On 17 August, 2015 – Stocks mixed as yuan steadies

Stocks were mixed in Asia and Europe but advanced in the US as China’s currency steadied and Greece’s bailout cleared another hurdle.
United States
Stocks advanced on the day after sinking in early trading on a poor Empire State manufacturing report. However, they rebounded after the housing market index indicated new strength in the housing market. The Dow Jones industrials were up 0.4%, the S&P added 0.5% and the Nasdaq was 0.9% higher. Nine of 10 major groups in the S&P advanced, with health-care and consumer-discretionary companies climbing the most. Energy shares had the only loss as a group.
Estée Lauder declined after it reported better than expected earnings for the fourth quarter but fell short of revenue forecasts in part because of disappointing results in its Clinique and namesake skin-care lines. The company’s outlook in future quarters also disappointed analysts. Zulily, a company that offers flash deals online, soared after QVC-owner Liberty Interactive offered to buy it for US$2.32 billion. Airlines including Southwest Airlines, American Airlines Group and United Continental Holdings increased. Tesla Motors climbed on a broker upgrade.
Greece cleared a big hurdle late Friday when Eurozone finance ministers approved the country’s €86 billion bailout program. A few European parliaments have to approve the deal before Greece gets the €26 billion tranche of money that will allow it to make a big repayment due on Thursday to the European Central Bank.
Gold at the afternoon London fixing was up 55 US cents to US$1,118.80. Copper futures were down 1.4% to US$2.32. WTI spot crude was down 60 US cents to US$41.90. Dated Brent spot crude was down 47 US cents to US$48.72. The US dollar was up against the euro, yen pound and Swiss franc. It was virtually unchanged against the Australian dollar. However, it declined against the Canadian dollar. The Dollar Index was up 0.1%. The yield on US Treasury 30 year bond was down 2 basis points to 2.82% while the yield on the 10 year note slipped 3 basis points to 2.17%.
Europe
Markets were mostly higher Monday after new loans of up to €86 billion were agreed to be made available over the next three years to Greece by the European Stability Mechanism or ESM, Europe’s firewall in response to the global financial crisis. The FTSE was virtually unchanged (down 0.44 point) and the DAX retreated 0.4%. However, the CAC and SMI were up 0.6% and 0.5% respectively.
The Eurozone trade surplus climbed to a 6-month high in June as an increase in exports exceeded imports growth. The trade surplus climbed to a seasonally adjusted €21.9 billion in June from €21.3 billion in May. It was the highest level since December 2014.
Lanxess and RWE gained. BMW advanced on a broker upgrade. Volkswagen and Daimler also were in positive territory. Hochtief declined on a broker downgrade. Alstom surged after a report said General Electric is expected to win approval from the European Union for its acquisition of assets from the French speed-train maker. Banks including Crédit Agricole, Société Générale and BNP Paribas gained moderately.
Shares in mining companies touched a 6-year low on Monday after the price of copper came under renewed pressure, accounting for around two thirds of the fall in the overall index. Mining shares have fallen over 60% since the end of 2010 as global demand for commodities has slowed, culminating in a move by China’s central bank to weaken its currency. Global miner Glencore declined after broker downgrades. BHP Billiton also retreated on a downgrade. Wolseley gained after a broker upgrade. TUI Travel extended its rally after saying last week that earnings would come in at the top end of forecasts.
Asia Pacific
Shares were mixed Monday as falling oil prices and uncertainty over whether the Federal Reserve will raise interest rates next month kept investors cautious after a series of shock devaluations of the yuan by China’s central bank last week. Investors remained wary of further moves to depress the currency despite statements from the People’s Bank of China that there is no ground for sustained yuan depreciation. The yuan’s reference rate was little changed for the second day today, helping stabilize the exchange rate after last week’s tumble in the yuan triggered a sell-off in equity and commodity markets around the world.
The Shanghai Composite was up 0.7% on expectations that policymakers will unveil further stimulus measures to deal with deflationary pressures and boost a sluggish economy. The Hang Seng however, declined 0.7% amid mounting concerns that China’s GDP growth could fall short of its goal of roughly 7% economic growth this year.
The Nikkei added 0.5% despite the contraction in growth in the second quarter. The yen weakened against the dollar and the People’s Bank of China moved to stabilize its currency, supporting sentiment to some extent. Japan’s economy contracted at an annualized pace of 1.6% in the second quarter as exports slumped and consumers cut back on spending. The data rekindled expectations the Bank of Japan will expand monetary stimulus again to help prop up the economy. Fujifilm Holdings rallied on a Nikkei report that the film maker plans to expand its medical and pharmaceutical business with antiviral drug Avigan. Panasonic, Uniqlo operator Fast Retailing and Mizuho Financial Group gained on the day.
Both the S&P/ASX and All Ordinaries added 0.2%. FlexiGroup advanced after the finance and leasing company reported a 44% increase in full year profit and reiterated its outlook for fiscal 2016 profit. Aurizon Holdings rallied on reporting a 15% increase in full year earnings. Shares of Asciano were in a trading halt amid speculation about an A$9 billion takeover bid from Brookfield Infrastructure. Miners and banks were both mixed.
The Kospi was 0.8% lower on foreign fund selling. The Sensex lost 0.7% as disappointing exports data, renewed weakness of the rupee on continued selling by foreign funds and fears that China may let its currency slide even further to help exporters kept investors’ risk appetite in check.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Minutes from the Reserve Bank of Australia’s meeting earlier this month are published. The UK releases July consumer and producer price indices. July housing starts are posted in the US.
*Note — all releases are listed in local time.