On 16 March, 2016 – Stocks mixed on Wednesday
Investors in Asia and Europe awaited FOMC announcement while US shares reacted to the news.
United States
Shares advanced after the Federal Reserve’s comments on the state of the economy. Oil prices rose on reports that major energy-producing nations would hold a new round of talks about curbing oil production. The S&P closed at its highest level of the year after the Federal Reserve left interest rates unchanged and signaled fewer rate increases in coming months. The Dow Jones industrials were up 0.4 percent, the S&P gained 0.6 percent and Nasdaq advanced 0.75 percent.
Peabody Energy plunged after the largest coal mining company in the United States said it would delay an interest payment and might have to file for Chapter 11 bankruptcy protection. Chipotle Mexican Grill tumbled after it forecast a big loss for the first quarter as sales tumbled after a series of illness scares. The Mexican food chain has never reported a quarterly loss since it went public in 2006 and had said it expected to break even during the first quarter. Oracle rose after the company reported mixed quarterly results and said it would buy back $10 billion in company stock.
The Federal Reserve kept its fed funds rate range at 0.25 percent to 0.50 percent at its FOMC meeting today. The FOMC signaled that it plans to resume increasing the fed funds rate in the coming months but forecast that there will only be two more increases in 2016. The Fed said the domestic economy seemed little harmed by the recent turmoil in financial markets. But the volatility has forced the Fed to delay higher rates. Most Fed officials now expect to raise the benchmark rate by half a percentage point this year. There was one dissent — Esther L. George, president of the Federal Reserve Bank of Kansas City who voted to raise rates by 25 basis points.
The FOMC acknowledged “inflation picked up in recent months” but included the caveat that “it continued to run below the Committee’s 2.0 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports.”
At her press conference, Fed Chair Janet Yellen noted that the Federal Reserve’s ability to raise US interest rates isn’t constrained by recent moves from the European Central Bank and Bank of Japan to add even more stimulus. Ms Yellen, the chair of the Fed, said that although respective monetary policies have spill over effects, including on exchange rates, that doesn’t prevent central banks pursuing divergent courses.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$3.50 to US$1,228.50. Copper futures were up 1.3 percent to US$2.26. WTI spot crude was up US$2.09 to US$38.43. Dated Brent spot crude was up US$1.53 to US$40.27. 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 dropped 1.3 percent. The yield on US Treasury 30 year bond was up 1 basis point to 2.73 percent while the yield on the 10 year note declined 5 basis points to 1.91 percent.
Europe
Stocks were mixed Wednesday as investors waited for the FOMC statement which was released after markets here were closed for the day. The FTSE was up 0.6 percent and the DAX added 0.5 percent. However, the CAC was down 0.2 percent while the SMI was 0.5 percent lower. Traders are also waiting for announcements from the Bank of England and the Swiss National Bank Thursday.
Deutsche Börse retreated after the board of London Stock Exchange Group and the management board of Deutsche Börse reached an agreement on the terms of a recommended all-share merger. Bilfinger plunged after posting an annual loss and suspending dividend payment. Automakers BMW, Daimler, Volkswagen, Renault and Peugeot advanced. Deutsche Bank and Commerzbank retreated. Technip and Total were up. BP, Royal Dutch Shell and Tullow Oil advanced.
February British claimant count unemployment rate was 2.1 percent. Employment on that basis declined 18,000. For the Three months November through January the unemployment rate was 5.1 percent at a 10-year low.
Asia Pacific
Asian shares were mixed as investors anxiously waited for the Federal Reserve policy announcement and forecasts which were announced after markets here were closed for the day. Oil prices rebounded from overnight losses after reports emerged that a meeting between oil producers to discuss freezing production may take place next month even without Iran.
The Shanghai Composite closed 0.2 percent higher after Premier Li Keqiang defended the country’s economic policies, saying the country will not see a hard landing and reforms would continue. On a long anticipated trading link between the Shenzhen and Hong Kong stock markets, Mr Li confirmed that China would launch such a channel this year, without giving a specific time. He spoke at the end of the country’s annual legislative sessions, which kicked off earlier this month Beijing. During the National People’s Congress, buying by state-backed funds has helped certain Chinese blue chips rally on occasion, according to analysts. Some financial stocks did so late afternoon today. The Hang Seng slipped 0.2 percent.
The Nikkei retreated 0.8 percent with banks coming under heavy selling pressure after BoJ Governor Haruhiko Kuroda said it was theoretically possible for the central bank to push rates down to minus 0.5 percent. Banks Mitsubishi UFJ Financial, Mizuho Financial Group and Sumitomo Financial tumbled. Sharp dropped on reports that Foxconn Technology Group is delaying finalization of its deal for the Japanese company amid apprehensions over its performance in the current quarter. Toshiba slid after denying media reports that it was in talks to sell its home appliance business.
Both the S&P/ASX and All Ordinaries added 0.1 percent. The big four banks advanced while miners BHP Billiton, Rio Tinto and Fortescue Metals Group retreated. The Kospi was up 0.3 percent as investors waited for the Federal Reserve. The Sensex added 0.5 percent.
Global Stock Markets
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*
Australia posts February labour force survey. Japan releases February merchandise trade data. The Swiss National Bank publishes its monetary policy assessment while the Bank of England announces its monetary policy decision. The Eurozone reports final February harmonized index of consumer prices and January merchandise trade balance. In the US, March Philadelphia Fed survey, February leading indicators and January JOLTS, fourth quarter current account balance will be released along with the weekly jobless claims, money supply and Fed balance sheet.
*Note — all releases are listed in local time.
Source: Fidelity
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