On 24 May, 2017 – Stocks in Asia and the US advanced while Europe retreated

US shares firmed after the release of the FOMC minutes.
United States
US stocks advanced with the Dow Jones industrials and Nasdaq gaining 0.4 percent. The S&P closed at a record high, up 0.2 percent. The continued strength followed the release of the latest FOMC minutes.
Lowe’s declined after the home improvement chain reported a lower-than-expected profit and comparable sales. Tiffany tumbled after posting a surprise drop in comparable sales. Signet Jewelers also was down 7.2 percent. Container Store advanced after reporting better than anticipated fiscal fourth quarter results. Advance Auto Parts retreated after reporting first quarter results that were below expectations. Intuit advanced after it had a stronger quarter than expected. Western Digital and Nvidia also were higher. General Electric declined after CEO Jeffrey Immelt addressed an industry conference. Immelt suggested it will be tough for the company to reach the earnings targets some investors want to see. Dow Chemical and DuPont, which are planning to combine, both gained. After US markets closed, HP reported its third straight rise in quarterly revenue as it benefited from a stabilizing market for personal computers.
The Federal Reserve released the minutes of its May 2 and 3 FOMC meeting. At that time, they left its target fed funds interest rate range at 0.75 percent to 1.00 percent. The FOMC thought it would soon be appropriate to increase short-term interest rates once again. However, the committee added that “it would be prudent” to wait for evidence that a recent slowdown in economic activity had been transitory. The view on short-term interest rates was “generally” shared by the nine officials who have a vote on policy this year according to the minutes. The committee favored starting the wind-down of the Fed’s massive holdings of Treasury debt and mortgage-backed securities this year primarily by not reinvesting in the securities as they become due but gradually scaling back reinvestments of maturing securities on its balance sheet.
Existing home sales in April declined 2.3 percent on the month thanks to a limited supply of homes on the market. Both single family and condos declined.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$7.65 to US$1,252.55. Copper futures were down 0.3 percent to US$2.59. WTI spot crude was down 16 US cents to US$51.31. Dated Brent spot crude was down 20 US cents to US$53.95. The US dollar was up against the pound and yuan. The currency declined against the yen, euro, Swiss franc and the Canadian and Australian dollars. The Dollar Index was down 0.2 percent. The yield on US Treasury 30 year bond was down 0.3 basis points to 2.92 percent while the yield on the 10 year note was down 4 basis points to 2.25 percent.
Europe
European stocks slipped Wednesday but were little changed overall. Investors were in a cautious mood prior to the release of the minutes from the most recent meeting of the Federal Reserve. Only the FTSE advanced, up 0.4 percent. Both the CAC and DAX edged down 0.1 percent while the SMI was down 0.3 percent. European Central Bank President Mario Draghi maintained his dovish tone Wednesday, stating that there was no need to change the policy path currently being projected. Traders are also awaiting the release of the minutes from the most recent meeting of the Federal Reserve later today.
Mining stocks were lower after Moody’s Investors Services downgraded China’s long-term local and foreign currency issuer ratings, saying its debt levels are likely to increase further in the years ahead. Later in the global market day, Hong Kong’s rating was also lowered.
Automakers were down after Fiat Chrysler was hit with a US government lawsuit and Daimler’s offices were reportedly raided in connection with a probe into diesel emissions. Fiat Chrysler was lower in Milan after the U.S. government filed a suit against the carmaker, accusing it of using illegal software to fake emission results on its diesel vehicles. Safran reduced its offer to purchase Zodiac Aerospace by 15 percent after Zodiac issued a profit warning. The stocks were halted throughout the session.
Kingfisher sank after the home improvement retailer reported weak sales in its first quarter on a constant currency and like-for-like basis amid continued weaker sales in France. Vodafone Group rose after it announced an agreement to combine mobile operator Vodafone Malta and Malta-based cable, broadband and pay TV provider Melita. Marks and Spencer climbed despite reporting a 64 percent drop in annual profits following a costly business overhaul. Glencore declined after it confirmed earlier reports that its agriculture unit has made an informal approach to US grains trader Bunge. But Bunge responded by saying it was not in talks with Glencore. Rio Tinto along with and precious metal miners Randgold and Fresnillo retreated. Babcock was down after reporting its full-year results.
Asia Pacific
Stocks were mostly higher after the Trump administration unveiled its first budget proposal and despite Moody’s Investors Services downgrading China’s long-term local and foreign currency issuer ratings, saying its debt levels are likely to increase further in the years ahead. Oil prices rose in Asia for a fifth straight session ahead of OPEC’s meeting on Thursday. The world’s major oil countries are likely to extend production cuts for another nine months after Iraq backed an extension.
The Shanghai Composite edged up 0.1 percent after declining earlier in the day after Moody’s downgraded China’s credit rating for the first time since 1989. The Hang Seng was also 0.1 percent higher. Moody’s cut China’s rating by one notch to A1 from Aa3 in its first downgrade of the country in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise. Later in the global market day, Moody’s cut Hong Kong’s local and foreign currency ratings by a notch to A1 amid concerns over the country’s rising debt and slow pace of economic reforms. Moody’s said, “The downgrade in Hong Kong’s rating reflects Moody’s view that credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close and tightening economic, financial and political linkages with the mainland.”
The Nikkei was up 0.7 percent and the Topix was 0.6 percent higher as the yen declined against the US dollar. This lifted export-oriented shares. Banking stocks also benefited from a rise in US Treasury yields. Sony, Panasonic, Mitsubishi UFJ Financial and Honda Motor were higher. Toshiba jumped on reports that Western Digital and its partners have offered ¥2 trillion to buy its chip unit.
The S&P/ASX and All Ordinaries both added 0.2 percent — gains in the healthcare and energy sectors offset losses among mining and utility stocks. Energy majors Woodside Petroleum, Oil Search and Origin Energy eked out modest gains as oil prices extended overnight gains on industry data showing a weekly decline in US crude supplies. Testing services provider ALS soared after posting turnaround results for fiscal 2017. Falling iron ore futures pulled down miners BHP Billiton, Rio Tinto and Fortescue Metals Group. Banks closed mostly lower. Gold miners Evolution, Newcrest, Northern Star and Regis Resources retreated after gold prices fell overnight.
The Kospi added 0.2 percent after the Trump administration’s 2018 budget proposal released Tuesday showed trillions of dollars of cuts to federal spending and Treasury Secretary Steven Mnuchin said he hoped to get tax reform passed by the end of the year. The Sensex was 0.2 percent lower in choppy trading. While better-than-expected quarterly results from Tata Motors and Voltas supported sentiment, geopolitical worries and news of a rating downgrade on China triggered profit taking at higher levels.
Looking forward
The UK posts revised first quarter gross domestic product data. In the US, April international trade in goods along with weekly jobless claims, money supply and Fed balance sheet will be released.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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