On 07 February, 2017 – Global stocks falter
Shares in Asia and Europe retreat but US stocks edge upward.
United States
Stocks were slightly higher Tuesday after drifting between small gains and losses throughout the trading day. Investors continued to focus on the latest company earnings and outlooks. Energy companies were down following a slide in crude oil prices. Consumer-focused companies gained. The Dow Jones industrials and Nasdaq added 0.2 percent while the S&P was virtually unchanged (up 0.52 point).
Among the energy companies, Chevron, Murphy Oil, Chesapeake Energy and Newfield Exploration declined. Energy has been the worst-performing sector in the market over the last month. Emerson Electric was up after the manufacturer reported a higher-than-expected profit. General Motors declined after the automaker said that fourth-quarter net income fell partly on the strength of the US dollar against the British pound and forecast flat 2017 profit per share.
Centene climbed after the health insurer’s latest quarterly snapshot exceeded expectations. Michael Kors tumbled after the luxury retailer reported lower fiscal third-quarter earnings and sales. The company also gave weak guidance for the current quarter and cut its estimates for the year. Sabre tumbled after the travel industry technology provider issued a forecast for 2017 that fell short of estimates. The company noted that increased investments in IT and other parts of its business will cut into its bottom line. Intercontinental Exchange shares gained after the exchange operator reported that revenue climbed more than expected in the fourth quarter supported by a rise in trading fees.
Walt Disney’s quarterly revenue fell 3 percent, hurt by a drop in advertising revenue at ESPN and a lack of hit movie releases compared with a year earlier. Disney’s revenue decreased to $14.78 billion in the first quarter ended December 31 from $15.24 billion a year earlier. Net income attributable to Disney dropped to $2.48 billion or $1.55 per share from $2.88 billion or $1.73 per share a year earlier.
The December international trade deficit narrowed to $44.3 billion from a revised $45.7 billion in November. Later in the day, a report from the Federal Reserve showed that consumer credit increased by less than expected in December.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$4.25 to US$1,231.00. Copper futures were down 0.7 percent to US$2.63. WTI spot crude was down 77 US cents to US$52.24. Dated Brent spot crude was down 57 US cents to US$55.15. The US dollar was up against the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. However, it declined against the pound. The Dollar Index was up 0.4 percent. The yield on US Treasury 30 year bond was down 4 basis points to 3.02 percent while the yield on the 10 year note slipped 3 basis points to 2.39 percent.
Europe
Stocks were mixed Tuesday. Political concerns were largely responsible for today’s cautious trade, but mixed corporate financial results and disappointing German economic data also helped to depress investors. Investors were focused on the forthcoming elections in Europe and at the same time looking for more clarity on US President Donald Trump’s policies with respect to bilateral trade, immigration and foreign affairs. Dutch, French and German elections are due in March, April and September, respectively. The FTSE was up 0.2 percent, the DAX gained 0.3 percent and the SMI was 0.5 percent higher.
According to the IMF, Greece’s economy will expand just below 1 percent in the long term and the government could attain the primary fiscal surplus target of around 1.5 percent of GDP. The report revealed a rare split in the 24-member Executive Board as directors were divided over the assessment of Greece’s fiscal performance and debt sustainability, and the country’s need for further bailout.
Munich Re declined after reporting a drop in profit in the last quarter of 2016. In Paris, BNP Paribas was lower after the lender posted lower than expected net profit in its fourth quarter after a €127 million write-down on its Polish business and restructuring costs. In London, homebuilder Bellway advanced after delivering strong first-half results. Barratt Developments and Taylor Wimpey also advanced.
BP retreated after reporting a drop in its fourth-quarter underlying profit. Fiat Chrysler finished lower in Milan after French investigators referred the probe over emissions test-cheating scandal to prosecutors. Chipmaker AMS soared in Zurich after the supplier to Apple and other consumer electronics and automotive products makers said it expects revenue and profits to expand at a fast pace over the next three years. Pearson, which suffered its worst-ever daily drop on January 18, advanced on a broker upgrade.
Germany’s industrial production dropped 3.0 percent in December and was down 0.6 percent from the same month a year ago. This was the biggest decline since January 2009, when output decreased 6.9 percent. France’s trade deficit narrowed in December as exports were boosted by Airbus deliveries that were twice the usual rate. UK house prices according to Halifax were down 0.9 percent in January — the first drop since August and followed December’s 1.6 percent increase.
Asia Pacific
Shares were mostly lower as economic and political uncertainty gripped global markets. Given the worries about the political landscape in Europe and lingering uncertainty surrounding Donald Trump’s fiscal and trade policies, investors were apprehensive about holding riskier assets. Safe-haven assets such as the Japanese yen and gold gained ground as risk appetite waned.
The Shanghai Composite slipped 0.1 percent as the People’s Bank of China refrained from adding cash into the system for a third straight session, underlining its tightening bias to deflate potential credit bubbles. The Hang Seng also lost 0.1 percent. China’s foreign exchange reserves fell by a larger-than-expected $12.3 billion in January, taking the stockpile to below $3 trillion.
Both the Nikkei and Topix were down 0.3 percent as the yen strengthened and caution prior to the meeting between Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump at the end of the week. Toyota Motor declined after reporting a drop in quarterly operating profit.
Both the S&P/ASX and All Ordinaries advanced 0.1 percent after the Reserve Bank of Australia left its key interest rate at 1.5 percent where it has been since August 2016. Miners including Fortescue Metals Group, Evolution, Regis, Northern Star and Newcrest climbed. The big four banks however, declined. Investment bank Macquarie Group was down after saying that full-year profit will be broadly in line with that of last financial year.
The Kospi slipped 0.1 percent as investors continue to be concerned about Trump’s anti-immigration and protectionism measures. The Sensex lost 0.4 percent, down from four-month highs hit on Monday. Investors were cautious prior to the Reserve Bank of India’s monetary policy announcement on Wednesday.
In mainland trading, the Shanghai Composite Index slipped 0.1% and the Shenzhen Composite Index was little changed from Monday’s closing levels. The onshore yuan slid 0.3% to 6.8829, while the currency traded offshore in Hong Kong slid more than 0.5% to 6.8366.
Looking Forward
The Reserve Bank of India announces its monetary policy decision. Canada releases January housing starts.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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