On 17 November, 2015 – Indices advance as political concerns are shaken off

Most indices advanced Tuesday and investors shook off potential economic concerns stemming from Friday’s terrorist attacks on Paris.

United States

US stocks lost early gains to close almost unchanged on the day. Encouraging quarterly results from Walmart, Home Depot and other big retailers helped nudge stocks slightly higher in afternoon trading Tuesday. But the gains melted away after a report that a soccer match between Germany and Netherlands was called off due to concerns of a bomb attack (no bomb was found). The Dow Jones industrials were virtually unchanged (up 6.49 points), the Nasdaq also was virtually unchanged (up 1.4 points) but the S&P lost 0.1%. Crude oil renewed a selloff a day after the commodity’s climb ignited the strongest gains among energy companies in six weeks.

Walmart advanced after the company reported improved customer traffic and an increase in a sales figure for the third quarter, even as a stronger dollar pressured its performance overseas. Walmart also issued a forecast for the holiday shopping season that largely beat expectations. Home Depot climbed after it reported better than expected third quarter earnings and revenue and delivered an upbeat fiscal outlook. TJX, parent of T.J. Maxx, Marshalls and other stores, was up after it reported better than expected sales at established stores in the third quarter. The retailer’s earnings also topped estimates. Urban Outfitters dropped after the company’s latest quarterly sales fell short. Dick’s Sporting Goods slumped after the sporting goods retailer reported worse than expected fiscal third quarter results and gave a weak outlook. Airgas soared after Air Liquide said it will acquire the company for an enterprise value of US$13.4 billion to form the world’s biggest supplier of industrial gases.

October’s consumer price index was up 0.2% from a year ago while core inflation, which excludes volatile food and energy prices, advanced 1.9% from a year ago. October manufacturing output added 0.4% on the months as factories turned out more steel, cars and computers.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$5.55 to US$1,079.20. Copper futures were down 0.0% to US$2.10. WTI spot crude was down US$1.00 to US$40.74. Dated Brent spot crude was down 90 US cents to US$43.66. The US dollar was up against the euro, yen and Swiss franc. It was virtually unchanged against the pound and Canadian dollar. However, it declined against the Australian dollar. The Dollar Index was up 0.3%. The yield on US Treasury 30 year bond was down 1 basis point to 3.05% while the yield on the 10 year note was down 2 basis points to 2.25%.

Europe

European markets surged Tuesday as investors shrugged off geopolitical concerns. The markets staged a broad based rally in the morning and extended their gains going into the close. Not surprisingly, defense stocks were among the best performers following the terrorist attacks in Paris late Friday. Travel and leisure stocks bounced back from their weak performance yesterday. The FTSE was up 2.0%, the SMI gained 2.6%, the CAC jumped 2.8% and DAX added 2.4%.

BMW, Daimler, Volkswagen, Peugeot and Renault gained. Deutsche Bank and Commerzbank also advanced. In Paris, Airbus gained after UK-based easyJet said it was increasing its fleet by taking delivery from Airbus. Vivendi was up after the company said that as at November 16, it holds 2.7 billion Telecom Italia ordinary shares, representing just more than 20% of the ordinary share capital of Telecom Italia. Technip and Total were higher. Smiths Group surged after it affirmed its full year forecast. EasyJet retreated after reporting full year results. Both Royal Dutch Shell and BP advanced. BAE systems and Rolls-Royce finished higher. Repsol jumped in Madrid, as production from the Organization of the Petroleum Exporting Countries (OPEC) declined for a third consecutive month.

Europe's passenger car registrations increased for the 26th consecutive month in October. Car sales advanced 2.9% in October from a year ago, but slower than the 9.8% increase recorded in September. Across the region, new passenger car registrations totaled 1.1 million units.

Germany's November ZEW survey of economic confidence strengthened more than expected as investors think economic conditions will improve in coming six months. UK October consumer price inflation remained in negative territory for the second straight month largely due to lower food and energy prices. Consumer prices decreased 0.1% from a year ago for a second month.

Greece reached an agreement with its lenders on financial reforms early on Tuesday, removing a major obstacle holding up fresh bailout loans for the cash-starved country. Athens signed a new aid program worth up to €86 billion earlier this summer, but payment of part of an initial tranche had been held up over disagreements on home foreclosures regulations and handling tax arrears owed to the state.

Asia Pacific

The major Asian markets advanced after Monday’s gains in US trading. The Australian market led the advances, with many major averages in the region gaining in excess of 1%.

The Nikkei added 1.2% with resource and electric machinery makers among the best performers. JFE Holdings, NEC and Fujikura rallied strongly. Also advancing on the day were Sumco, Sumitomo Chemical, Tosoh, Mitsui Chemicals, JX Holdings, Nippon Steel, Nisshin Steel, Toho Zinc, Furukawa Electric, Chiyoda, Mitsubishi Electric, Alps Electric and Mazda Motor.

The S&P/ASX rallied 2.3% and the All Ordinaries added 2.2%. The indices saw broad strength with energy stocks ending solidly higher. The Reserve Bank of Australia published minutes of its monetary policy meeting held earlier this month. The minutes indicate that the RBA expects the economy to maintain its upward trend over the next two years, with the lower exchange rate mitigating the impact of falling commodity prices. The bank also expressed readiness to infuse more stimulus if necessary. BHP Billiton was up — a turnaround from last week when shares tumbled to multiyear lows amid a drop in commodity prices and the fallout of a dam burst at its jointly owned Brazilian mine.

The Hang Seng added 1.2% but the Shanghai Composite edged down 0.1%. The Kospi added 1.1% while the Sensex added 0.4% and the Taiex, 1.5%.

Looking forward

US October housing starts will be posted. The Federal Reserve publishes minutes from its October FOMC meeting.

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.