Geopolitical worries continued to make investors cautious.
United States
Stocks advanced for a second day on Friday and that helped offset some of Wednesday’s steep losses. The Dow Jones industrials and S&P gained 0.7 percent while the Nasdaq added 0.5 percent. However, for the week, the three indices declined. The Dow and S&P both lost 0.4 percent and the Nasdaq was 0.6 percent lower. Wednesday’s selloff was sparked by renewed concerns about Donald Trump’s presidency.
Positive sentiment may have been generated by comments from St. Louis Federal Reserve President James Bullard raising questions about the need for another increase in interest rates next month. Noting the financial market reaction to the March rate increase has been opposite of what is typically expected, Bullard said the Fed’s contemplated policy rate path may be overly aggressive relative to incoming economic data. Bullard, who is not a voting member of the Fed’s policy committee this year, pointed out that US macroeconomic data since the March meeting has been relatively weak.
Deere rallied and hit an all-time high after the farm and construction equipment maker posted a better-than-estimated quarterly profit. Caterpillar and General Electric also were higher. Autodesk jumped after reporting better-than-expected quarterly revenue.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$3.90 to US$1,252.00. Copper futures were up 2.0 percent to US$2.58. WTI spot crude was up 98 US cents to US$50.33. Dated Brent spot crude was up US$1.10 to US$53.61. The US dollar was down against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was down 0.8 percent. The yield on US Treasury 30 year bond was unchanged at 2.90 percent while the yield on the 10 year note was up 1 basis point to 2.23 percent.
Europe
European stocks advanced Friday but recovered only some of the ground lost on the previous two days. However, the markets suffered their worst week since November due to the mid-week selloff. On Friday, the FTSE was up 0.5 percent, the CAC gained 0.7 percent, the DAX added 0.4 percent and the SMI was 0.9 percent higher. For the week, only the FTSE advanced (up 0.5 percent). However, the CAC, DAX and SMI lost 1.5 percent, 1.0 percent and 1.1 percent respectively. On Friday, investors were encouraged by the continued rise in crude oil prices — they climbed back above $50 a barrel at the end of the trading week.
Greece’s lawmakers approved a reforms package Thursday that includes pension cuts and tax increases as demanded by the country’s lenders in return for unlocking another tranche of bailout funds and to start discussions over debt relief. The parliament approval came ahead of the Eurogroup meeting on May 22 when euro area finance ministers will consider disbursement of the bailout funds and discuss debt relief.
Wirecard climbed on a broker upgrade. Orange advanced after it entered into exclusive negotiations to acquire a controlling stake in Business & Decision. Danone gained after it said it is targeting an operating margin of above 16 percent in 2020. Shire increased after saying it would highlight new research on the treatment of chronic hypoparathyroidism at the upcoming 19th Annual Meeting of the European Congress of Endocrinology in Portugal on May 20 to 23.
Hikma Pharma climbed after the drug-maker cut its full-year revenue forecasts, citing delays to the approval of its generic version of GlaxoSmithKline’s asthma drug. Travel retailer Dufry soared in Zurich after Richemont bought a 5 percent stake in the company. Miners Rio Tinto and Anglo American advanced.
Eurozone consumer confidence strengthened for a third consecutive month in May to its highest level in nearly a decade. The flash consumer confidence index climbed to minus 3.3 from April’s minus 3.6.
Asia Pacific
Asian stocks reversed early losses to end mixed Friday as Thursday’s better-than-expected US economic data and higher oil prices offset concerns surrounding deepening political turmoil in Washington and the Brazilian political crisis. Brazil’s real, stocks and bonds tumbled as President Michel Temer faced calls for impeachment in the wake of a corruption scandal.
The Shanghai Composite was virtually unchanged (up 0.49 point) after foreign direct investment into China decreased 4.3 percent from a year ago in April. On the week, the Shanghai Composite edged up 0.2 percent. The Hang Seng index was up 0.2 percent Friday and 0.1 percent on the week.
The Nikkei was up 0.2 percent and the Topix gained 0.3 percent. However the Nikkei lost 1.5 percent on the week while the Topix was 1.3 percent lower. Financial stocks saw some bargain hunting after recent heavy losses with Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial all rallying. Takata jumped after four automakers agreed to pay $553 million to settle with owners of vehicles for losses linked to defective Takata airbag inflators. Toshiba rallied on a Nikkei report that U.S. private equity firm Bain Capital is preparing to tender a bid for a 51 percent stake in its memory chip unit.
The All Ordinaries declined 0.1 percent and the S&P/ASX was down 0.2 percent. The big four banks retreated on concerns over the proposed $6 billion tax and overheated property markets. Gold miners Newcrest, Northern Star and Regis Resources were lower after a bounce in the US dollar weighed on gold prices overnight. Origin Energy declined after it agreed to sell a gas pipeline network in Australia for A$392 million. However, BHP Billiton, Rio Tinto and Fortescue Metals Group gained on the day. For the week, the All Ordinaries and S&P/ASX were down 1.7 percent and 1.9 percent respectively.
The Kospi was up 0.1 percent both for Friday and the week. The Sensex edged up 0.1 percent on Friday and 0.9 percent for the week. The government finalized Goods and Services Tax rates for substantial items, clearing a major hurdle towards July 1 rollout of the country’s biggest indirect reform to create one unified market.
Looking forward

Central Bank activities

May 24

Canada

Bank of Canada Monetary Policy Announcement

United States

Federal Reserve Publishes Minutes from May 2,3 FOMC Meeting

The following indicators will be released this week…

Europe

May 23

Germany

Gross Domestic Product (Q1.2017 final)

Ifo Business Survey (May)

May 24

Eurozone

Manufacturing, Service & Composite PMI (May flash)

Germany

Manufacturing, Service & Composite PMI (May flash)

France

Manufacturing, Service & Composite PMI (May flash)

May 25

Spain

Gross Domestic Product (Q1.2017 final)

UK

Gross Domestic Product (Q1.2017 second estimate)

Asia Pacific

May 22

Japan

Merchandise Trade Balance (April)

May 24

Japan

Manufacturing PMI (May flash)

May 26

Japan

Consumer Price Index (April)

Americas

May 23

United States

New Home Sales (April)

May 24

United States

Existing Home Sales (April)

Manufacturing PMI (May flash)

May 25

United States

Initial Unemployment Claims (week ending prior Saturday)

International Trade in Goods (April)

May 26

United States

Durable Goods Orders (April)

Gross Domestic Product (Q1.2017 second estimate)

Consumer Sentiment (May final)

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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