On 09 June, 2016 – Global stocks lower
With little new economic information, investors retreated from risk sending stocks lower and bond prices higher.
United States
Stocks retreated Thursday after three consecutive days of gains. Bank stocks slid as bond yields fell and interest rates weakened. Shares of mining and metals companies were down but lower bond yields helped utility and phone companies to gain. The Dow Jones industrials were down 0.1 percent, the S&P slipped 0.2 percent and the Nasdaq lost 0.3 percent.
Bank of America and Capital One stock retreated. Copper and gold producer Freeport-McMoRan dropped as did aluminum company Alcoa. Restoration Hardware tumbled. It cut its forecast for the year after it reported weak quarterly results. The company said it was facing weaker sales of luxury goods. JM Smucker was up after it reported strong fourth quarter sales of coffee products and pet foods. The company also gave an optimistic profit forecast for the current fiscal year. American Airlines and United Continental advanced after oil prices dropped, potentially reducing fuel costs.
US weekly jobless claims were down 4,000 on the week to 264,000. The unemployment rate for insured workers was down to a new low of 1.5 percent from 1.6 percent in the prior week.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up 90 US cents to US$1,263.90. Copper futures were down 1.2 percent to US$2.04. WTI spot crude was down 64 US cents to US$50.59. Dated Brent spot crude was down 50 US cents to US$52.01. The US dollar was up against all of its major counterparts including the euro, yen, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was up 0.6 percent. The yield on US Treasury 30 year bond was down 4 basis points to 2.47 percent while the yield on the 10 year note declined 2 basis points to 1.68 percent.
Europe
Stocks extended Wednesday’s losses into Thursday. Investor concerns over the upcoming Brexit referendum weighed on investor sentiment. Traders are worried that a “Brexit” would spark further exits from the EU. The FTSE was down 1.1 percent, the CAC declined 1.0 percent, the DAX lost 1.3 percent and the SMI was 0.8 percent lower.
Crude oil prices reached a 10-month high of over $51 a barrel on Wednesday, but pulled back on Thursday as investors locked in profits. The recent strengthening of the euro also contributed to the negative mood among investors. The euro has been rising since it has become apparent that the Federal Reserve will not raise interest rates in June.
European Central Bank President Mario Draghi said that the Eurozone must hasten with structural reforms in order to avoid the lasting economic damage that weak growth and productivity entail. “There are many understandable political reasons to delay structural reform, but there are few good economic ones,” Draghi said at the Brussels Economic Forum. “The cost of delay is simply too high.” A committed central bank can always fulfill its mandate irrespective of the stance of other macroeconomic policies, Draghi said. However, monetary policy does not exist in vacuum as other policies can strengthen or dilute the effects of the central bank policy, he added.
E.ON slid after its shareholders approved the spinoff of Uniper. Commerzbank retreated on reports it is considering hoarding billions of euros in cash in vaults, rather than paying a penalty charge for depositing it with the European Central Bank. In Paris, Technip and Total declined. Crédit Agricole, Société Générale and BNP Paribas finished lower. Essentra tumbled after warning about challenging market conditions. Miner Glencore dropped after agreeing to sell 9.99 percent stake in its agriculture business to a large Canadian pension fund. Johnson Matthey was down after going ex-dividend.
Vodafone Group was down after it reached an agreement to combine Vodafone New Zealand with Sky Network Television. AstraZeneca decreased after selling the marketing rights to a portfolio of anesthetics for up to $770 million. In London, property developers were under pressure after the closely-watched RICS survey predicted a short-term drop in UK house prices in the coming months amid worries about Brexit and higher taxes on buy-to-let and second home purchases.
Asia Pacific
Stocks retreated Thursday. Mining and energy stocks finished mostly higher as the dollar index remained under pressure on increasing uncertainty over the timing of the next US interest rate increase. Markets in China, Hong Kong and Taiwan were closed for the Dragon Boat Festival. China’s May consumer price index was up 2.0 percent from the same month a year ago, down from 2.2 percent in April and below expectations of a 2.3 percent rise. Deflationary pressures eased further — the producer price index declined 2.8 percent in May from a year earlier after sliding 3.4 percent in April.
The Nikkei retreated 1.0 percent, weighed down by a stronger yen and worse-than-expected machinery orders data. In April, Japan’s core machinery orders (excluding volatile items) tumbled 11 percent on the month, in part owing to earthquakes that hit the southern manufacturing hub. Banks Mizuho Financial Group, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial declined after bond yields hit a record low in the developed world on concerns over the health of the global economy and uncertainty ahead of the Brexit referendum on June 23. Toshiba rallied after its US unit Westinghouse Electric clinched a deal to build nuclear plants in India. Suzuki Motor advanced on news Osamu Suzuki is stepping down as chief executive of the company. Inpex and JX Holdings climbed after US crude futures settled above $51 for the first time in almost a year on Wednesday.
Both the S&P/ASX and All Ordinaries slipped 0.1 percent. The four big banks were lower. Miners BHP Billiton, Rio Tinto and Fortescue Metals Group advanced. Santos and Origin Energy gained after oil prices extended gains for a third day Wednesday to close at new 2016 highs. Gold miner Newcrest Mining, Northern Star Resources and Evolution Mining jumped as gold hit a three-week high.
The Kospi was 0.1 percent lower after the Bank of Korea took markets by surprise by cutting the benchmark interest rate for the first time in a year to a new record low of 1.25 percent in the wake of low inflation and diminished expectations of a US rate increase over the summer. The Sensex tumbled 1.0 percent on profit taking.
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*
Japan posts May producer price index. Germany releases final May consumer price index. India, France and Italy post April industrial production. Canada releases May labour force survey. The US releases preliminary consumer sentiment for June and the May Treasury budget.
*Note — all releases are listed in local time.
Source: Fidelity
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