On 19 January, 2017 – Global stocks lower waiting for the inauguration of the next US President

There were no surprises from the ECB.
United States
US stocks retreated with Treasuries and the US dollar in light trading. Investors listened to the confirmation testimony of Steven Mnuchin who has been nominated to be Treasury Secretary in the new administration. Utilities and financial shares led losses as Treasury yields climbed to the highest level of the year. The Dow Jones industrials and S&P were both down 0.4 percent while the Nasdaq slid 0.3 percent. This was the fifth consecutive decline for the Dow.
Fed Chair Janet Yellen said on Wednesday the US economy was getting closer to running on its own, adding that it made sense to raise interest rates gradually. She will speak on monetary policy at Stanford University at 8:00 PM ET in the US.
CSX jumped 18.3 percent after a source said CP Rail CEO Hunter Harrison, who steps down on January 31, is in advanced talks to team up with a former Pershing Square Capital partner to shake up CSX. Union Pacific advanced after better than expected quarterly net profit. Morgan Stanley, Goldman Sachs Group and Citigroup all retreated.
International Business Machines reported a 1.3 percent decline in quarterly revenue, hurt by a stronger dollar and continued weakness in the company’s traditional hardware division. IBM’s revenue fell to $21.77 billion in the fourth quarter ended December 31 from $22.06 billion a year earlier. The company’s net income rose to $4.50 billion or $4.72 per share from $4.46 billion or $4.59 per share.
American Express quarterly profit fell 8.2 percent as the credit card issuer boosted spending on marketing and promotion to fend off rising competition. Net income attributable to common shareholders fell to $825 million or 88 cents per share in the fourth quarter ended December 31 from $899 million or 89 cents per share a year earlier. Total revenue, net of interest expense, fell to $8.02 billion from $8.39 billion last year.
Initial unemployment claims unexpectedly declined 15,000 in the week ended January 14th to 234,000. After posting a steep drop in new residential construction in November, housing starts rebounded 11.3 percent to an annualized rate of 1.226 million in December. Meanwhile, building permits, an indicator of future housing demand, edged down by 0.2 percent to a rate of 1.210 million. Philadelphia area manufacturing activity unexpectedly grew at a faster pace in January. The Philly Fed said its index for current manufacturing activity in the region rose to 23.6 in January from a revised 19.7 in December.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$18.70 to US$1,196.05. Copper futures were down 0.25 percent to US$2.61. WTI spot crude was up 33 US cents to US$51.41. Dated Brent spot crude was up 27 US cents to US$54.19. The US dollar was up against the yen, yuan and Canadian dollar. It was down against the euro, pound, and the Australian dollar. The currency was virtually unchanged against the Swiss franc. The Dollar Index was down 0.2 percent. The yield on US Treasury 30 year bond was up 4 basis points to 3.04 percent while the yield on the 10 year note was up 5 basis points to 2.47 percent.
Europe
Stocks were mostly lower Thursday. Early losses were pared after the European Central Bank’s monetary policy announcement. Weakness in US markets hampered their recovery attempt however. The FTSE and SMI both lost 0.5 percent and the CAC was down 0.3 percent. The DAX was virtually unchanged (down 2.5 points).
The European Central Bank left its key interest rates unchanged for a seventh consecutive monetary policy meeting and maintained its asset purchases. The Governing Council left the main refi rate at zero percent, the deposit rate at minus 0.40 percent and the marginal lending facility rate at 0.25 percent. In its statement, the governing council said it expects the key ECB interest rates to remain at present or lower levels for an extended period of time and well past the horizon of the net asset purchases. The bank also retained its asset purchases of €80 billion a month to March. It will then continue the purchases at a reduced size of €60 billion a month till December 2017. Regarding inflation, ECB President Mario Draghi said that it is largely being driven by higher energy prices and the recent pick up in momentum is unlikely to be sustained. He said that there are no signs yet of a convincing upward trend in underlying inflation.
Bayer increased after the company reportedly pledged (after meeting with President-elect Donald Trump) that it will maintain Monsanto’s entire US workforce after acquisition of the US agrochemical group. Rhoen-Klinikum declined after it said, on the basis of new internal findings, the company’s board expects significant structural burdens on the results in a range of low to middle two digit millions for fiscal 2017. Rémy Cointreau surged after the company reported sales of €836.7 million in the first nine months of its 2016/17 financial year, with reported growth of 4.7 percent. In organic terms, at constant exchange rates and scope of consolidation, sales climbed 6.0 percent on the back of an impressive third-quarter performance.
Carrefour Group advanced after it reported that total group sales including value added tax or VAT were €23.37 billion, growth of 2.9 percent on a like-for-like basis excluding petrol and calendar. Safran and Zodiac Aerospace announced they have entered into exclusive negotiations for an acquisition of Zodiac Aerospace by Safran. Zodiac soared but Safran tumbled. In London, Royal Mail was down after the company reported that its Group revenue was flat year-over-year for the nine months ended 25 December 2016. Moneysupermarket.com climbed after it announced that it expects full year revenues to grow by 12 percent.
Asia Pacific
Asian stock markets were mixed Thursday. Investor optimism on an upbeat outlook of the US economy by Federal Reserve Chair Janet Yellen later turned to caution prior to President-elect Donald Trump’s inauguration on Friday. The Japanese market rose on a weaker yen.
Both the S&P/ASX and All Ordinaries were up 0.2 percent on optimism about the US economy. Bega Cheese jumped after the company said it has agreed to acquire brands including the iconic spread Vegemite from Mondelez International in a deal valued A$460 million. Miners Rio Tinto, BHP Billiton and Fortescue Metals advanced. Banks including ANZ Banking, National Australia Bank and Westpac declined but Commonwealth Bank edged higher.
Both the Nikkei and Topix were up 0.9 percent thanks to a weaker yen. Upbeat comments from Fed Chair Janet Yellen about the US economy also boosted investor sentiment. Exporters including Sony, Panasonic, Canon Toyota and Honda gained. However, Takata dropped after the Nikkei reported that two potential sponsors for the air-bag maker’s rehabilitation plan have asked for court involvement in the process. Toshiba tumbled after Kyodo reported that it could post a loss of ¥700 billion at its US nuclear reactor business, much bigger than the ¥500 billion loss it had earlier flagged to investors.
The Hang Seng was down 0.2 percent as buyers appeared to step back after Fed Chair Janet Yellen said US interest rate increases made sense and the yuan retreated. The Shanghai Composite was 0.4 percent lower. The Kospi edged up 0.1 percent. The Sensex added 0.2 percent.
Looking Forward
China releases fourth quarter gross domestic product and December industrial production and retail sales. The UK reports December retail sales. Canada releases December consumer prices and November retail sales. Donald Trump is sworn in as President of the US.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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