On 31 July, 2015 – Corporate earnings results continued to buoy European markets

Stocks were mixed in the Asia Pacific region while they rallied in Europe and slipped in the US. For the month of July, shares were up in the US and Europe but mostly lower in the Asia Pacific.
United States
Stocks slipped Friday but advanced for the month of July. Energy stocks retreated while weak wage data supported expectations that the Federal Reserve might hold off on an interest rate. Initially helping share prices, second quarter labor costs recorded their smallest increase in 33 years, with the employment cost index edging up a less than expected 0.2%. Earlier in the week, many investors considered positive comments by the Fed about the economy as a signal that a rate rise could come as early as September. The Dow Jones industrials were down 0.3% on the day but added 0.7% on the week. The S&P slipped 0.2% Friday but was up 1.2% for the week. Nasdaq was virtually unchanged and up 0.8%. In July, the indices added 0.4%, 2.0% and 2.8% respectively.
Exxon Mobil and Chevron declined after reporting poor quarterly earnings due to weak oil prices. Exxon said Friday it cut spending by US$1.54 billion in the second quarter while Chevron announced it is laying off 1,500 workers. Exxon said earnings fell 52% from a year earlier, causing the company to report its lowest quarterly profit since June 2009. Chevron, hurt by low oil prices and a write-off of some of its assets, reported its lowest profit in 13 years. The company reported a profit of 30 US cents per share which was well below expectations. Coca-Cola Enterprises jumped after a report said the independent Coca-Cola bottling company is in merger talks with two European bottlers. LinkedIn slumped after the social network’s second quarter results failed to connect with investors.
US wages and benefits grew at their slowest pace in 33 years in the spring, stark evidence that the improving job market is having little impact on earnings. The slowdown likely reflects a sharp drop-off in bonus and incentive pay for some workers. The ECI rose just 0.2% in the April to June quarter after a 0.7 increase in the first quarter. Wages and salaries alone also rose 0.2%. Both measures recorded the smallest quarterly gains since the second quarter of 1982.
Gold at the afternoon London fixing was up US$10.90 to US$1,098.40. Copper futures were down 0.6% to US$2.36. WTI spot crude was down US$1.40 to US$47.12. Dated Brent spot crude was down US$1.10 to US$52.21. The US dollar was up against the Canadian dollar. However, it declined against the euro, yen, pound, Swiss franc and the Australian dollar. The Dollar Index was down 0.3%. The yield on US Treasury 30 year bond was down 4 basis points to 2.91% while the yield on the 10 year note declined 8 basis points to 2.18%.
Europe
Shares advanced for the day and month but were mixed for the week. The driving force behind the upward move continued to be European corporate earnings results. The markets fluctuated between gains and losses throughout Friday’s trading session. In the end, enthusiasm for positive earnings results won out over pessimism caused by weak German retail sales, Eurozone unemployment and UK consumer confidence data. The FTSE was up 0.4% on the day and 2.7% for the week. The CAC added 0.3% and 0.5% while the SMI was also up 0.3% and edged up 0.1% on the week. The DAX gained 0.5% but lost 0.3% on the week. All advanced for the month of July. The Greek stock market is reopening on Monday. The market has been closed for over a month.
Hochtief increased after saying it expects operational net profit of €220 million to €260 million for 2015, representing an increase of 15 to 35% from a year ago. Airbus Group advanced after the company confirmed its 2015 guidance after reporting net income for the first half of €1.524 billion, up 34% from €1.135 billion last year. BNP Paribas climbed after it swung to its highest quarterly profit in more than three years and said it would acquire Indian brokerage Sharekhan. Carrefour finished higher after the retailer posted forecast beating results. Lloyds Banking Group tumbled after the lender reported a 38% surge in first half profit despite setting aside a further £1.4 billion to compensate customers for its miss-selling of loan insurance. Vedanta Resources gained after posting a drop in first quarter earnings and revenue. Antofagasta declined after it agreed to acquire a 50% interest in the Zaldivar copper mine in Chile from Barrick Gold. InterContinental Hotels Group dropped after its denied reports that it is in talks to acquire Starwood Hotels & Resorts.
July flash harmonized index of consumer prices inched up 0.2% on the year. The euro area June unemployment rate remained unchanged at 11.1% — the lowest level since early 2012. Germany’s retail sales dropped 2.3% unexpectedly in June after rising in the previous two months. French consumer spending increased for the third straight month in June at the fastest pace in five months, largely led by robust food consumption.
Asia Pacific
Markets here were mixed Friday. Chinese shares tumbled, data from Japan were weak and US corporate earnings results were mixed. The second quarter US GDP data missed expectations, but the rise in personal consumption growth after a dismal start to 2015 reinforced expectations that the Federal Reserve is on track to raise interest rates later this year.
Chinese shares ended a volatile session lower despite unprecedented measures by Beijing to support the market and bolster the flagging economy. The Shanghai Composite dropped 1.1%, extending losses for the second straight session and taking this week’s loss to 10%. The Hang Seng closed up 0.6% but down 2.0% on the week. Both indices retreated for the month of July. The Hang Seng lost 6.1% while the Shanghai Composite plummeted 14.3%.
The Nikkei added 0.3% despite lackluster economic data. On the week and month the index was 0.2% and 1.7% higher respectively. Japan’s annual core consumer inflation rose just 0.1% on the year in June, household spending unexpectedly fell 2% and the unemployment rate edged up to 3.4%, highlighting the challenges the Bank of Japan faces to meet a 2% inflation target. Honda Motor advanced before reporting a 20% increase in the April to June quarter net profit after the market close. Sharp closed higher before reporting a bigger than expected quarterly net loss after market hours.
Both the S&P/ASX and All Ordinaries added 0.5% Friday. The former added 2.4% and the latter, 2.2% for the week. For July, the indices were up 4.4% and 4.2% respectively. The four big banks advanced while mining and energy stocks succumbed to profit taking after the previous session’s gains. The Kospi was 0.6% higher on the day but 0.8% lower for the week and registered a 2.1% decline in July. The Sensex gained 1.5% Friday to end the week virtually unchanged and 1.2% higher for July.
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*
Monday — Final manufacturing PMIs will be reported for China, Japan, France, Germany, Eurozone, UK and US. The US releases June personal income and spending, July ISM manufacturing survey and June construction spending.
Tuesday — Australia posts June merchandise trade and retail sales. The Reserve Banks of Australia and India both publish their monetary policy decisions. The Eurozone releases June producer prices. In the US, June factory orders will be reported.
Wednesday — Japan, China, India, France, Germany and the Eurozone post July composite PMIs. The UK and US report July services PMIs. The Eurozone also reports June retail sales. In the US, June international trade, July ADP private employment and ISM nonmanufacturing survey will be released. Canada also posts June international trade data.
Thursday — Australia releases July labour force survey. Germany posts June manufacturers’ orders. The UK releases June industrial production. The Bank of England announces its monetary policy decision and releases the minutes from the meeting at the same time. The Quarterly Inflation Report will also be released at the same time. In the US, weekly data for jobless claims, money supply and Fed balance sheet will be released.
Friday — Bank of Japan announces its monetary policy decision. Both Germany and France post June industrial production and merchandise trade balance. Canada releases July labour force survey. The US reports July employment situation and June consumer credit.
Sunday — China posts July consumer and producer price indices.
*Note — all releases are listed in local time.