On 06 June, 2016 – Most global markets advanced
Investors paid close attention to Fed Chair Janet Yellen’s remarks concerning the economy.
United States
Stocks advanced Monday with energy companies increasing along with the price of oil. Stocks wobbled but remained higher after Fed Chair Janet Yellen gave a mixed view of the economy. The Dow Jones industrials were up 0.6 percent while both the S&P and Nasdaq added 0.5 percent.
Chesapeake Energy, Southwestern Energy and Exxon Mobil were up on the day. Devon Energy was up after it said it would sell almost $1 billion in assets later this year. The oil field services company Hercules Offshore filed for Chapter 11 bankruptcy protection for the second time in less than a year. Hercules plans to sell all of its assets to pay off investors, including international divisions. Halliburton and Baker Hughes advanced. CF Industries climbed along with Mosaic. AbbVie slid after investors were disappointed with results from a study of a lung cancer drug that AbbVie is acquiring. Tyson Foods slumped on a broker downgrade. Both Lowe’s and Home Depot retreated.
Fed Chair Janet Yellen spoke to the World Affairs Council in Philadelphia on Monday afternoon. Her remarks were parsed closely in light of the disappointing May employment report which was released Friday. She said the economy was improving, but is marked by so many uncertainties that it was not clear when the Fed should resume raising interest rates. Dr Yellen said that although the report was a concern, she noted that one report did not derail the labor markets’ progress which she described as continuing to strengthen. She repeated that a gradual path of rate increases was still “appropriate”. If the May report does prove to be an aberration, Yellen said that incomes will continue to rise. In further positives, she pointed to easing concerns over slowing in China and more predictability in the value of the Chinese currency.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$3.50 to US$1,244.00. Copper futures were up 0.2 percent to US$2.11. WTI spot crude was up US$1.10 to US$49.72. Dated Brent spot crude was up 92 US cents to US$50.56. The US dollar was up against the yen and pound. The currency declined against the euro, Swiss franc and the Canadian and Australian dollars. However, it declined against the yen. The Dollar Index was down 0.4 percent. The yield on US Treasury 30 year bond was up 4 basis points to 2.55 percent while the yield on the 10 year note was up 3 basis points to 1.73 percent.
Europe
Stocks advanced Monday. Investors were cautious prior to a speech by Federal Reserve Chair Janet Yellen, which will take place after the European close. Investors are looking for some clarity regarding Fed policy following Friday’s disappointing jobs report. The FTSE was up 1.0 percent and the DAX and SMI added 0.2 percent. The CAC was virtually unchanged (up 1.60 points).
The Bank of Italy downgraded its growth projections citing weak global economic activity. Gross domestic product is expected to increase 1.1 instead of 1.5 percent in 2016. GDP will accelerate slightly to 1.2 percent in both 2017 and 2018. Germany’s April factory orders dropped 2.0 percent on the month thanks to weak foreign demand. RWE and E.ON were up on the day along with Technip and Total. In London, property developers Berkeley Group, Barratt Developments and Taylor Wimpey dropped after two opinion polls indicated a Brexit lead among voters. Mining stocks including Anglo American, Rio Tinto, Glencore, BHP Billiton, Antofagasta and Fresnillo advanced on the rally in metal prices. easyJet and International Consolidated Airlines Group fell about 1 percent each. Air France KLM and Lufthansa retreated on a broker downgrade.
Asia Pacific
Asian stocks were mixed to begin the new week as investors reacted to Friday’s disappointing US employment report. Japanese were under pressure from the stronger yen while Chinese markets slipped prior to this week’s release of key economic data. The Shanghai Composite was down 0.2 percent as investors awaited the slew of new economic data for May and the upcoming Dragon Boat Festival holidays. The Hang Seng added 0.4 percent.
The Nikkei lost 0.4 percent thanks to the climbing yen and the weaker than expected US jobs report. Exporters bore the brunt of the selling with Honda Motor, Panasonic and Sharp retreating. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial, Nomura Holdings and Dai-ichi Life Insurance tumbled. SoftBank advanced after increasing the amount of money it will raise from selling down its stake in Chinese e-commerce firm Alibaba Group Holding to $10 billion. Brewer Asahi Group Holdings declined on reports it is exploring a bid for some of SABMiller’s eastern European assets. However, the company has denied the reports.
The S&P/ASX was up 0.8 percent and the All Ordinaries added 0.7 percent. A weaker US dollar sent oil and metal prices higher and solid economic data helped investors take an optimistic view on domestic growth. The Melbourne Institute’s monthly inflation gauge turned negative in May, supporting the case for another rate cut after a historic rate cut last month. Separately, Australia’s job advertisements increased at the fastest pace in eight months in May after six months of broadly flat readings. Miners advanced.
Global Stock Markets
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*
The Reserve Banks of Australia and India announce their respective monetary policy decisions. Germany’s April industrial production will be released. France reports April merchandise trade balance. The Eurozone releases revised gross domestic product data. In the US, first quarter productivity and costs will be released.
*Note — all releases are listed in local time.
Source: Fidelity
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