On 21 September, 2017 - Stocks were mixed the day after the Fed announcement

Investors continued to parse the Fed’s forecast for another rate increase this year.

United States

US stocks retreated Thursday, wiping out modest gains from a day earlier. Investors were uncertain whether the Fed would increase its fed funds rate again in December. Supermarket operators, beverage companies and other consumer staples stocks declined. Banks and other financial companies however gained. Industrial stocks also rose. The retreat in stocks followed the latest policy announcement from the Federal Reserve. Fed Chair Janet Yellen indicated that the Fed remains on course to raise interest rates on several occasions over the coming year. Investors are now pricing in about a 70 percent chance of a December rate increase according to CME’s FedWatch tool, up from about 51 percent just prior to the Fed meeting. The Dow Jones industrials were down 0.2 percent, the S&P declined 0.3 percent and the Nasdaq was 0.5 percent lower.

Beverage, food and supermarket companies were lower as part of an overall slide in consumer staples sector. Kroger and Dr Pepper Snapple Group were lower. Banks and other financial stocks posted gains. Citizens Financial Group advanced. American Airlines Group and General Electric gained. Calgon Carbon soared after the maker of water and air filtration systems agreed to be acquired by Japanese company Kurary for $1.1 billion. Ash Grove Cement jumped after saying it would be bought by CRH. Blue Apron was up after a rival company, Plated, agreed to be acquired. Apple declined on concerns about demand for its latest smartphone.

Weekly jobless claims surprisingly declined 23,000 to 259,000 but may reflect the inability of displaced workers in hurricane hit states to file claims. September’s Philadelphia Fed report headline index jumped nearly 5 points in September to 23.8. New orders were up more than 9 points to 29.5 while unfilled orders were up 3.5 points to 17.0. The index of leading economic indicators rose a solid 0.4 percent in August in results that do not fully reflect the impact of Hurricane Harvey.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$19.20 to US$1,292.10. Copper futures were down 1.1 percent to US$2.94. WTI spot crude was up 2 US cents to US$50.71. Dated Brent spot crude was up 19 US cents to US$56.48. The US dollar was up against the yen, Swiss franc and the Australian dollar. The currency was lower against the euro and pound and unchanged against the Canadian dollar. The Dollar Index was down 0.2 percent. The yield on both the US Treasury 30 year bond was unchanged at 2.80 and 10 year note was up 1 basis point to 2.28.

European markets

Most European stock indices advanced Thursday as investors had their first opportunity to react to Wednesday’s announcement from the Federal Reserve. At that time, the Fed kept its fed funds rate range unchanged at 1.00 percent to 1.25 percent. It also announced that it would begin tapering its $4.5 trillion balance sheet in October, initially allowing $10 billion in bonds to roll off each month. The Fed announcement helped to spark a rally in shares of European banks Thursday. The bank sector also benefited from media reports that UniCredit is interested in combining with Commerzbank. The FTSE slipped 0.1 percent, the CAC added 0.5 percent, the DAX was up 02 percent and the SMI was 0.4 percent higher.

Commerzbank rallied after Reuters reported that Italy's UniCredit had made early approaches to authorities in Germany in order to sound-out support for a merger with the state-backed lender. UniCredit gained in Milan. ThyssenKrupp declined a day after it announced its decision to form an equal JV with India's Tata Steel. Abivax was lower after its first-half net loss narrowed from last year. ABB, Adecco and Schindler gained. Richemont finished higher but Swatch dropped. Roche and Novartis gained but shares of Nestlé retreated. Precious metals miners Antofagasta, Randgold Resources and Fresnillo all retreated. Kingfisher and Sainsbury were both down.

Johnson Matthey surged after the chemicals company confirmed its guidance for the current financial year ending March 31, 2018. CRH rose after the company said it would buy US cement maker Ash Grove Cement in a $3.5 billion deal to expand business in North America. Capita sank after reporting a decline in first-half underlying revenue. UBS and Credit Suisse gained while Swiss Re advanced after a broker upgrade. Swiss Life and Zurich Insurance also were higher. British banks including Lloyds, Barclays and Royal Bank of Scotland advanced. Banks have struggled with low interest rates.

September Eurozone consumer confidence improved for a second straight month to its highest level since 2001. The flash consumer confidence index rose to minus 1.2, marking the highest score since April 2001, when the reading was minus 0.9. The UK budget deficit decreased to its lowest August level since 2007 on higher sales tax.

Asia Pacific

Asian stocks ended mostly lower on Thursday after the US Federal Reserve struck a hawkish tone by signaling that it might increase the fed funds rate again this year.

The Organization for Economic Cooperation and Development said in an interim update that global growth momentum has improved and is more broad-based now, but a self-sustained recovery is far from secured as inflation remains subdued and there exists an unmet need for structural reforms.

The Shanghai Composite was down 0.2 percent while the Hang Seng was 0.1 percent lower. Losses in the realty and material sectors overshadowed gains in financials. Standard & Poor’s cut its rating on China by one notch weeks before the country is expected to launch a rare dollar bond, with the ratings agency citing rising economic and financial risks after a long period of heavy credit growth. The rating now stands at A+ from AA- according to S&P’s website.

The Nikkei was up 0.2 percent while the Topix added 0.82 point. The yen eased on the back of a hawkish Federal Reserve. Investors were relieved after the Bank of Japan kept its monetary policy unchanged and maintained its upbeat view of the economy, saying that exports have been increasing. The BoJ kept its policy interest rate at minus 0.1 percent. The target level for the 10-year yield remains at around zero percent. The monetary policy board voted 8-1 in favor of this decision. Banks Mizuho Financial and Mitsubishi UFJ Financial climbed on expectations that they would benefit from higher bond yields. Toshiba retreated after it agreed to sell its memory chip unit to a consortium backed by US private equity firm Bain Capital for $18 billion. Apple supplier Murata Manufacturing tumbled amid reports that Apple's new Series 3 smartwatch has connectivity issues.

Both the S&P/ASX and All Ordinaries dropped 0.9 percent after the Fed indicated that a third rate increase might be on the table in December. Miners BHP Billiton, Rio Tinto and Fortescue Metals Group were lower as Chinese iron ore futures succumbed to selling pressure for a fifth consecutive session. Gold miners Newcrest, Evolution, Regis Resources and Norther Star dropped after gold prices hit three week low. The big four banks slid.

The Kospi was down 0.2 percent, dragged down by auto and steel stocks. The Sensex slipped 0.1 percent.

Looking forward

France posts final second quarter gross domestic product. Flash composite PMI will be reported for France, Germany, the Eurozone and the US. Canada releases August consumer price index and July retail sales. OPEC along with Russia and other producers meet in Vienna to discuss a continuation of its production cuts.

Global Stock Markets

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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