On 15 December, 2016 – US dollar rises and commodities retreat

Stocks in Europe and the US rally but shares in Asia down.
United States
US stocks rebounded from Wednesday’s losses — the indices had retreated in the immediate aftermath of Wednesday afternoon’s monetary policy announcement and Chair Janet Yellen’s press conference. The Dow Jones industrials were up 0.3 percent and the S&P and Nasdaq both gained 0.4 percent.
November consumer prices were up 0.2 percent and 1.7 percent from a year ago while core CPI which excludes food and energy also added a monthly 0.2 percent and was up 2.1 percent from a year ago. The Fed’s inflation target is 2 percent. The three manufacturing surveys for December — the Philadelphia Fed, Empire State and flash PMI — all indicated a strengthening in the sector.
Yahoo tumbled after the company disclosed a massive data breach that raised fears Verizon might not buy its core internet business. Verizon was up. Oracle declined after the company reported earnings and revenue in line with expectations. Oracle reported net income of $2 billion or 48 cents per share with profit increasing to $2.7 billion or 61 cents per share, after adjusting for stock-based compensation and acquisition expenses. Financial shares were among the biggest beneficiaries with American Express, Goldman Sachs Group and J.P. Morgan Chase all rising on the day. Airline, biotechnology, and semiconductor stocks turned in some of the market’s best performances on the day, while considerable weakness was visible among gold stocks.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$35.30 to US$1,126.95. Copper futures were down 0.1 percent to US$2.60. WTI spot crude was up 2 US cents to US$51.06. Dated Brent spot crude was up 29 US cents to US$54.19. The US dollar was up against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was up 0.9 percent. The yield on US Treasury 30 year bond was down 3 basis points to 3.16 percent while the yield on the 10 year note was up 2 basis points to 2.60 percent.
Europe
Stock markets advanced Thursday after announcements from the Bank of England and the Swiss National Bank. Banks were among the strongest performing stocks after yesterday’s decision by the Federal Reserve to increase its fed funds rates by 25 basis points. The FTSE was up 0.7 percent, the CAC gained 1.0 percent, the DAX advanced 1.1 percent and the SMI added 0.9 percent.
The Bank of England left its bank rate at 0.25 percent, its asset purchase program at £435 billion and its corporate bond purchases at £10 billion. The decision was unanimous. The Norges Bank also left its benchmark rate at 0.50 percent.
The Swiss National Bank kept its expansionary monetary policy unchanged but cautioned about a ‘multitude’ of political risks to the global economy. The interest rate on sight deposits at the SNB was kept unchanged at minus 0.75 percent and the target range for the three-month Libor was retained between minus 1.25 percent and minus 0.25 percent. The SNB reiterated that the Swiss franc is ‘still significantly overvalued’ and vowed to remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.
Deutsche Börse and the London Stock Exchanged advanced. Both confirmed that they have received a Statement of Objections from the European Commission in relation to the proposed merger. Deutsche Bank and Commerzbank climbed. In London, Royal Bank of Scotland, Barclays, Lloyds Banking Group, Standard Chartered and HSBC were higher. In Paris, BNP Paribas, Société Générale and Crédit Agricole advanced.
Vivendi gained after it announced that it has increased its stake in Mediaset to 20 percent. Mediaset dropped 1 in Milan. EDF tumbled after it issued a warning for the full year 2017. Centrica was higher after the company said it continues to make good progress against its strategic priorities and now expects to exceed the 2016 targets originally set out at its 2015 Preliminary Results. Bunzl gained after the company announced that it expects full year revenue growth between 4 percent and 5 percent at constant exchange rates.
Mining and resource stocks tumbled thanks to sliding commodity prices. Wednesday’s decision from the Federal Reserve sparked a jump in the value of the U.S. dollar, which has pressured commodity prices. Miners Randgold Resources, Fresnillo, Antofagasta, Anglo American, BHP Billiton, Glencore and Rio Tinto declined.
Asia Pacific
Stocks in the Asia Pacific were mostly lower Thursday after the Federal Reserve, as widely anticipated increased its fed funds rate by 25 basis points. The FOMC also hinted that it was likely that there were be three likely rate increases in 2017, up from two that had previously been suggested.
Bucking the trend were Japanese markets — they were higher thanks to a weaker yen after the Fed’s move. The Nikkei edged up 0.1 percent and the Topix added 0.3 percent. Automakers including Toyota Motor, Suzuki Motor and Honda Motor gained.
The Shanghai Composite lost 0.7 percent while the Hang Seng tumbled 1.8 percent. The Hong Kong dollar is pegged to its US counterpart, which means Hong Kong rates rise at the same time as those in the US. Higher rates make Hong Kong mortgages more expensive, deterring home sales. On Thursday, the Hong Kong Monetary Authority raised its base rate by 0.25 percentage point to 1.0 percent, matching the overnight interest-rate increase by the Fed. The Hang Seng Property Index slumped, making it the worst performer among the Hang Seng’s main subindexes. Property majors Wharf (Holdings) and New World Development retreated.
The S&P/ASX and All Ordinaries both retreated 0.8 percent following six consecutive days of gains after the Federal Reserve increased interest rates and crude prices tumbled. BHP Billiton, Rio Tinto and Fortescue Metals declined. Gold miner Newcrest Mining and Evolution Mining also were lower. Among oil stocks, Woodside Petroleum, Oil Search and Santos were down.
The Kospi was virtually unchanged (down 0.22 point). The Bank of Korea’s monetary policy board kept its interest rate unchanged at a record low of 1.25 percent for the sixth straight month. The Sensex was down 0.3 percent after the Federal Reserve’s action. Higher US interest rates could result in US dollar outflows from emerging markets towards the US.
Looking Forward
Eurozone reports final November harmonized index of consumer prices. In the US, November housing starts will be released.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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