With little new economic news, investors focused on earnings.
United States
Trading was lackluster Friday with earnings in the focus. The Dow Jones industrials slipped 0.1 percent and the S&P was virtually unchanged (down 0.18 point). However, the Nasdaq was 0.3 percent higher. For the week, the Dow was virtually unchanged (up 7.33 points), the S&P added 0.4 percent and the Nasdaq advanced 0.8 percent.
The Nasdaq benefited from a strong gain by Microsoft. The advance followed the release of the company’s first quarter results — both adjusted earnings per share and revenues exceeded forecasts, helped by a strong performance by its Cloud business. PayPal gained after reporting third quarter earnings that matched estimates and a growing number of active accounts. McDonald’s moved higher after it reported third quarter earnings and sales that beat estimates. Global same-store sales rose 3.5 percent during the quarter.
General Electric closed modestly lower after the conglomerate reported third quarter earnings that beat estimates but on lower than expected revenues. GE also lowered its full-year revenue growth forecast. Reynolds American jumped after British American Tobacco offered to acquire the 58 percent stake in the company it does not already own for $47 billion. Johnson & Johnson and Merck were both down and among the biggest drags on the healthcare sector. Schlumberger retreated after releasing its quarterly results. AT&T declined on news the wireless carrier was in advanced talks to buy Time Warner. Time Warner’s stock surged. Verizon was also lower.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$5.60 to US$1,266.05. Copper futures were down 0.4 percent to US$2.09. WTI spot crude was up 22 US cents to US$50.85. Dated Brent spot crude was up 40 US cents to US$51.78. The US dollar was up against the euro, pound, Swiss franc and the Canadian and Australian dollars. However, it declined against the yen. The Dollar Index was up 0.4 percent. The yields on both the US Treasury 30 year bond and the 10 year note slipped 2 basis points to 2.48 percent and 1.73 percent respectively.
Europe
Stocks were mixed in choppy trading Friday. The indices fluctuated between small gains and losses over the course of the trading session. The euro weakened against the US dollar after ECB President Mario Draghi’s dovish comments in his post governing council meeting press conference. The strength of the US dollar negatively affected commodity prices, which in turn weighed on resource stocks. The FTSE and CAC slipped 0.1 percent while the DAX inched up 0.1 percent. The SMI lost 0.4 percent. On the week, The FTSE was 0.1 percent higher, the CAC was up 1.5 percent, the DAX gained 1.2 percent but the SMI was down 0.7 percent.
Longer term expectations for Eurozone inflation were broadly unchanged, while growth and unemployment projections were lowered in the quarterly ECB Survey of Professional Forecasters. Average longer-term inflation expectations for 2021 remained at 1.8 percent, unchanged from the previous survey.
SAP jumped after the company raised its full-year guidance despite reporting lower profit in its third quarter because of higher stock based compensation expenses. Daimler dropped after the luxury car maker lowered its forecasts for 2016. In Paris, Valeo advanced after it raised its full-year 2016 operating margin target to about 8 percent after reporting 16 percent growth in its sales for the third quarter. Essilor retreated after its revenue declined by 2.3 percent in the nine months to September 30 due to currency fluctuations.
In London, British American Tobacco was down after it offered to pay $47 billion to take full control of Reynolds American. Royal Mail was lower on a Bloomberg report that it is seeking buyers for its private equity portfolio. Burberry rose on reports of a possible merger with US company Coach. Ericsson dropped in Stockholm. The company reported its first loss in almost four years, hurt by weaker demand for mobile broadband.
Asia Pacific
Stocks were mostly lower Friday — oil extended overnight losses and the US dollar gained on expectations of a US interest rate rise. Investors here were disappointed that the ECB left its monetary policy unchanged and left the door open for more stimulus if needed, but did not discuss an extension of its monthly €80 billion bond buying program. The US dollar hovered near a seven month high against a basket of currencies after the ECB left is policy mix unchanged and Fed voting member William Dudley reiterated that a rate increase could happen by the end of 2016. The Hang Seng was closed due to a typhoon warning. The index was up 0.6 percent on the week.
The Shanghai Composite added 0.2 percent, led by gains in infrastructure-related stocks, after China’s finance ministry issued rules for the management of government funds used in private-public partnership projects. The yuan hit a fresh six-year low after ECB President Mario Draghi signaled that quantitative easing won’t come to an “abrupt” end. On the week, the Shanghai Composite was up 0.9 percent.
The Nikkei and Topix were 0.3 percent and 0.4 percent higher respectively. The Nikkei was up 1.9 percent and the Topix was up 1.3 percent on the week. Nintendo declined after unveiling its ambitious Switch device. Nissan Motor advanced after it completed takeover of Mitsubishi Motors. Shares of Mitsubishi Motors jumped. Showa Denko rallied following an acquisition announcement.
Both the S&P/ASX and All Ordinaries lost 0.2 percent Friday and slipped 0.1 percent on the week. Healthscope sank after a profit warning. CSL and Ramsay Health Care also tumbled. Gold miners Newcrest, Northern Star and Evolution retreated as gold succumbed to selling on US dollar strength after three days of gains. Woodside Petroleum, Origin Energy and Oil Search were lower after oil prices fell more than 2 percent overnight on a stronger dollar. Banks Commonwealth, ANZ and Westpac advanced.
The Kospi retreated 0.4 percent but was 0.5 percent higher on the week. Samsung once again succumbed to selling pressure on renewed worries over its Galaxy Note 7 smartphones. The Sensex was 0.2 percent lower Friday up 1.5 percent higher on the week.
Looking Forward
The following indicators will be released this week…

Europe

October 24

Eurozone

Manufacturing, Services & Composite PMI (October flash)

Germany

Manufacturing, Services & Composite PMI (October flash)

France

Manufacturing, Services & Composite PMI (October flash)

October 25

Germany

Ifo Business Survey (October)

October 27

Eurozone

M3 Money Supply (September)

UK

Gross Domestic Product (Q3.2016 preliminary)

October 28

Eurozone

EC Consumer & Business Sentiment (October)

France

Gross Domestic Product (Q3.2016 flash)

Consumption of Manufactured Goods (September)

Spain

Gross Domestic Product (Q3.2016 preliminary)

Asia/Pacific

October 24

Japan

Merchandise Trade Balance (September)

Manufacturing PMI (October flash)

October 26

Australia

Consumer Price Index (Q3.2016)

October 28

Japan

Consumer Price Index (September)

Unemployment Rate (September)

Household Spending (September)

Australia

Producer Price Index (Q3.2016)

Americas

October 24

United States

Manufacturing PMI (October flash)

October 25

United States

Consumer Confidence (October)

October 26

United States

Services PMI (October flash)

New Home Sales (September)

October 27
United States

Initial Unemployment Claims (week ending prior Saturday)

Durable Goods Orders (September)

October 28

United States

Gross Domestic Product (Q3.2016 preliminary)

Consumer Sentiment (October final)

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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