On 18 May, 2017 – Positive economic data lifted US stocks

Stock indices in Asia and Europe tumbled Thursday but US indices bounced back and were up on the day.
United States
Stocks rebounded from Wednesday’s selloff. Strong economic data offered support, but investors remained anxious about the tumult in Washington even though officials sought to ease concerns. However, investors continue to carefully monitoring events that could hinder Trump’s ability to implement proposals such as tax reform and deregulation. The Dow Jones industrials gained 0.3 percent, the S&P was up 0.4 percent and the Nasdaq was 0.7 percent higher. Bargain hunting helped the rebound. Secretary of the Treasury Steven Mnuchin reiterated his opposition to breaking up big banks. The chairman of the House of Representatives ways and means committee said now was the time to “go bold” on tax reform. The Trump administration also notified Congress of its intent to start Nafta renegotiation talks.
Shares of technology and financial companies which declined on Wednesday, bounced back Thursday. Apple shares climbed. Cisco declined after the networking gear maker forecast current-quarter revenue that came in below estimates. Wal-Mart advanced after quarterly earnings beat expectations. Achillion Pharmaceuticals climbed on a broker upgrade.
Initial jobless claims edged down to 232,000, a decrease of 4,000 from the previous week’s unrevised level of 236,000. Philadelphia-area manufacturing activity unexpectedly expanded at a faster pace in May. The Philly Fed said its index for current manufacturing activity in the region climbed to 38.8 from 22.0 in April, with a positive reading indicating growth. April index of leading economic indicators rose by 0.3 percent, matching the downwardly revised increase in March.These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$1.50 to US$1,255.90. Copper futures were down 0.55 percent to US$2.53. WTI spot crude was up 26 US cents to US$49.33. Dated Brent spot crude was up 28 US cents to US$52.49. The US dollar was up against the yen, euro, pound, and the Australian dollar. The currency declined against the Canadian dollar and was virtually unchanged against the Swiss franc. The Dollar Index was up 0.4 percent. The yield on US Treasury 30 year bond was down 1 basis point to 2.90 percent while the yield on the 10 year note unchanged at 2.22 percent.
Bank stocks, which outperformed in the post-election rally, were the worst hit. Bank of America, Morgan Stanley, Goldman Sachs and JPMorgan retreated. American Eagle Outfitters moved sharply lower after the apparel retailer reported weaker than expected first quarter earnings and provided disappointing guidance. Urban Outfitters also posted a notable loss after reporting first quarter results that came in below expectations. Red Robin Gourmet Burgers jumped higher after the restaurant chain reported better than expected first quarter results and provided upbeat guidance. Cypress Semiconductor, Integrated Device Technology and Silicon Labs retreated.
Cisco Systems reported its sixth straight fall in quarterly revenue largely due to declines in its router business. The company’s net income rose to $2.52 billion or 50 cents per share in the third quarter ended April 29 from $2.35 billion or 46 cents per share a year earlier. Revenue fell 0.5 percent to $11.94 billion.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$23.20 to US$1,257.40. Copper futures were down 0.35 percent to US$2.54. WTI spot crude was up 31 US cents to US$48.97. Dated Brent spot crude was up 48 US cents to US$52.13. The US dollar declined against the yen, euro, pound and Swiss franc. The currency was up against the Canadian dollar and virtually unchanged against the Australian dollar. The Dollar Index was down 0.7 percent. The yield on US Treasury 30 year bond was down 8 basis points to 2.91 percent while the yield on the 10 year note was down 10 basis points to 2.22 perent.
Europe
European stocks tumbled for a second day as investor sentiment continued to be affected by the barrage of issues besetting the Trump administration. Traders are concerned that it could prevent Trump from implementing his pro-business policy agenda. However, the markets pared losses in the afternoon after US stocks recovered. The FTSE was down 0.9 percent, the CAC declined 0.5 percent, the DAX retreated 0.3 percent and the SMI was 0.7 percent lower.
The European Central Bank published minutes of its recent governing council meeting on April 27. At that time, policymakers agreed that there was a need for great caution in undertaking even subtle changes in communication so as to avoid market volatility similar to the ‘taper tantrum’ in 2013. The Governing Council’s communication should be adjusted in a very gradual and cautious manner as, at the current juncture, monetary and financial conditions were particularly sensitive to changes in communication. “After a long period of very accommodative monetary conditions, even small and incremental changes in communication could have strong signaling effects when interpreted as heralding a change in the monetary policy stance.”
