On 17 August, 2016 – Global shares mostly lower

Investors took profits after recent gains and investors focused once again on the Federal Reserve.
United States
Stocks reversed course in afternoon trading and erased earlier losses after the Federal Reserve released the minutes of its July meeting. Losses for phone and utility companies continued to drag the market from its recent record highs. Shares of retailers, including Target and Lowe’s, skidded after the companies reported disappointing earnings. The Dow Jones industrials were up 0.2 percent, the S&P edged up 0.1 percent and the Nasdaq was virtually unchanged (up 1.55 points).
Target tumbled after the company cut its annual profit forecast and reduced its estimates for sales at older stores. Target is facing stiff competition and analysts say it has had trouble with grocery sales. Urban Outfitters jumped after it disclosed solid second quarter results. Sales at older stores improved, surprising analysts who had expected a decline. Barnes & Noble dropped after the book seller said its chief executive was leaving after less than a year. The company’s chairman and former chief, Leonard Riggio, who was scheduled to retire next month, will stay with the company as it seeks a new leader. Barnes & Noble has been cutting costs and closing stores as it copes with people doing more of their shopping online and at discount stores.
Lowe’s stock slid after the company cut its annual profit forecast after it reported mixed quarterly results, including lower-than-expected earnings and weak sales at older stores. Home Depot posted solid results on Tuesday but traded slightly lower. Cree declined after it forecast disappointing earnings for the current quarter, and its sales estimate was far weaker than expected. Staples’ retreated after its quarterly results were as anticipated. But the office supply company said its sales would continue to decline in the current quarter.
According to the FOMC minutes released today, the committee remains data dependent. The Federal Reserve published the minutes of its July meeting. While the committee saw less risk to the economic outlook, at the same time they wanted to see more data before they increased rates again.
The view of the economy was upbeat with household spending described as “growing strongly” and the labor market, following June’s initial 287,000 surge in nonfarm payroll, described as “strengthening”. Housing was seen as a modest positive with the service sector expanding but with the factory sector no better than mixed.
Committee members agreed that the labor market would continue to strengthen and that inflation would gradually move to their 2 percent target. Some saw a rate increase coming soon and one member — Kansas City’s Esther George — wanted to raise rates immediately. But the bulk of the FOMC were content to wait and see.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down 65 US cents to US$1,343.35. Copper futures were down 0.6 percent to US$2.17. WTI spot crude was up 30 US cents to US$46.88. Dated Brent spot crude was up 62 US cents to US$49.85. The US dollar was up against the Canadian and Australian dollars. However, it was virtually unchanged against the euro, pound, yen and Swiss franc. The Dollar Index was unchanged. The yield on US Treasury 30 year bond was down 3 basis points to 2.26 percent while the yield on the 10 year note slipped 2 basis points to 1.55 percent.
Europe
Stocks retreated for a second day as investors waited for the publication of the Federal Reserve minutes. The FTSE was down 0.5 percent, the CAC declined 1.0 percent, the DAX retreated 1.3 percent and the SMI was 0.8 percent lower.
Mining stocks remained weak after yesterday’s disappointing earnings from global giant BHP Billiton. Admiral Group slid in London. The British car insurance provider said its solvency position had dropped 20 percent in the first half because of market volatility around Britain’s vote to leave the European Union. Glencore was lower. Indivior surged to close at an all-time high after its drug for opioid use disorder passed its latest clinical trials.
Infrastructure firm Balfour Beatty was higher after beating first-half expectations and resuming dividend payouts. It said there was little sign yet of the Brexit vote affecting its markets, but that it was too soon to know how the decision would eventually play out. ASML Holding retreated after Intel said it won’t use the semiconductor-equipment maker’s lithography technology to make its 10-nanometer chips. Finnair declined after the carrier scaled back plans to add flights this year because European terrorism hurt travel demand.
In economic news, the UK job market remained steady in the immediate aftermath of Brexit vote. Claimant unemployment dropped by an unexpected 8,600. The ILO unemployment rate for the three months to June remained at 4.9 percent, matching the lowest level since the third quarter of 2005. Employment increased by a solid 172,000 in the three months to June.
Asia Pacific
Stocks were mixed Wednesday. The yen weakened after hawkish comments from a few Federal Reserve officials. Japanese shares gained for the first time this week, while Chinese shares ended marginally lower. Shares showed little reaction to the formal announcement of a long-awaited stock trading link between Shenzhen and Hong Kong.
The Nikkei climbed 0.9 percent. Dai-ichi Life Insurance, Komatsu, Inpex Corp, Nippon Steel & Sumitomo Metal and Sumitomo Heavy Industries rallied. Shiseido, Nissan Chemical Industries and Dainippon Screen Manufacturing retreated. Sharp jumped to extend recent gains after completing the sale of a stake to Foxconn Technology Group.
The S&P/ASX edged up 0.1 percent while the All Ordinaries were virtually unchanged (up 2.47 points). Investors responded to a slew of earnings reports and better-than-expected wage growth figures for the second quarter. Moody’s affirmed Australia’s AAA credit rating, saying it expects the country’s economic resilience will endure in an uncertain global environment. BHP Billiton rallied despite reporting its biggest annual loss amid writedowns and impairments. Rio Tinto and Fortescue Metals Group also advanced. Sonic Healthcare, the lab pathology and radiology services company, jumped after posting better-than-expected full-year results. Santos, Woodside Petroleum, Origin Energy and Oil Search gained after oil prices advanced. Commonwealth Bank dropped on going ex-dividend.
The Shanghai Composite was virtually unchanged (down 0.49 point) while the Hang Seng lost 0.5 percent. The Kospi slipped 0.2 percent. The Sensex was down 0.2 percent as IT stocks continued to retreat in reaction to Royal Bank of Scotland’s decision cancelling a $300 million contract with Infosys.
Looking forward
Japan releases July merchandise trade data and Australia posts July labour force data. France releases second quarter ILO unemployment. UK July retail sales will be released along with final July harmonized index of consumer prices. The European Central Bank releases minutes from its latest monetary policy meeting. In the US, August Philadelphia Fed business outlook survey, July leading indicators and weekly jobless claims, money supply and Fed balance sheet will be reported.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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