On 18 November, 2016 – FedSpeak leans toward a December rate increase
Stocks were mixed both on Friday and for the week.
United States
Stocks faded Friday as investors paused after some large moves since last week’s presidential election. Drug makers and other health care companies were the largest losers. The Dow Jones industrials, S&P and Nasdaq were all 0.2 percent lower Friday. On the week however, the Dow edged up 0.1 percent, the S&P gained 0.8 percent and the Nasdaq added 1.6 percent.
Amgen, Gilead Sciences and Merck retreated. Procter & Gamble and Walgreens Boots Alliance slumped. Investors approved the combination of the electric carmaker Tesla Motors and the solar power company SolarCity. Both companies declined. Abercrombie & Fitch was lower after it reported weak sales and a smaller profit than expected. Gap tumbled after it said fewer people were visiting stores heading into the holiday season. It said shoppers were not buying as many clothes and were moving toward discount chains. Shares of the discount retailer Ross Stores advanced after the company posted a better-than-expected profit and sales. Salesforce.com gained after a solid quarterly report and strong guidance. Marvell Technology was higher after it disclosed much stronger sales than expected and gave a surprising forecast for the current quarter.
St. Louis Fed President James Bullard said Friday he was leaning toward supporting a December interest rate increase and that the real question would be the Fed’s rate path in 2017. Kansas City Fed President Esther George said that while she supports raising rates, the US central bank must do so only gradually.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$15.75 to US$1,211.00. Copper futures were down 1.0 percent to US$2.48. WTI spot crude was up 27 US cents to US$45.69. Dated Brent spot crude was up 37 US cents to US$46.86. The US dollar was up against the yen, euro, pound, Swiss franc, yuan and the Australian dollar. However, it was unchanged against the Canadian dollar. The Dollar Index was up 0.45 percent. The yield on US Treasury 30 year bond was up 3 basis points to 3.03 percent while the yield on the 10 year note was up 7 basis points to 2.35 percent.
Europe
Most stock indices retreated Friday. The continued strength of the US dollar drove commodity prices lower as the week ended. Mining and resource stocks were under pressure along with energy stocks. Banks also declined following their recent rally. Global economic data was on the light side Friday and there was also very little corporate news to drive trading. The FTSE slipped 0.3 percent, the CAC declined 0.5 percent, the DAX was down 0.2 percent and the SMI was 0.8 percent lower. For the week, the results were mixed. The FTSE was up 0.7 percent, the CAC gained 0.3 percent and the SMI was 0.3 percent higher. The DAX was virtually unchanged.
ECB president Mario Draghi said Friday that despite the many encouraging trends in the euro area economy, the recovery remains highly reliant on easy financing conditions. “The ECB will continue to act, as warranted, by using all the instruments available within our mandate to secure a sustained convergence of inflation towards a level below, but close to 2 percent,” he said at the European Banking Congress in Frankfurt.
Volkswagen retreated after the automaker and its labor unions agreed to a turnaround plan to save billions of dollars for the company. BMW, Renault and Peugeot advanced. Airbus was lower after Japanese firm Peach Aviation ordered 13 commercial aircraft from the company. In London, Rio Tinto declined after the government of Guinea called on the firm to explain what it had found in an internal investigation that led to the firing of two senior executives. Mining stocks were under pressure due to falling precious metal prices. Fresnillo, Randgold Resources, Antofagasta and Anglo American were lower along with Polymetal International and Glencore. LafargeHolcim dropped in Zurich after cutting its mid-term profit outlook.
Asia Pacific
Stocks were mixed Friday, however some indices recouped losses to close higher on the day. Concerns that emerging markets will face capital outflows continued to haunt investors. With bond yields rising in developing economies and the dollar gaining ground on signs of economic progress and amid expectations for higher inflation and interest rates in the US, the outlook for emerging market assets seems to be far more uncertain now.
The Shanghai Composite was down 0.5 percent while the Hang Seng index was 0.4 percent higher. On the week, the former slipped 0.1 percent and the latter was down 0.8 percent. China house price growth slowed in October as local governments took measures to tighten property market. Compared to September, house prices increased in 62 cities out of 70 in October. In September, prices had increased in 63 cities.
The Nikkei and Topix were up 0.6 percent and 0.4 percent respectively as the yen continued to weaken against the US dollar. On the week, the Nikkei added 3.4 percent and the Topix was 3.6 percent higher. Mazda Motor, Suzuki Motor and Mitsumi Electric rallied.
The S&P/ASX and All Ordinaries were 0.4 percent and 0.3 percent higher respectively. The four big banks and along with investment bank Macquarie Group advanced. Telstra Corp gained after flagging better returns for shareholders. The S&P/ASX was down 0.2 percent on the week while the All Ordinaries lost 0.4 percent.
The Kospi was down 0.3 percent Friday and 0.5 percent on the week. The Sensex was down 0.3 percent on the day and 2.5 percent on the week.
Looking Forward
The following indicators will be released this week…
Europe
Nov 22
Eurozone
EC Consumer Sentiment (November flash)
Nov 23
Eurozone
Manufacturing , Services & Composite PMI (November flash)
France
Manufacturing , Services & Composite PMI (November flash)
Germany
Manufacturing , Services & Composite PMI (November flash)
Nov 24
Germany
Gross Domestic Product (Q3.2016 final)
Ifo Survey (November)
Nov 25
UK
Gross Domestic Product (Q3.2016 second estimate)
Asia Pacific
Nov 21
Japan
Merchandise Trade Balance (October)
Nov 24
Japan
Manufacturing PMI (November flash)
Nov 25
Japan
Consumer Price Index (October)
Americas
Nov 22
Canada
Retail Sales (September)
United States
Existing Home Sales (October)
Nov 23
United States
Initial Unemployment Claims (week ending prior Saturday)
Durable Goods Orders (October)
Manufacturing PMI (November flash)
Consumer Sentiment (November final)
New Home Sales (October)
Nov 25
United States
International Trade in Goods (October)
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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