On 26 October, 2016 – Global stock indices mostly lower
A combination of mixed earnings reports and lower oil prices sink shares.
United States
US stocks were mixed with the Dow Jones industrials ending in positive territory thanks to Boeing while the S&P and Nasdaq slumped thanks primarily to Apple. The Dow was up 0.2 percent while the S&P and Nasdaq retreated 0.2 percent and 0.6 percent respectively. Apple was the major drag on all three indices and ended lower on the day. Boeing shares were trading at their highest level this year after the world’s largest plane maker reported a jump in quarterly profit despite slower sales. The stock gave the biggest boost to the S&P and the Dow.
Financial companies continued to report strong third-quarter results. Chubb advanced along with Huntington Bancshares and KeyCorp. Banks also received a lift from higher bond yields, which are linked to higher interest rates and bigger profits on loans. Simon Property Group, which owns shopping malls and other real estate, reported strong earnings. But analysts are worried about its performance, including lower income from stores that have been open more than a year. Its stock initially declined but then advanced. Boston Properties declined — investors were disappointed by the company’s forecasts. Edwards Lifesciences tumbled after it reported disappointing sales of heart devices and forecast another shortfall in the current quarter.
Mondelez, the maker of Oreo cookies, Cadbury chocolate and Trident gum, advanced after the company reported a bigger profit than expected. Coca-Cola edged higher after it announced a slightly larger profit and better sales than expected. Chipotle Mexican Grill tumbled after the restaurant chain operator reported a bigger-than-expected drop in quarterly sales at established restaurants. Southwest Airlines was down after it forecast weak revenue for the rest of the year. Ticket prices have been falling for two years and Southwest said prices were still “soft” while its spending grew. American Airlines and United also were lower.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$1.10 to US$1,270.50. Copper futures were up 0.1 percent to US$2.14. WTI spot crude was down 83 US cents to US$49.13. Dated Brent spot crude was down 95 US cents to US$49.84. The US dollar was up against the yen and the Canadian. It was down against the euro, pound, Swiss franc and yuan. It was unchanged against the Australian dollar. The Dollar Index was down 0.1 percent. The yields on both the US Treasury 30 year bond and 10 year note were up 4 basis points to 2.54 and 1.79 percent respectively.
Europe
Stocks were mixed Wednesday thanks to weak commodity prices and mixed corporate earnings results. The FTSE was down 0.8 percent, the CAC slipped 0.1 percent, the DAX retreated 0.4 percent and the SMI was 0.5 percent lower.
Energy stocks were down for most of the day after crude oil prices dropped below $50 a barrel in early trading. However, they pared their losses before the close after the US EIA report showed an unexpected draw down in crude inventories. Mining and resource stocks also were weaker because of lower precious metal prices.
The planned summit to sign the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada is still possible on Thursday according to European Council President Donald Tusk. His comments came as Belgian lawmakers began a second day of talks on the deal that took about seven years of negotiations to formulate. Three deadlines to sign the pact have now passed. Belgium cannot approve the deal without the consent from all of its seven federal, regional and linguistic communities. French-speaking Wallonia is posing the deal. But the rest of the EU, which are 27 countries, is willing to sign.
Bayer declined despite posting solid third-quarter results. Airbus climbed despite reporting a 21 percent drop in third-quarter earnings due to weakness in its commercial plane business. Kering advanced after the luxury goods maker reported a 10 percent increase in third-quarter sales. Cap Gemini sank despite confirming its 2016 guidance. In London, Antofagasta, Anglo American, Glencore and BHP Billiton declined. Royal Dutch Shell, BP and Tullow Oil retreated.
Lloyds Banking Group was higher after it said it has set aside a further £1 billion to compensate customers who were wrongly sold loan insurance. Royal Bank of Scotland Group finished higher after Clydesdale made a preliminary non-binding proposal to snap up its Williams & Glyn operations. Logitech surged in Zurich after reporting a rise in second quarter retail revenue. Banco Santander gained in Madrid after its third-quarter net profit topped forecasts. Whitbread declined on broker downgrades.
Asia Pacific
Asian stocks were mostly lower Wednesday as oil prices retreated and an unexpected increase in Australian inflation weakened the case for a surprise November rate cut from the Reserve Bank of Australia. A slew of disappointing earnings results from the US and worries over yuan depreciation also kept investors on edge.
The Shanghai Composite was down 0.5 percent while the Hang Seng lost 1.0 percent. A private survey said that China’s consumer sentiment hit a six-month high in October as consumers seem inclined to spend more on appliances, technology products and phones.
The Nikkei and Topix were up 0.2 percent and 0.4 percent respectively as the yen remained at a three-month low against the US dollar and a survey showed Japan’s small business confidence strengthened for the second consecutive month in October. Daiichi Sankyo, Sumitomo Metal Mining, Sumitomo Realty, Nissan Chemical Industries, Mitsubishi Chemical, Mitsui Fudosan, Mitsui Chemicals and Mitsubishi Materials climbed, Alps Electric, Fujitsu, Asahi Group, Komatsu and Mitsubishi Motors declined.
Both the S&P/ASX and All Ordinaries dropped 1.5 percent. Oil prices declined while third quarter consumer prices was up 1.3 percent from a year ago after increasing 1.0 percent in the second quarter. The gain was attributed to a surge in fruit and vegetable prices. Wesfarmers’ disappointing quarterly sales also dented investor sentiment. Commonwealth Bank of Australia, Westpac Banking, Australia and New Zealand Banking Group and National Australia Bank all retreated.
The Kospi was 1.1 percent lower. The Sensex tumbled 0.9 percent with financials under heavy selling pressure after Axis Bank posted weak quarterly results due to higher provisioning for bad loans. Weak global cues also dented investor sentiment.
Looking Forward
The Eurozone posts M3 money supply. The UK reports its first estimate of third quarter gross domestic product. In the US, September durable goods orders and pending home sales index along with 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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