On 20 April, 2016 – It’s all about oil again

Stocks advanced in Europe and the US but were mixed in Asia.
United States
Markets were slightly higher as the price of oil recovered from an early slide. Investors were also weighing the latest company earnings and deal news. The Dow Jones industrials and Nasdaq added 0.2 percent while the S&P gained 0.1 percent. After several weeks of moving in different directions, the stock market appears to be moving more closely with the fluctuations in oil prices.
Climbing oil and natural gas prices helped lift shares in several energy companies including Chesapeake Energy, Williams and Devon Energy. Lexmark International advanced after the company, which makes printers, agreed to be bought by a group that includes Apex Technology and PAG Asia Capital for about $2.51 billion. Discover Financial Services climbed after it reported better than anticipated quarterly profit and sales as loan volume improved.
Coca-Cola slid after the company reported a lower profit for the first quarter. The company was squeezed by a strong dollar and charges related to the transformation of its North American operations. Cloud-computing company VMware gained after the company reported better than expected earnings. Yahoo gained a day after the company said it was considering the sale of part or all of its Internet business. The news overshadowed its latest quarterly loss. UnitedHealth was up after the nation’s largest health insurer raised its guidance for the year and said Tuesday that it would pull out of nearly all of the Affordable Care Act’s exchanges. Intel was up after it said it is planning to slash 11 percent of its workforce.
March existing home sales jumped 5.1 percent on the month to an annualized rate of 5.3 million. Weekly petroleum status report indicated that inventories of crude increased but those of gasoline and distillates declined.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$3.40 to US$1,252.00. Copper futures were up 0.5 percent to US$2.24. WTI spot crude was down US$1.55 to US$42.63. Dated Brent spot crude was up US$1.40 to US$45.43. The US dollar was up against the yen, euro, pound, Swiss franc and the Australian dollar. However, it declined against the Canadian dollar. The Dollar Index was up 0.55 percent. The yields on both the US Treasury 30 year bond and the 10 year note were up 5 basis points to 2.66 percent and 1.85 percent respectively.

Europe
Stocks advanced after rebounding from early losses in lackluster trading. Crude oil and metal prices pulled back in European trading Wednesday and the safe-haven Japanese yen rose against the US dollar as investors waited for Thursday’s European Central Bank meeting. Crude prices fell after Kuwaiti oil workers called off a three day strike that had cut output from the Middle Eastern country. The FTSE edged up 0.1 percent, the CAC gained 0.6 percent, the DAX advanced 0.7 percent and the SMI was 0.4 percent higher.
After unveiling a slew of stimulus measures last month, the European Central Bank is expected to maintain status quo and focus on defending its independence as it faces intense criticism from Germany over its ultra loose policy stance. Bank of England Governor Mark Carney said the U.K. central bank has a duty to report on the implications of Brexit to Parliament and to the public. “Assessing and reporting major risks does not mean becoming involved in politics; rather it would be political to suppress important judgments which relate directly to the Bank’s remits and which influence our policy actions. … These policy actions include developing, and if necessary implementing, contingency plans,” he said.
SAP advanced after the business software maker reiterated its guidance for the current year after reporting a 9 percent increase in first quarter profit. Volkswagen jumped after reportedly confessing that it created Diselgate — the diesel emissions tests cheating software that its parent company used in its cars. Renault and Peugeot retreated. In Paris, banks including BNP Paribas, Société Générale and Crédit Agricole finished higher. In London, BHP Billiton gained despite cutting its annual production guidance. Royal Dutch Shell and BP advanced along with miners Anglo American, Antofagasta, BHP Billiton, Rio Tinto and Glencore. Bookmaker Paddy Power Betfair declined on a broker downgrade.
Germany’s producer prices declined 3.1 percent from a year ago in March. The UK’s unemployment rate held steady at 5.1 percent, a 10-year low in three months to February and unchanged from previous three months.

Asia Pacific
Asian stocks were mixed with Chinese and Hong Kong shares succumbing to selling pressures while Japanese shares extended gains from the previous session. Markets across the region either gave up or pared early gains after oil prices declined in response to news that a three-day strike by oil workers in Kuwait had ended.
The Shanghai Composite plunged nearly 4 percent before recouping losses to end the session down 2.3 percent. A number of reasons were cited for the sell-off. They ranged from a lack of confidence in the economy, short-term liquidity pressures and valuation worries. The Hang Seng retreated 0.9 percent.
The Nikkei added 0.2 percent as the yen strengthened in the wake of encouraging merchandise trade data and comments from BoJ Governor Haruhiko Kuroda that there is scope for pushing the interest on excess cash parked by banks further into negative territory. Both exports and imports declined helping to push the trade surplus to its highest level in more than five years. Mitsubishi Motors tumbled after the carmaker announced it would release details about misconduct in its fuel economy tests. Honda Motor, Nissan and Toyota also closed lower. Asahi Group Holdings advanced after saying it had reached a deal to buy four European units belonging to SABMiller for $2.9 billion.
Both the S&P/ASX and All Ordinaries added 0.5 percent, led by miners after iron ore prices rallied overnight. BHP Billiton rallied after the company lowered its annual production guidance for the second time this year and vowed to keep cutting costs to deal with depressed commodity prices. Rival Rio Tinto and Fortescue Metals Group also gained. Banks Commonwealth, NAB and ANZ declined after Treasurer Scott Morrison announced that banks will pay an additional A$121 million over four years to boost the powers of the financial sector watchdog.
The Kospi lost 0.3 percent on concerns that improving economic data will prevent the government from adding stimulus. The Sensex ended a choppy session up 0.1 percent. Domestic sentiment was supported by forecasts of normal monsoon rains this year and hopes for another rate cut in the coming months.

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*
The UK posts March retail sales. The European Central Bank announces its monetary policy decision followed by President Mario Draghi’s press conference. April flash EC consumer sentiment will be reported. In the US, April Philadelphia Fed business outlook survey, March leading indicators and February FHFA house price index along with the weekly jobless claims, money supply and Fed balance sheet will be released.
*Note — all releases are listed in local time.

Source: Fidelity

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