Merck KgaA was down after its first-quarter net profit declined 11.8 percent from a year earlier. Deutsche Börse tumbled after ruling out big stock exchange mergers for now. Land Securities dropped after warning of Brexit uncertainty hitting the London office market. Thomas Cook advanced after its half-year results came in line with expectations. Royal Mail advanced after it reported a 25 percent rise in fiscal 2017 pretax profit.
Burberry jumped after the company announced a new buyback of £300 million and said its targeted cost savings are on track. Experian retreated despite reporting a profit before tax of $1.07 billion at actual exchange rates for the twelve months ended 31 March 2017, up from $966 million a year ago. The company also announced a $600 million share repurchase program. Royal Dutch Shell and BP declined. Ashtead was down and building materials firm CRH ended flat. HSBC Holdings retreated but Barclays shook off an early stumble and closed higher.UK April retail sales rebounded a monthly 2.3 percent, reversing a 1.4 percent drop in March. This was the fastest growth since January 2016.
Asia Pacific Markets
Asian stocks retreated as U.S. political turmoil continued to keep investors risk averse.
The Shanghai Composite index dropped 0.5 percent after data showed home price growth in China’s biggest cities softened in April due to stricter restrictions on property purchases. The Hang Seng was down 0.6 percent. Japanese shares hit 2-1/2-week lows thanks to the yen’s recent strength. Both the Nikkei and Topix lost 1.3 percent. Exporters including Canon, Toyota Motor, Honda Motor and Sony tumbled. Energy majors Inpex, Japan Petroleum and JX Holdings also declined. The initial estimate of first quarter gross domestic product indicated that the economy grew 0.5 percent on the quarter or at an annualized pace of 2.2 percent. The data were overshadowed by the rising yen and concerns regarding the political situation in Washington.
Both the S&P/ASX and All Ordinaries were down 0.8 percent thanks to continued declines in banking stocks in the wake of concerns over the new tax on banks and the uncertain path for Trump’s administration. Westpac declined on going ex-dividend while the other three banks also were lower. Mining and oil stocks also closed broadly lower. April employment increased 37,400 jobs while unemployment declined to 5.7 percent from 5.9 percent in March. The Kospi was down 0.3 percent as worries over US political risks dented investor demand for riskier assets. The Sensex was down 0.7 percent.
Stocks tumbled Wednesday as oil prices declined and safe-haven assets such as the yen and gold were higher on renewed worries about intensifying political situation in the US. Both the Nikkei and Topix lost 0.5 percent as the US currency weakened after April housing starts data disappointed along with fresh worries over the Trump administration. Economic reports painted a mixed picture of the Japanese economy, with core machinery orders falling short of expectations in March, while industrial output declined less than initially estimated in the month.
Automakers Honda Motor and Toyota declined as the yen pushed higher to reach its strongest level in more than a week. Lower US yields pulled down banking stocks including Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial.
Australian shares tumbled to their lowest level in seven weeks as banks extended recent declines on concerns about the surprise levy introduced in the federal budget. Disappointing wage growth and consumer confidence data also weighed on markets. The S&P/ASX dropped 1.1 percent while the All Ordinaries was 1.0 percent lower. The big four banks declined while miners Rio Tinto and Fortescue Metals Group rallied. Gold miners also posted strong gains as gold prices hit two-week high amid Trump concerns.
The Shanghai Composite and Hang Seng both declined 0.2 percent. The Kospi slipped 0.1 percent as growing doubts over US political leadership triggered profit taking after a recent rally. The Sensex was up 0.2 percent to a new record high helped by strong capital inflows. Hopes of an interest rate cut by the Reserve Bank of India, encouraging earnings news from Tata Steel and the US dollar’s weakness in overseas markets helped investors shrug off Asian and European markets weakness.
Looking Forward
Germany posts April producer price index. May CBI industrial trends survey will be released in the UK. The Eurozone releases its flash May EC consumer confidence survey. Canada reports March retail sales and April consumer price index.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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