On 30 August, 2016 – Investors remain focused on US monetary policy

Most stock indices in Asia and Europe advanced while those in the US slipped.
United States
United States markets wavered between small gains and losses on Tuesday as a summer slowdown continued. Technology losses were offset by banking sector gains. The Dow Jones industrials were down 0.3 percent while the S&P and Nasdaq were both off 0.2 percent. Investors continued to be focused on whether and when the Federal Reserve will increase its fed funds rate. The US dollar strengthened, pushing down commodity prices.
Hershey shares sank after Mondelez International said it was walking away from its proposal to buy Hershey for $25 billion. Mondelez proposed to buy the company earlier this summer, but Hershey is a notoriously difficult company to propose mergers with because the majority of the shares are controlled by a nonprofit organization. Apple shares retreated after the European Union ruled that it had to pay $14.5 billion in back taxes to Ireland. Both Apple and Ireland said they would appeal the decision, which is the bloc’s latest and most aggressive move in its campaign to have multinationals pay a fair tax rate.
Abercrombie & Fitch tumbled after it reported a wider loss for its second quarter and said it is closing up to 60 stores in the United States as both US and international sales fell. The company also offered a downbeat outlook for a key sales measure, as business continues to be hurt by a decline in tourists to its flagships in key cities. The closures will represent about 8 percent of its store count in the domestic market. Both Gap and Urban Outfitters declined as well.
August consumer confidence increased to an almost one-year high. Fed Vice Chairman Stanley Fischer told Bloomberg Television Tuesday that rate increases will be data dependent without giving a specific timeline. He said that the US is close to full employment even as the US dollar has strengthened.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down 60 US cents to US$1,318.15. Copper futures were down 0.1 percent to US$2.08. WTI spot crude was down 58 US cents to US$46.40. Dated Brent spot crude was down 80 US cents to US$48.46. 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 0.6 percent. The yields on both the US Treasury 30 year bond and the 10 year note were up 1 basis point to 2.22 percent and 1.57 percent respectively.
Europe
Most European stock markets advanced Tuesday. The exception was the FTSE which slipped 0.3 percent following its long holiday weekend. The uncertain outlook for US interest rates remains the chief concern among the investor community as they wait for Friday’s employment report. The CAC was up 0.8 percent, the DAX gained 1.1 percent and the SMI added 0.6 percent. European exporters, especially the automakers, benefited from a weaker euro Tuesday.
Shares of European banks including Deutsche Bank, Commerzbank, Société Générale, BNP Paribas and Crédit Agricole gained. Wirecard advanced on a broker upgrade. Volkswagen, BMW, Daimler, Peugeot and Renault rallied. Bunzl slipped after the business supplies distributor reported higher profit and revenues in its first half and announced three acquisitions.
Associated British Foods increased on a broker upgrade. Braemar Shipping Services sank after the company said its full-year results will be materially lower than 2016. Mining stocks were under pressure due to the rising US dollar. Antofagasta, Anglo American, Rio Tinto, Glencore and BHP Billiton retreated. Randgold Resources and Fresnillo also declined.
Eurozone economic confidence deteriorated to a five-month low in August reflecting widespread weakness across sectors. The economic confidence index slid to 103.5 from 104.5 in July. This was the lowest reading since March, when it was at 103. Germany’s consumer price index rose 0.4 percent on the year for a second month in August. Housebuilders Berkeley Group and Persimmon declined after data showed that UK mortgage approvals for house purchases fell to the lowest since January 2015.
Asia Pacific
Asian stocks were mostly higher thanks to higher commodity prices and a positive finish overnight in the US. Investors remained firmly focused on Friday’s August US nonfarm payroll report and its impact on US monetary policy.
The Shanghai Composite was up 0.2 percent as banks rebounded from recent losses on concerns about the quality of capital and mounting debt problems. The Hang Seng added 0.9 percent.
The Nikkei edged down 0.1 percent. Data released before the market opened showed that July household spending and retail sales fell by less than expected and the jobless rate hit a two-decade low. East Japan Railway, Asahi Group, NTT DoCoMo and Softbank retreated. Hitachi advanced on a Nikkei report that the electronic equipment maker plans to cut costs by ¥200 billion in the current fiscal year. Banks Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial gained.
Both the S&P/ASX and All Ordinaries were 0.2 percent higher. ANZ, Commonwealth and NAB advanced while Westpac dropped. BHP Billiton gained after releasing the investigating engineer’s report into the causes of the Samarco dam disaster in Brazil. Fortescue Metals rallied after S&P Global Ratings revised its outlook to stable. Gold miner Newcrest and Evolution Mining jumped as gold prices rebounded from five-week lows. Santos and Woodside Petroleum closed marginally higher after oil prices rose in Asian deals despite lingering concerns about additional output from the Middle East. Ramsay Health Care surged to a record after profit beat estimates.
The Kospi was up 0.4 percent. The Sensex jumped 1.6 percent. While the RBI annual report dashed hopes of further rate cut in the near term, gains in the rupee and data showing resumption of buying by foreign funds on Monday helped to underpin investor sentiment.
Looking forward
Japan posts July industrial production. July retail sales and French consumption of manufactured goods will be released. German August unemployment will be reported. The Eurozone posts August flash harmonized index of consumer prices and July unemployment. India releases second quarter gross domestic product. Canada reports June monthly and second quarter GDP. In the US, August ADP private employment and Chicago PMI along with July pending home sales index and weekly EIA petroleum status report will be released.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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