On 18 October, 2016 – Global stocks rebound from Monday’s losses
Strong earnings reports sent shares higher on Tuesday.
United States
US stock indices advanced Tuesday, partly offsetting the weakness incurred over the past few days. The Dow Jones industrials were up 0.4 percent, the S&P added 0.6 percent and the Nasdaq was 0.8 percent higher. A positive reaction to some of the latest corporate results also generated buying interest as the earnings season continues to pick up steam.
Netflix moved sharply higher on the day after the company reported better than expected third quarter results amid strong subscriber growth. Netflix also provided upbeat guidance. UnitedHealth also posted a standout gain after reporting better than expected third quarter earnings and revenues and raising its full-year guidance. IBM and Johnson & Johnson were lower even though the companies reported third quarter results that exceeded estimates.
Yahoo reported a 6.5 percent rise in quarterly revenue. Yahoo’s revenue rose to $1.31 billion in the third quarter ended September 30 from $1.23 billion a year earlier. After deducting fees paid to partner websites, revenue fell to $857.7 million from $1 billion. Net income attributable to Yahoo rose to $162.8 million or 17 cents per share from $76.3 million or 8 cents per share a year earlier.
Intel’s quarterly revenue increased 9.1 percent, helped by improving PC demand and growth in its data center and cloud businesses. The company said that net income rose to $3.38 billion or 69 cents per share in the third quarter ended October 1 from $3.11 billion, or 64 cents per share a year earlier. The company’s net revenue rose to $15.79 billion from $14.47 billion.
Goldman Sachs Group’s quarterly earnings jumped 47 percent. Profit climbed to $2.09 billion or $4.88 a share up from $1.43 billion or $2.90 a share a year earlier. Revenue grew to $8.17 billion from $6.86 billion a year earlier. Trading revenue increased 17 percent, driven largely by a 34 percent increase in revenue from fixed income, currency and commodities trading.
Domino’s Pizza said share buybacks and a greater flow of customers helped deliver a large quarterly profit jump, despite intense competition. Sales at domestic franchise units open at least one year were up 12.9 percent for the third quarter ended September 11. Foreign same-store sales rose by 6.6 percent.
September consumer price index was up 0.3 percent on the month and 1.5 percent from a year ago. Core CPI excluding food and energy edged up 0.1 percent and 2.2 percent on the year.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$3.40 to US$1,258.20. Copper futures were down 0.1 percent to US$2.10. WTI spot crude was up 46 US cents to US$50.40. Dated Brent spot crude was up 28 US cents to US$51.80. The US dollar was up against the euro and Swiss franc. The currency retreated against the pound and the Canadian and Australian dollars. However, it was unchanged against the yen. The Dollar Index was unchanged on the day. The yields on both the US Treasury 30 year bond and 10 year note were down 1 basis point to 2.51 percent and 1.75 percent respectively.
Europe
Stocks rebounded from Monday’s losses with basic resources, including energy and mining stocks, turning in a strong performance as commodity prices rebounded. A weakening of the U.S. dollar drove commodity prices higher, with crude oil prices rising back above $50 a barrel. Positive earnings reports also helped. The FTSE was up 0.8 percent, the CAC gained 1.3 percent, the DAX advanced 1.2 percent and the SMI added 0.9 percent.
Positive earnings from companies like Hays, Bellway and Rémy Cointreau also contributed to the positive mood among investors. However, weak results from Burberry disappointed.
Continental tumbled 1 after the tire maker cut its earnings outlook for fiscal 2016 citing antitrust and warranty provisions. Commerzbank and Deutsche Bank advanced along with Société Générale, BNP Paribas and Crédit Agricole. Both RWE and E.ON were higher on the day. In Paris, Rémy Cointreau gained after the company reported a 2.5 percent rise in first-half sales thanks to improved cognac sales in China and robust demand for its premium cognac in the United States. Burberry Group tumbled after reporting a decline in underlying first-half revenue. Pearson also retreated.
AstraZeneca advanced after the company said that the US FDA has accepted a complete re-submission of a new drug application for sodium zirconium cyclosilicate (ZS-9). Hays increased after the company reported growth in net fee income for the first quarter of fiscal 2017, led by strong performance in its international businesses. Bookmaker William Hill slipped after it ended talks of a possible merger with Canadian online poker giant Amaya. Homebuilder Bellway gained after reporting a jump in full-year profit and raising its dividend. Ryanair Holdings climbed in London despite lowering its profit outlook. easyJet was also higher.
UK September consumer price index climbed 1.0 percent from a year ago. The rate was the highest since November 2014, when it was also 1.0 percent. September output prices climbed 1.2 percent on the year while input prices jumped 7.2 percent.
Asia Pacific
Asian stock indices climbed higher Tuesday as oil prices inched higher and mixed US economic data helped ease worries about a possible rate increase by the Federal Reserve in November. Financials and commodity-related stocks advanced even though underlying sentiment remained somewhat cautious prior to the release of key Chinese data Wednesday and the European Central Bank meeting on Thursday.
The Nikkei was up 0.4 percent and the Topix gained 0.3 percent before the beginning of earnings season later this week. Mitsui Engineering & Shipbuilding, Mitsui Fudosan, Nippon Paper Industries, Mitsubishi Chemical, Olympus, Nippon Suisan Kaisha and Mitsui Chemicals climbed. Exporters closed mostly higher despite a firmer yen.
Both the S&P/ASX and All Ordinaries added 0.4 percent. The increase was led by miners and financials as a weaker US dollar supported commodity prices and the Reserve Bank of Australia’s minutes of its recent monetary policy meeting offered no surprises. Miners BHP Billiton and Fortescue Metals Group advanced along with energy stocks including Woodside Petroleum, Origin Energy, Oil Search and Santos. The big four banks advanced. Woolworths was higher after Caltex Australia confirmed it has made a bid to buy the former’s fuel business. Caltex shares retreated. Crown Resorts closed higher after falling on Monday.
The Shanghai Composite added 12.4 percent while the Hang Seng was 1.5 percent higher. The Kospi added 0.6 percent. The Sensex jumped 1.9 percent after falling sharply to hit a three-month low in the previous session.
Looking Forward
China releases third quarter gross domestic product and September retails sales and industrial production. The UK reports on the September labour market. In the US, September housing starts will be released. The Federal Reserve publishes the Beige Book in preparation for its FOMC meeting on November 1 and 2. The Bank of Canada announces its monetary policy decision and publishes its Monetary Policy Report.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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