On 21 March, 2017 – Global stocks retreat
Investors are waiting for the US policy agenda to advance.
United States
Stocks tumbled after failing to sustain an opening move higher. The Dow Jones industrials were down 1.1 percent, the S&P lost 1.2 percent and the Nasdaq dropped 1.8 percent. The last time the S&P 500 lost 1 percent or more in a day was on October 11. The sell-off was partly attributed to the uncertainty surrounding the fate of the Republican plan to repeal and replace Obamacare before an anticipated vote on Thursday. A failure to approve the Obamacare replacement plan could also raise questions about Mr Trump’s ability to achieve other policy goals that are popular in the financial markets.
Financial stocks dropped adding to the losses in the sector since the Federal Reserve raised interest rates by 25 basis points last week and signaled it would remain on a gradual pace of increases. This was less aggressive than some investors expected. Other economically sensitive sectors also retreated. Materials and industrials along with tech and consumer discretionary stocks tumbled.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$9.20 to US$1,241.60. Copper futures were down 2.3 percent to US$2.61. WTI spot crude was down 88 US cents to US$47.34. Dated Brent spot crude was down 71 US cents to US$50.91. The US dollar was down against the yen, euro, pound and Swiss franc. The currency declined against the Australian dollar and was virtually unchanged against the Canadian dollar. The Dollar Index was down 0.6 percent. The yields on both the US Treasury 30 year bond and 10 year note were down 4 basis points to 3.04 percent and 2.42 percent respectively.
Europe
Stock indices declined Tuesday. The indices initially began the day in positive territory but reversed direction that was triggered by a selloff in US shares. The FTSE was under pressure after a strong increase in British inflation sent the pound higher. In the French presidential debate, centrist frontrunner Emmanuel Macron was the perceived victor over far-right leader Marine Le Pen. The FTSE declined 0.7 percent, the CAC retreated 0.2 percent, the DAX dropped 0.8 percent and the SMI was 0.9 percent lower.
A meeting of the European leaders will be held on April 29 to adopt the Brexit guidelines for the 27 member states, European Council President Donald Tusk said Tuesday. The UK government announced on Monday that Prime Minister Theresa May is set to invoke the Article 50 of the Lisbon Treaty on March 29, thus formally beginning the process of exiting the European Union and paving the way for talks on trade and future relations, which should conclude in two years.
Deutsche Bank sank a day after unveiling plans to boost capital. BMW gained after saying it is targeting record sales, revenue and earnings this year. SGL Carbon advanced after the carbon products maker narrowed its fiscal 2016 net loss to €34 million from €67.5 million last year. Partners Group advanced after the asset management firm reported strong 2016 financial results and proposed an increased dividend.
Société Générale, BNP Paribas and Crédit Agricole finished higher. Total and Technip advanced. Barclays gained in London. Fresnillo and Randgold Resources were up. Akzo Nobel climbed in Amsterdam on a Bloomberg report that PPG Industries is preparing another bid for the Dutch paints and chemicals company. Miners Glencore, Rio Tinto and BHP Billiton dropped as copper hit a one-week low after talks to resolve a strike at the world’s biggest copper mine in Chile were set to resume and as another huge mine in Indonesia restarted production.
UK inflation accelerated to 2.3 percent in February from 1.8 percent in January. This was the biggest rise in prices since September 2013 and above the expected rate of 2.1 percent. The Bank of England’s inflation target is 2.0 percent. UK public sector borrowing excluding banks in February declined to its lowest level for the month since 2007.
Asia Pacific
Shares were mixed Tuesday as the dollar continued to slide on expectations of slower Fed rate increases this year and oil prices rose in Asian deals on speculation that OPEC members are likely to extend output cuts beyond June.
The Nikkei was down 0.3 percent and the Topix lost 0.2 percent as the yen rose against the US dollar. SoftBank shares fell on reports that it has invested $300 million in shared-office space WeWork. Mitsubishi UFJ Financial and Sumitomo Mitsui dropped after U.S. yields fell in the wake of comments from a Federal Reserve official that the pace of interest rate increases in 2017 would be slower than what investors had feared earlier. Toshiba rallied after reports that Westinghouse Electric is seeking US bankruptcy financing.
The S&P/ASX slipped 0.1 percent while the All Ordinaries was virtually unchanged (down 1.02 points). Shares were dragged down by miners as Chinese steel and iron ore futures tumbled on profit taking after recent sharp gains. Investor sentiment was also dampened after minutes of the RBA board’s March meeting noted a build-up of risks associated with the housing market on the back of a surge in investment borrowing and rapid price gains in Sydney and Melbourne. Banks were mixed while miners BHP Billiton, Fortescue Metals Group, Rio Tinto and South32 were lower.
The Shanghai Composite was up 0.3 percent and the Hang Seng added 0.4 percent. The Kospi was up 1.0 percent after ousted President Park Geun-hye apologized to the country in her first comments directly to the public since she was dismissed on March 10. The Sensex slipped 0.1 percent.
Looking Forward
Japan posts February merchandise trade and January all industry index. In the US, February FHFA house price index and February existing home sales will be released along with the weekly EIA petroleum status report.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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