On 09 March, 2017 – Global markets sag on weak commodity prices
Investors wait for Friday’s US employment report and FOMC announcement next Wednesday.
United States
Stocks were virtually unchanged Thursday as investors waited for Friday morning’s February employment report. It is the last major data release prior to next Wednesday’s FOMC meeting. The Dow Jones industrials and Nasdaq were virtually unchanged (up 2.46 points and up 1.26 points respectively.). The S&P inched up 0.1 percent. Thursday is the eighth anniversary of the bull market, that is based on the fact that the S&P 500 notched its bear-market closing low on March 9, 2009.
Industrial companies such as Caterpillar were down. Caterpillar has retreated as the government investigates the company’s taxes and accounting. Deere was lower. Banks climbed along with bond yields. American Airlines led airlines lower after it reported weak February traffic. Health care companies including Johnson & Johnson, Celgene and Edwards Lifesciences advanced. Sears Holdings was higher after the company took a smaller adjusted loss than it did a year ago. Signet Jewelers gained after it said it will spend more money on technology as it closes mall-based stores.
Staples declined after it reported fourth-quarter sales that were far weaker than expected and the company said it will close another 70 stores in North America. Tailored Brands, the parent of Men’s Wearhouse and Jos. A. Bank, plunged after the company disclosed a bigger loss than expected along with disappointing sales. Repsol says it has made one of the biggest conventional onshore oil discoveries in the US for decades on Alaska’s North Slope. The Spanish group said the latest drilling at its Nanushuk play had extended previous discoveries by 20 miles and increased estimated resources to 1.2 billion barrels of recoverable light crude oil. Weekly jobless claims increased 20,000 to 243,000 from the previous week’s 223,000. Both import and export prices were up in February.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$2.65 to US$1,206.55. Copper futures were down 0.9 percent to US$2.58. WTI spot crude was down 55 US cents to US$49.73. Dated Brent spot crude was down 50 US cents to US$52.61. The US dollar was up against the yen, euro and the Canadian and Australian dollars. The currency declined against the euro, pound and Swiss franc. The Dollar Index was down 0.2 percent. The yield on US Treasury 30 year bond was up 4 basis points to 3.18 percent while the yield on the 10 year note was up 5 basis points to 2.60 percent.
Europe
Stock indices mostly advanced Thursday with muted gains. The exception was the FTSE which was down 0.3 percent. The CAC, DAX and SMI added 0.4 percent, 0.1 percent and 0.2 percent respectively. Mining stocks tumbled as the Chinese yuan hit its lowest level in two months against the US dollar. China’s February consumer inflation eased sharply although in part because of the lunar New Year holidays. However, bank stocks climbed after ECB President Mario Draghi suggested that deflationary pressures have been reduced.
As widely expected, no changes in policy were announced following the European Central Bank’s meeting. The benchmark refi rate stays at zero percent, the deposit rate at minus 0.40 percent and the marginal lending rate at 0.25 percent. The central bank also confirmed that quantitative easing, currently running at an average €80 billion a month, will be reduced to €60 billion per month from April as foreshadowed at the December 2016 discussions. Forward guidance was similarly unmodified, with key interest rates expected to remain at present or lower levels for an extended period of time and well past the horizon of the net asset purchases.
Merck KgaA declined after forecasting stagnant adjusted earnings for 2017. Carrefour tumbled after posting a steeper-than-expected decline in 2016 profit, pressured by declining sales in Asia and France. Lagardère soared after its fiscal 2016 year profit jumped to €175 million from €74 million last year. Domino’s Pizza Group tumbled after the firm announced it has struck a deal to buy Norwegian pizza operator Dolly Dimple’s.
Morrison Supermarkets sank after the company posted its first profit increase in five year. It warned that a rise in imported food prices means that it faces an uncertain future. Miners tumbled as they tracked a sharp decline in metals prices. Mining stocks BHP Billiton, Anglo American, Glencore, Antofagasta and Rio Tinto all were lower on the day. British insurers including Aviva climbed. Admiral Group rallied on a broker upgrade.
Asia Pacific
Most Asian stocks were lower after strong US private payrolls data added to expectations the Federal Reserve will raise interest rates on Wednesday. Lower commodity prices and mixed Chinese inflation data also dampened investor sentiment. While copper hovered near a one-month low on selling triggered by a firmer dollar, oil prices recovered some lost ground in Asian deals after plunging more than 5 percent overnight to their lowest levels this year on data showing production cuts from OPEC and other exporters have not been enough to reduce U.S. supplies.
Chinese shares hit two-week lows as tumbling oil prices, renewed weakness in the yuan and weaker-than-expected consumer inflation data sapped risk appetite. The Shanghai Composite was down 0.7 percent while the Hang Seng tumbled 1.2 percent. February consumer prices were up 0.8 percent on the year, sharply lower than January’s 2.5 percent. At the same time, the producer price index soared 7.8 percent, up from 6.9 percent in the previous month. As is usually the case, the variable dates for the lunar New Year celebrations skew economic data for January and February.
Both the Nikkei and Topix snapped a four-day losing streak and were up 0.3 percent. The ADP estimate of private employment helped weaken the yen against the US dollar and pushed exporter shares higher. Toshiba declined after reports that the struggling conglomerate is accelerating a study on the possibility of filing for Chapter 11 bankruptcy protection for its US nuclear power plant unit, Westinghouse Electric.
Both the S&P/ASX and All Ordinaries were 0.3 percent lower — the decline in metals prices and the overnight slump in oil prices weighed on resource stocks. Energy stocks such as Woodside Petroleum, Santos, Origin Energy and Beach Energy were lower. Mining giant BHP Billiton, Fortescue Metals Group and Rio Tinto tumbled. However, Commonwealth, NAB and Westpac gained after a surge in US private-sector jobs pushed Treasury yields higher.
The Kospi slipped 0.2 percent as investors positioned themselves ahead of the Constitutional Court’s ruling on the fate of President Park Geun-hye on Friday and next week’s FOMC meeting. The Sensex erased early losses to end 0.1 percent higher. Markets opened on a subdued note as US rate increase worries, mixed Chinese inflation data and anxiety ahead of exit poll results for Assembly elections due out later in the day tempered investors’ appetite for risk.
Looking Forward
Japan releases February producer prices. Germany and the UK post January merchandise trade balances. India, France and the UK release January industrial production. Canada reports its February labour force survey and the US releases February employment situation. The US moves to daylight saving time on Sunday.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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