On 30 July, 2015 – Stocks mixed as FOMC keeps options open

Stocks were mixed in Asia, up in Europe and virtually unchanged in the US as investors reacted to the Federal Reserves’ Wednesday monetary policy statement as well as to mixed earnings.
United States
Stocks closed with tiny gains after recovering losses incurred earlier in the day. Investors continued to focus on mixed company earnings. They also were looking over a report that showed the US economy rebounded in the second quarter. The Dow Jones industrials and S&P were virtually unchanged on the day while Nasdaq added 0.3%.
The US economy grew at a 2.3% annualized rate in the April to June quarter, rebounding from a harsh winter. The first quarter was revised to positive growth of 0.6%. It previously had been estimated to have contracted. Leading growth was a surge in consumer spending and a recovery in foreign trade.
Procter & Gamble dropped after it reported softer sales than expected. The company, like many others, was negatively affected by the strong dollar which makes US products more expensive abroad. Whole Foods sank after the company reported a sharp slowdown in sales growth last quarter, partly hurt by the recent news that some Whole Foods locations in New York City were overcharging customers. Facebook retreated after the company’s results, while positive, included a sharp 82% jump in expenses as the company invested in growth.
Both Modelez and Digital Corp advanced as quarterly profits beat estimates. Ensco and Range Resources tumbled to lead energy shares lower. Marathon Petroleum and Valero Energy also declined after oil erased an earlier gain. Varian Medical Systems retreated after reporting sales that fell short of forecasts. Cardinal Health and McKesson also retreated. Air Products & Chemicals rallied the most since January after raising its full year profit forecast as margins expanded.
Gold at the afternoon London fixing dropped US$2.75 to US$1,087.50. Copper futures were down 1.3% to US$2.38. WTI spot crude was down 31 US cents to US$48.48. Dated Brent spot crude slipped 4 US cents to US$53.34. The US dollar was up against the euro, yen, Swiss franc and the Canadian dollar. It was virtually unchanged against the pound and Australian dollar. The Dollar Index was up 0.4%. The yield on US Treasury 30 year bond was down 4 basis points to 2.95% while the yield on the 10 year note slipped 2 basis points to 2.26%.
Europe
Most European markets advanced, extending the gains from the previous two days. The driving force behind the move continues to be better than expected European corporate earnings reports. Energy stocks also turned in a strong performance, partly due to rising crude oil prices and news of job cuts among major oil companies. Both the FTSE and CAC added 0.6% while the DAX advanced 0.4% and the SMI was 0.1% higher.
Investors here had their first opportunity to react to the US Federal Reserve monetary policy announcement which was released after the European close yesterday. However, traders remained concerned over the volatility in the Chinese market. The Shanghai Composite closed down 2.2% today after rallying more than 3% in early trading. Investors continued to follow the situation in Greece. The country’s Prime Minister Alexis Tsipras has called for a referendum in an attempt to overcome divisions within the ruling Syriza party.
Deutsche Bank increased after its second quarter profit more than tripled. Fresenius retreated — the firm lifted its full year guidance after a strong showing in the second quarter. Siemens surged after it stuck to its full year outlook after reporting a slight decline in third quarter net profit. Accor was down despite the hotel group reporting a 5% increase in half year revenues amid challenging economic conditions in France and Brazil. Alcatel-Lucent climbed after narrowing its second quarter net loss to €54 million from €298 million a year ago. Sanofi retreated after the drug maker reported that its second quarter International Financial Reporting Standards (IFRS) net income climbed 67.6% to €1.30 billion euros from €777 million euros last year. Royal Dutch Shell advanced after the company unveiled plans to cut 6,500 jobs after its profit fell sharply in the second quarter. Royal Bank of Scotland declined after it reported a half year loss after provisions for restructuring costs and potential legal settlements.
Eurozone economic confidence climbed unexpectedly to a four year high in July and businesses became more upbeat after the threat of Grexit diminished. The economic sentiment index climbed to 104 in July. German unemployment increased unexpectedly in July with the number of unemployed increasing 9,000 in July from June, confounding expectations for a decline. Spain’s economic growth continued to accelerate in the second quarter. Gross domestic product advanced 1% on the quarter, up from the 0.9% growth logged in the first quarter and 0.7% seen in the fourth quarter of 2014.
The International Monetary Fund will not reach a deal on a new debt program with Greece until Athens reaches an agreement with European governments that would ensure it can pay its debts, an IMF official said on Thursday. “The IMF can only support a program that is comprehensive,” the official said in a telephone briefing with journalists, adding that it “will take some time” before Greece and its European creditors can lay the necessary groundwork for a new program.
Asia Pacific
Markets were mixed in this region thanks to some late-session selling pressure in Chinese and Hong Kong stocks as well as Samsung Electronics’ lackluster results for the second quarter. They tempered gains stemming from rising commodity prices, solid earnings from a slew of Japanese companies and the Fed’s upbeat assessment of economic conditions.
The Shanghai Composite closed lower after a late afternoon slide. The index rallied more than 3% before reversing direction to end the session down 2.20% on a late selloff in the final 30 minutes of trading. The Hang Seng retreated 0.5% in response to the sudden slide in mainland Chinese shares.
The Nikkei rallied 1.1% in reaction to a slew of positive earnings reports from Nissan Motor, Nintendo and Nomura Holdings. The yen weakened after the FOMC statement and a report that showed that Japan’s industrial output increased more than forecast in June, further bolstering sentiment. Japan’s industrial output rose 0.8% in June, bouncing from the previous month’s 2.1% drop. Banks gained ground, with Mitsubishi UFJ Financial, Sumitomo Mitsui Financial and Mizuho Financial all closing higher. Toyota and Honda Motor rose despite industry data showing sluggish auto sales in June. Mazda Motor soared after unveiling its quarterly earnings results. Nissan pared early gains to end higher after reporting quarterly profit that beat estimates. Nintendo shares climbed after the company swung to an unexpected net profit during the April to June quarter, boosted by cost controls and robust videogame business. Nomura Holdings rallied after its first quarter profit more than tripled. NTT DoCoMo jumped on reporting a 24% increase in first quarter net profit.
Both the S&P/ASX and All Ordinaries added 0.8%. BHP Billiton and Rio Tinto both climbed after iron ore prices surged 6% overnight. Energy producers Woodside Petroleum, Oil Search and Santos also advanced. National Australia Bank advanced after completing the full divestment of US-listed Great Western Bank. Commonwealth, ANZ and Westpac also advanced. The Kospi lost 0.9%. Samsung Electronics tumbled after reporting a fifth straight quarterly profit drop, reflecting continued weakness in its flagship handset business. The Sensex gained 0.5% thanks to better than expected earnings from Dr Reddy’s Laboratories and ITC prompting investors to square off their short positions on the eve of derivatives expiry. News that the government has approved amendments to the GST Bill and the Fed’s non-committal approach to rate increases also helped buoy investor sentiment.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Japan reports June consumer prices, household spending and unemployment. Australia posts second quarter producer price index. France reports June consumption of manufactured goods and producer prices. The Eurozone reports flash harmonized index of consumer prices for July and June unemployment. In the US, final July consumer sentiment will be released.
*Note — all releases are listed in local time.