Perspective “Risk aversity fades,” then scroll down to Global Stock Market Recap chart

http://online.barrons.com/articles/google-china-and-greece-offer-balm-to-the-markets-1437196237?mod=BOL_hp_we_columns

http://www.bloomberg.com/news/articles/2015-07-17/chinese-bazooka-xi-readies-483-billion-to-end-stock-selloff

http://www.theguardian.com/business/2015/jul/05/greek-referendum-no-vote-signals-huge-challenge-to-eurozone-leaders

http://www.npr.org/sections/thetwo-way/2015/07/15/423218128/greeces-parliament-poised-to-vote-on-austerity-measures

 

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