On 17 January, 2017 – Global stocks were mostly lower
Investors focused on PM Teresa May’s speech and the US inauguration on Friday.
United States
Stocks declined Tuesday with the Dow Jones industrials and S&P both losing 0.3 percent and the Nasdaq dropping 0.6 percent. Bank stocks retreated, the US dollar dropped and bond prices were higher.
Reynolds American advanced after British American Tobacco said it would buy the remaining 57.8 percent of the company that it doesn’t already own. British American Tobacco said it will pay $59.64 per share in cash and stock. Utilities gained but they were offset by sharp losses for bank stocks. NRG Energy advanced after an investment firm run by activist investor Paul Singer disclosed an ownership stake in the power company.
Noble Energy rose after it agreed to buy Clayton Williams Energy for $2.7 billion in stock and cash. The deal includes tens of thousands of acres in Texas that are directly adjacent to Noble Energy holdings. Tiffany retreated after the jeweler said revenue during the holiday season was weaker than expected after sales at its flagship store in New York fell 14 percent. It blamed at least part of the drop on “post-election traffic disruptions” due to its proximity to Trump Tower.
Biotech and pharma stocks declined after President-elect Donald Trump said in a Washington Post interview over the weekend that he would target companies over drug pricing and that he was ready to unveil a plan to replace Obamacare.
Morgan Stanley declined even though its profit doubled in the fourth quarter. Morgan Stanley posted its best fourth quarter since the financial crisis, beating expectations as all of its major businesses generated higher revenue. The financial firm’s profit jumped to $1.67 billion or 81 cents per share in a quarter that included a surge of post-election trading activity. That compares with the $908 million or 39 cents per share it reported in the year-earlier period. Revenue grew 17 percent to $9.02 billion from $7.74 billion a year earlier. Goldman Sachs Group and JPMorgan both declined.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$13.05 to US$1,216.05. Copper futures were down 2.6 percent to US$2.62. WTI spot crude was up 12 US cents to US$52.49. Dated Brent spot crude was down 42 US cents to US$55.44. The US dollar was up against the Swiss franc and the Australian dollar. However, it declined against the yen, euro, pound, yuan and the Canadian dollar. The Dollar Index was down 1.2 percent. The yield on US Treasury 30 year bond was down 6 basis points to 2.93 percent while the yield on the 10 year note declined 8 basis points to 2.32 percent.
Europe
Stocks retreated for a second day but trimmed Tuesday’s early losses following the speech by UK Prime Minister Theresa May. The FTSE declined 1.5 percent, the CAC was down 0.5 percent, the DAX slipped 0.1 percent and the SMI was 0.7 percent lower.
Mrs May stated that the UK is set for a ‘hard Brexit’, which implies a complete separation from the European Union. She went on to say that her country will not remain a member of the single market. Further she said that Britain will not seek to “hold on to bits of [EU] membership” and the country also will not seek to adopt models that are enjoyed by other countries. “We seek a new and equal partnership – between an independent, self-governing, Global Britain and our friends and allies in the EU.” Mrs May also said her government will seek a ‘bold and ambitious’ free trade agreement with the EU and would seek to remove all sorts of barriers possible to trade. The days of the UK making vast contributions to the EU will end, she added.
Bank of England Governor Mark Carney said economic growth driven by household consumption would slow in 2017. Households appear to be entirely looking through Brexit-related uncertainties, Carney said at the London School of Economics on Monday. The UK economic expansion increasingly is relying on consumption. However, Carney cautioned that past experience suggests that consumption-led growth tends to be both slower and less durable. The increase in inflation could weigh on spending.
Beiersdorf increased after the company reported that its organic Group sales increased by 3.2 percent in 2016, according to preliminary, unaudited figures. In nominal terms, sales rose by 1.0 percent to €6.75 billion from €6.69 billion. Merck advanced after it announced that as of April 1, Michael Heckmeier, currently Head of the Pigments & Functional Materials business unit, will become Head of the Display Materials business unit within Performance Materials. Zalando sank after its fourth quarter results came in weaker than expected.
Alstom declined after it reported that its sales for third quarter 2016/17 increased 3.0 percent mainly fueled by deliveries of suburban and regional trains in Europe, progress of Riyadh metro system in Saudi Arabia, PRASA project in South Africa and maintenance contract in the United Kingdom. British American Tobacco weakened after the company announced that it has agreed to acquire the 57.8 percent of Reynolds American that it does not already own for $49.4 billion. Intertek Group declined after a broker downgrade. Rolls-Royce climbed after the company has agreed to pay £671 million to settle bribery and corruption charges with UK, US and Brazilian regulators.
Europe’s car registrations climbed for the second straight month in December, the European Automobile Manufacturers Association reported. Total passenger car registrations grew 3.0 percent on the year in December, but slower than previous month’s 5.8 percent growth. German ZEW economic sentiment rose to 16.6 from 13.8 in December. UK inflation reached its highest level in more than two years. The CPI was up 1.6 percent on the year after rising 1.2 percent in November.
Asia Pacific
Asian stock markets were mixed Tuesday. Investors were cautious as they waited for UK Prime Minister Theresa May’s speech on her government’s Brexit plans after markets close and US President-elect Donald Trump’s inauguration Friday.
The S&P/ASX was down 0.9 percent and the All Ordinaries was 0.8 percent lower. Banks including ANZ, Commonwealth, National Australia Bank and Westpac closed lower. Among the major miners, Rio Tinto declined after the company said it shipped iron ore from its Pilbara operations in line with its lowered full-year guidance. BHP Billiton also retreated. Fortescue Metals declined after it named travel group Helloworld’s former chief executive as its new chief finance officer. Gold miners advanced after gold prices rose on safe-haven demand. Newcrest Mining and Evolution Mining gained.
The Nikkei tumbled 1.5 percent and the Topix slid 1.4 percent as the yen strengthened on safe-haven demand and weighed on exporters’ shares. Canon, Panasonic and Sony were lower. Toshiba advanced. Automakers Toyota and Honda declined. The Shanghai Composite rebounded 0.2 percent after declining for five consecutive days while the Hang Seng was up 0.5 percent.
The Kospi was up 0.4 percent. Samsung Electronics rose, rebounding despite its leadership crisis after special prosecutors requested an arrest warrant for the company’s vice chairman and heir-apparent. The Sensex was 0.2 percent lower as investors booked profits after last week’s strong surge.
Looking Forward
The Eurozone posts final harmonized index of consumer prices. The UK releases its labour market report. The Bank of Canada announces its monetary policy and publishes its monetary policy report. The US posts December consumer prices and industrial production. The Federal Reserve publishes its Beige Book in preparation for its FOMC meeting on January 31 and February 1.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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