On 05 October, 2016 – Global stocks mixed

US stocks advanced but Asian and European stocks mostly retreated on fears of an interest rate increase in the US.
United States
US stocks advanced Wednesday. The Dow Jones industrials were up 0.6 percent, the S&P added 0.4 percent and the Nasdaq was 0.5 percent higher. Energy stocks advanced thanks to an increase in crude oil prices after weekly inventories declined sharply last week. Oil prices have risen since the Organization of the Petroleum Exporting Countries (OPEC) tentatively agreed a week ago to cut production. Steel, railroad, networking and biotechnology stocks were higher while commercial real estate retreated.
Several Fed officials strengthened investor expectations that the Bank would increase rates this year. The Federal Reserve Bank of Richmond president, Jeffrey Lacker, said rates needed to be increased to keep inflation under control, echoing the view held by the Cleveland Federal Reserve president, Loretta J. Mester, who said in an interview with Bloomberg that the economy is ripe for an interest rate increase. The Fed is expected by most investors to wait until December to raise rates.
There were numerous economic releases. The ADP private employment report predicted that Friday’s employment report would add only 154,000 jobs, which is below the consensus 170,000 estimate. The August trade deficit widened to $40.7 billion from $39.5 billion in July. Factory orders edged 0.2 percent higher in August after jumping a revised 1.4 percent in July. September ISM nonmanufacturing index rebounded to a reading of 57.1 from 51.4 in August.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$13.90 to US$1,269.40. Copper futures were up 0.1 percent to US$2.17. WTI spot crude was up US$1.02 to US$49.71. Dated Brent spot crude was up 84 US cents to US$51.71. The US dollar was up against the yen and Australian dollar. However, it declined against the pound, Swiss franc and Canadian dollar. The currency was unchanged against the euro. The Dollar Index was virtually unchanged. The yield on US Treasury 30 year bond was up 2 basis points to 2.43 percent while the yield on the 10 year note was up 3 basis points to 1.71 percent.
Europe
Stocks were mostly lower Wednesday as concerns over possible monetary tightening by the European Central Bank dented risk appetite. Disappointing regional data also weighed on markets. The FTSE was down 0.6 percent, the SMI declined 0.4 percent and both the CAC and DAX lost 0.3 percent.
A Bloomberg report released just before markets closed in Europe Tuesday stated that the European Central Bank would probably wind down its $90-billion monthly bond purchases before the scheduled conclusion of its quantitative easing program. The ECB later said the report was erroneous, but investors remained cautious anyhow. The markets pared their early losses in the afternoon.
Air Berlin jumped after the carrier said it would join discussions regarding the transfer of its touristic business to a new airline group to be established by TUI Group and Etihad Aviation Group. Commerzbank slipped on a broker downgrade. In Paris, Orange declined after it received approval to take majority control of Groupama Banque. Air Liquide slipped after it said it has entered into exclusive negotiations to sell its diving-equipment business Aqua Lung to Montagu Private Equity.
SFR tumbled after securities regulator AMF blocked an all-share buyout offer for the French telecoms group by Altice. In London, Tesco jumped after the retailer posted positive sales growth in the first half of 2016 and said it is on track to hit its full-year profit target. SVG Capital shares declined after the investment firm announced a proposed sale of 50 percent of the investment portfolio and a wind-down of the company to maximize returns for shareholders. United Utilities declined on a broker downgrade.
September composite PMIs eased in Germany, Italy and Spain. Eurozone composite PMI slipped to 52.6 from 52.9 in the previous month. Eurozone retail sales declined for the first time in five months in August. Retail sales were 0.1 percent lower on the month. British service sector activity expanded for the second straight month in September, though at a slower pace. The services PMI was 52.6 in September, down from 52.9 in August.
With the value of imports rising by more than the value of exports, the Commerce Department released a report on Wednesday showing that the U.S. trade deficit unexpectedly widened in the month of August. The report said the trade deficit widened to $40.7 billion in August from $39.5 billion in July, while economists had expected the deficit to narrow to $39.0 billion.
Asia Pacific
Asian stocks were mixed Wednesday, as hawkish comments from Federal Reserve officials and speculation that the European Central Bank may start unwinding its quantitative easing program (which was denied) offset gains by energy companies. Crude oil futures extended overnight gains on data showing a surprise U.S. crude stockpile drawdown. The sterling hovered near its 31-year low on concerns about Britain’s exit from the European Union.
The Nikkei was up 0.5 percent and the Topix was 0.6 percent higher. Exporters Panasonic, Canon, Toyota Motor, Honda and Nissan Motor rallied after the yen weakened further against the US dollar on Federal Reserve rate increase expectations. Hitachi jumped after reports that it plans to sell Hitachi Koki and a portion of Hitachi Kokusai Electric. Asahi Group Holdings declined on a Nikkei report that it plans to offer more than ¥500 billion for British brewer SABMiller’s beer operations in five Eastern European countries. Investors shrugged off the Nikkei services PMI report, which showed that Japan’s services sector activity contracted at the fastest pace since April 2014 in September.
Both the S&P/ASX and All Ordinaries were down 0.6 percent after the International Monetary Fund warned that the global recovery remains “weak and precarious”. Economic reports painted a mixed picture, with the country’s services sector contracting for a second consecutive month in September, raising fresh concerns about a broader slowdown in the economy, while Australian retail sales surged in August to hit a seven-month high. Gold miners Newcrest Mining, Evolution, OceanaGold, Northern Star Resources and Saint Barbara slumped after gold prices tumbled overnight to their lowest level since June. Miners Rio Tinto and Fortescue Metals also were lower while banks and energy stocks ended on a mixed note.
The Kospi slipped 0.1 percent while the Sensex was down 0.4 percent on profit taking. Fed interest rate uncertainty and worries over possible monetary tightening by the European Central Bank kept investors’ risk appetite in check. The Shanghai Composite remained closed for the week. The Hang Seng added 0.4 percent.
Looking Forward
Australia releases August merchandise trade balance. Germany posts August manufacturers’ orders. The European Central Bank publishes minutes from its most recent governing council meeting. In the US, weekly jobless claims, money supply and Fed balance sheet will be released.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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