On 07 October, 2015 – Most European markets rose on continued strength in energy and mining stocks

Most stocks advanced in the Asia Pacific and Europe thanks to Tuesday’s higher oil prices. US stocks gyrated but finished on the plus side thanks to biotechnology shares.

United States

US stocks wavered between gains and losses Wednesday as oil prices lost ground. However, a rebound in biotech stocks lifted the three indices for the day. The Dow Jones industrials were up 0.7%, the S&P added 0.8% and the Nasdaq, 0.9%. Earnings season begins Thursday with Alcoa unofficially kicking off the reporting season after US markets close.

Shares of KFC owner Yum Brands plunged after its profits and sales missed analysts’ expectations. Sales in China, a major market for KFC, rose only 2%, far less than expected. Adobe Systems retreated after the company cut its full-year profit forecast. Monsanto said it is slashing 2,600 jobs and restructuring operations to cut costs in a slumping commodity market. The company, which said it expects low prices for agricultural products to squeeze results well into 2016, also reported a much wider quarterly loss and gave an outlook below many analysts' expectations. To try to shore up investor confidence, the company announced a US$3 billion accelerated share repurchase program to be completed in the next six months. Regeneron Pharmaceuticals and Amgen advanced. Express Scripts said it reached deals to cover two costly new cholesterol drugs produced by the two companies.

Oil prices gave up much of an early gain after the Energy Department reported that US oil inventories rose by 3.1 million barrels last week and demand for oil fell slightly. Oil had rallied earlier on signs that producers were cutting back production.

Gold at the afternoon London fixing declined US$2.90 to US$1,144.60. Copper futures were up 0.6% to US$2.37. WTI spot crude was down 40 US cents to US$48.13. Dated Brent spot crude was 28 US cents lower to US$51.64. The US dollar was up against the euro, Swiss franc and the Canadian dollar. However, it declined against the yen, pound and the Australian dollar. The Dollar Index was up 0.1%. The yield on US Treasury 30 year bond was up 2 basis points to 2.90% while the yield on the 10 year note added 3 basis points to 2.07%.

Europe

Stocks were mixed in Europe. The recent gains continued to be fueled by strength in energy and mining stocks. Commodity prices have been rising since the start of the trading week, while the Chinese stock market has been closed for a week long holiday. However, the gains in Europe began to erode after the release of a report that showed a larger than expected build-up in weekly US crude inventories data. The FTSE was up 0.2%, the CAC edged up 0.1% and the DAX advanced 0.7%. But the SMI retreated 1.4% on weak performance by pharmaceutical companies.

Volkswagen surged after Matthias Müller, chief executive officer, promised employees "swift and relentless clarification" of the emissions scandal. He also expressed confidence that the company would overcome this crisis. Auto makers BMW, Daimler, Renault and Peugeot advanced. RWE and E.ON also gained. Airbus Group slipped after talks between it and Canada's Bombardier about possible "business opportunities" ended. Technip and Total were up on the day. In London, SABMiller gained after AB InBev boosted its offer for the brewer. Diageo retreated after it sold interest in Desnoes & Geddes and in Guinness Anchor Berhad to Dutch brewer Heineken and acquired additional shares in Guinness Ghana Breweries. Tesco finished higher after the supermarket chain reported a net loss in its first half compared to a profit last year, mainly reflecting weak sales as well as a loss from its discontinued Korean business. Miners increased due to a positive research note from a broker. Anglo American, Antofagasta, Rio Tinto and Glencore advanced.

Germany's industrial production declined at the fastest pace in 12 months in August (down 1.2% on the month), suggesting that economic growth slowed in the third quarter. France's external trade deficit for August narrowed from a year ago as imports fell at a faster rate than exports. UK August industrial output rebounded at a faster than expected pace driven by oil extraction and transport equipment. Industrial production grew 1% from July, reversing a 0.3% drop in the prior month.

Asia Pacific

Stocks advanced Wednesday after a sharp rebound in oil prices overnight boosted resource stocks. Hong Kong shares led the region's gains despite downbeat data pointing to continued decline in China's forex reserves in September. The Chinese market remained closed for the Golden Week holiday and will reopen on Thursday. The Hang index closed 3.1% higher, with energy stocks pacing gainers as oil prices rebounded sharply on signs of ebbing US oil production and reports that global oil investments are likely to be cut by US$130 billion this year.

The Nikkei added 0.8% after the Bank of Japan refrained from expanding its stimulus program as widely expected. At the end of a two-day policy meeting, the BoJ maintained its optimistic assessment of the economy, saying that the economy has continued to recover moderately as a trend. Mitsui Chemicals, Inpex and Mitsubishi gained. Sony was up after the company outlined its intention to sequentially split out the business units currently within Sony Corporation and operate them alongside existing Sony Group companies. Honda Motor, Hitachi Construction Machinery and Sumitomo Heavy Industries gained while Fast Retailing dropped.

Both the S&P/ASX and All Ordinaries gained 0.6% thanks to the rebound in commodity prices. Oil Search, Woodside Petroleum, Origin Energy and Santos climbed. Crude oil prices soared nearly 5% on Tuesday after a new US forecast showed tighter oil supplies next year and Russia signaled it would pursue further talks with other big oil producers to support the market. Miners BHP Billiton, Rio Tinto, Newcrest Mining and Evolution Mining advanced.

The Kospi was up 0.8% on earnings optimism after Samsung Electronics said its July to September operating profit likely leapt 79.8% to 7.3 trillion won, beating forecasts. The Sensex added 0.24%.

Looking Forward

Germany's August merchandise trade balance will be reported. The Bank of England announces its monetary policy decision and publishes minutes of the meeting. The European Central Bank posts minutes of its September meeting. In the US, FOMC minutes from its September 17 meeting are published. Weekly jobless claims, money supply and Fed balance sheet will be released.

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.