US:
US indices rose in April as the Federal Reserve maintained its $85 bn per month asset purchase program, hoping to steer the economy through the rough patch. News from Europe that Italy formed a government also helped markets rise. Health insurers had gained after the government released revised reimbursement rates for Medicare Advantage plans which suggested that funding cuts will be less severe than had been feared.
But markets pulled back after the minutes of Federal Reserve’s last policy-setting meeting showed that a few policymakers expected to taper the pace of asset purchases by mid-year and end them later this year, while several others expected to slow the pace a bit later and halt the quantitative easing program by year-end. News of a blast at the finish line of the Boston marathon spooked investors. Indices gave up gains after US GDP grew at a 2.5% pace in the first quarter of 2013, against expectations on an over 3% rise and as non-farm payrolls increased by 88,000 in March following a revised 268,000 gain in February. And though the unemployment rate dipped to 7.6% from 7.7%, it was largely due to people dropping out of the work force.
Among corporate results, Alcoa, the first company in the Dow to release results, reported earnings that exceeded estimates though revenue trailed projections. On the positive side, strong earnings from Coca-Cola and Johnson & Johnson helped indices move up.
Europe:
European markets gained after the Italian parliament re-elected Giorgio Napolitano as president, ending uncertainty and sparking hopes for stability. The political situation further stabilized in Italy after a new government was named under the leadership of Enrico Letta. Gains were also seen after Germany's parliament approved an international bailout package for Cyprus by a large majority and as Moody's retained Germany's top-notch sovereign rating, citing its highly competitive economy and high levels of investor confidence. Markets were boosted after UK didn't slip into a triple-dip recession; the economy expanded by 0.3% in the first quarter, after contracting 0.3% in the previous quarter.
But gains were reduced after the European Central Bank Chief said that "weak economic activity has extended into the early part of the year and a gradual recovery is projected for the second half of this year, subject to downside risks." Mid-month there were concerns after Portugal's top court ruled against 1.3 bn euros of austerity measures for 2013 and as the International Monetary Fund lowered its expectations for Euro zone economic growth; Euro area is forecast to shrink 0.3% this year, which is worse than the earlier projection of 0.2% contraction. Negativity prevailed after Bundesbank President Jens Weidmann warned that Euro zone's economic recovery could take a decade. Fall was seen after Fitch cut the UK's long-term foreign and local currency issuer default ratings to 'AA+' from 'AAA' with a stable outlook.
Asia:
Asian indices mostly rose, led by the Nikkei after the Bank of Japan unveiled aggressive credit easing measures that investors had been hoping for. The Board pledged to double the monetary base and its holdings of Japanese government bonds (JGBs) as well as the exchange-traded funds to lift the economy out of deflation. Exporters were boosted as the yen weakened after the Bank of Japan Governor told lawmakers at the Upper House Budget Committee that the central bank's monetary easing measures are not targeted to weaken yen, but to attain the central bank's 2% inflation target at the earliest.
Shanghai Composite fell after China increased the minimum down payment on purchases of second homes to 70% from 60%. Also, Fitch downgraded China's long-term local currency rating to 'A+' from 'AA-' with a 'stable' outlook, saying that risks to China's financial stability have grown. Losses mounted after data showed that the Chinese economy expanded 7.7% in the first quarter from a year earlier, slower than expectations for an 8% increase, while industrial production grew 8.9% annually in March, falling short of expectations for a 10.1% increase.
