Investor focus is once again on Federal Reserve monetary policy.
United States
Stocks ebbed lower Friday and were mixed for the week. Investors continued to sell some of the safe assets such as phone and utility companies they favored earlier in the year. The Dow Jones industrials were down 0.2 percent, the S&P slipped 0.1 percent and the Nasdaq was virtually unchanged (down 1.77 points). On the week, the Dow lost 0.1 percent while the Nasdaq gained 0.1 percent and the S&P was virtually unchanged (down 0.18 point). Trading was quiet on a Friday in August.
Estée Lauder skidded after the company’s profit forecast for the current quarter and the new fiscal year fell far short of estimates. Emerson Electric agreed to buy Pentair’s valves and controls business for $3.15 billion. Pentair acquired that business from Tyco International in 2012 as part of a larger deal between those companies and said it had $1.8 billion in revenue in 2015. Both Emerson and Pentair declined. Foot Locker advanced after it reported stronger results than expected. Nike also gained. Ross Stores was higher after it raised its profit projections after it surpassed estimates in the second quarter.
Applied Materials advanced after the company, which makes chip-making equipment, disclosed new orders and a contract backlog that were much stronger than forecast. Deere was higher after it posted strong results and raised its outlook for the year. The company has been cutting costs as farmers struggle with smaller profits on corn and soybeans thanks to large harvests. Olympic Steel, AK Steel and US Steel retreated after a broker downgrade.
Late Thursday, San Francisco Federal Reserve Bank President John Williams said if the Fed waited too long to increase rates, it could be costly for the economy and that a possible September rate increase should be in play. The comments added to statements from New York Fed President William Dudley earlier in the week. Investors are waiting for Friday’s meeting of global central bankers in Jackson Hole, Wyoming where Fed Chair Janet Yellen may provide insight on the US rate outlook.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$3.65 to US$1,346.40. Copper futures were up 0.2 percent to US$2.18. WTI spot crude was up 30 US cents to US$48.52. Dated Brent spot crude was down 1 US cent to US$50.88. The US dollar was up against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was up 0.4 percent. The yield on US Treasury 30 year bond was up 3 basis points to 2.29 percent while the yield on the 10 year note was up 4 basis points to 1.58 percent.
Europe
European markets declined on Friday and for the week in quiet August trading. Automakers and the banks added negative pressure to the markets. An uncertain outlook for US interest rates also weighed on investor sentiment. The FTSE slipped 0.1 percent, the CAC and SMI lost 0.8 percent and the DAX was 0.6 percent lower. On the week, the FTSE declined 0.8 percent, the CAC dropped 2.2 percent, the DAX was down 1.6 percent and the SMI was 2.0 percent lower.
BMW dropped after a broker downgrade. Automakers Volkswagen, Daimler, Peugeot and Renault retreated as well. Banks including Deutsche Bank, Commerzbank, Crédit Agricole, BNP Paribas and Société Générale declined. In London, easyJet was higher on speculation over a possible bid for the discount airline by its founder in combination with other investors. Bookmaker 888 Holdings and The Rank Group gained after they withdrew a proposed three-way tie-up with William Hill. William Hill also was higher.
Asia Pacific
Asian stocks ended mixed on Friday — a rally in crude prices was offset by hawkish comments from New York Fed President William Dudley and San Francisco Fed President John Williams on US interest rate increases. Investors are waiting for Friday’s remarks from Fed Chair Janet Yellen when she speaks at the Jackson Hole, Wyoming symposium.
The Shanghai Composite edged up 0.1 percent on the day and was up 1.9 percent on the week. Shares climbed earlier in the week on hopes of additional stimulus as a slew of data underscored persisting economic weakness. The Hang Seng was down 0.4 percent and added 0.7 percent for the week.
The Nikkei was up 0.4 percent but dropped 2.2 percent on the week. Oil’s price gains boosted energy stocks, with Inpex, JX Holdings and Japan Petroleum advancing. Mitsui Chemicals, Fujitsu and Sumco climbed while Obayashi, Nippon Telegraph and Telephone, Shionogi and Astellas Pharma retreated.
Both the S&P/ASX and All Ordinaries added 0.3 percent helped by strong gains in the mining sector. BHP Billiton, which posted its first full-year loss in 15 years earlier in the week, advanced as did and Fortescue Metals Group. On the week, the S&P/ASX slipped 0.1 percent while the All Ordinaries was virtually unchanged. Banks finished flat to slightly higher even though Moody’s downgraded the outlooks of the big four banks and the banking system to negative.
The Kospi was virtually unchanged (up 0.77 point) while the Sensex was 0.2 percent lower. For the week, the former was up 0.3 percent and the latter down 0.3 percent. On Saturday, India’s Prime Minister Narendra Modi appointed Urjit Patel, a deputy governor at the Reserve Bank of India, to be the Bank’s next governor. He will be replacing current chief Raghuram Rajan, who two months ago surprised markets by announcing he would step down when his term ends in September. Patel is credited with focusing the RBI on taming inflation. He also pushed for a Monetary Policy Committee to be set up.
Looking forward

Central Bank activities

August 26 – 28

United States

Jackson Hole Monetary Policy Symposium

The following indicators will be released this week…

Europe

August 23

Eurozone

Manufacturing, Services & Composite PMI (August flash)

Germany

Manufacturing, Services & Composite PMI (August flash)

France

Manufacturing, Services & Composite PMI (August flash)

August 24

Germany

Gross Domestic Product (Q2.2016 final)

August 25

Germany

Ifo Business Survey (August)

August 26

Eurozone

M3 Money Supply (July)

France

Gross Domestic Product (Q2.2016 second estimate)

UK

Gross Domestic Product (Q2.2016 second estimate)

Asia/Pacific

August 24

Japan

Manufacturing PMI (August flash)

August 26

Japan

Consumer Price Index (July)

Americas

August 23

United States

New Home Sales (July)

August 24

United States

Manufacturing PMI (August flash)

Existing Home Sales (July)

August 25

United States

Initial Unemployment Claims (week ending prior Saturday)

Durable Goods Orders (July)

August 26

United States

Gross Domestic Product (Q2.2016 second estimate)

Consumer Sentiment (August final)

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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