On 19 May, 2016 – Global stocks retreat

Investors became risk averse as they reacted to the FOMC minutes.
United States
Stocks continued Wednesday’s decline on Thursday after the Federal Reserve FOMC minutes indicated that a June interest rate increase was still in play. It was a jolt to traders — a rate increase had been all but dismissed for the foreseeable future. Although stocks pared their losses, the Dow Jones industrials were down 0.5 percent, the S&P declined 0.4 percent and the Nasdaq lost 0.6 percent. The S&P tumbled to its lowest level since March.
Jobless claims declined by 16,000 in the May 14 week — the sample week for the May employment situation report. The May Philadelphia Fed survey was virtually unchanged from April and indicated a slight contraction in manufacturing activity in the Mid-Atlantic region. The index of leading economic indicators was up 0.6 percent to confirm that April was a solid month for economic data.
Among the stocks that declined were telephone and utilities. Both Verizon and AT&T were lower. Walmart Stores advanced after the company reported surprisingly strong sales and released an optimistic outlook. Urban Outfitters gained after the company reported first-quarter sales that exceeded expectations. Darden Restaurants also gained on the day. Monsanto was up after the German drug and chemicals company Bayer confirmed that it had entered talks with Monsanto. Cisco Systems was up after it reported results that beat expectations.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$26.65 to US$1,246.25. Copper futures were down 0.7 percent to US$2.06. WTI spot crude was unchanged on the day at US$48.19. Dated Brent spot crude was down 13 US cents to US$48.80. The US dollar was up against the euro, Swiss franc and the Canadian dollar. However, it declined against the yen and pound and was unchanged against the Australian dollar. The Dollar Index was up 0.1 percent. The yield on US Treasury 30 year bond was down 3 basis points to 2.64 percent while the yield on the 10 year note slipped 2 basis points to 1.85 percent.
Europe
Stocks tumbled Thursday as investors got their first chance to respond to the Federal Reserve’s FOMC minutes that were released after markets here were closed on Wednesday. Also adding to the downward pressure was the news of a missing EgyptAir flight. The stronger US currency sent commodity prices lower which in turn pressured mining and energy stocks. The FTSE tumbled 1.8 percent, the DAX lost 1.5 percent, the CAC declined 0.9 percent and the SMI was 0.8 percent lower.
The minutes of the Fed’s April meeting hinted strongly that an interest rate increase was on the table for the June FOMC meeting. Many FOMC members said that it would likely be appropriate to raise rates in June if upcoming economic data were consistent with higher growth in the second quarter.
Summary minutes of the ECB’s April policy meeting offered little fresh insight into the central bank’s thinking. Having only just launched its latest easing initiative in March, there was too little new data available to make a useful assessment of any changes in underlying trends in the Eurozone economy. However, in general the Bank seemed to be cautiously content with the way in which the package had been received.
EgyptAir flight disappeared over the Mediterranean Sea sending travel stocks lower. TUI and easyJet retreated. International Consolidated Airlines dropped as did InterContinental Hotels Group. Deutsche Lufthansa and Air France-KLM also were lower.
Bayer declined after it made an unsolicited takeover offer for Monsanto in a deal that could create the world’s biggest supplier of seeds and pesticides. Merck KGaA climbed after its first quarter profit was lifted mainly by the acquisition of pharmaceutical equipment maker Sigma-Aldrich. Both RWE and E.ON retreated. In Paris, Technip jumped after it agreed to merge with US rival FMC Technologies in an all-stock deal. Royal Mail declined after reporting a fall in net profit amid a challenging trading environment. Thomas Cook Group tumbled after warning its full-year earnings would be at the lower end of expectations. Fresnillo was down on a broker downgrade. Randgold Resources was lower as gold hovered near three-week low. Anglo American, Glencore, BHP Billiton and Rio Tinto retreated. Credit Suisse dropped as it began trading on an ex-dividend basis. UBS advanced. Julius Baer also was higher after the company released interim results for the first 4 months of the year. Gross margin was slightly above expectations.
The French jobless rate held steady in the first quarter. The ILO unemployment rate in metropolitan France and overseas departments held steady at 10.2 percent while for mainland France it remained at 9.9 percent. UK April retail sales volume climbed 1.3 percent from March when it decreased by a revised 0.5 percent.
Asia Pacific
Most Asian stocks declined Thursday. Falling commodity prices dampened sentiment after the Federal Reserve’s April FOMC minutes indicated that members have a strong bias for raising rates as early as June, depending on incoming economic data.
The Shanghai Composite was virtually unchanged (down 0.60 point) in thin trading after a State Council executive meeting chaired by Premier Li Keqiang urged state owned enterprises to boost their competitiveness. The Hang Seng lost 0.7 percent.
The Nikkei was also virtually unchanged (up 1.97 point) after erasing early gains ahead of a G7 meeting to be held this week in Japan. March core machinery orders rose 5.5 percent from the previous month. However, a forecast in the report indicated that orders will decline in the three months April through June by 3.5 percent from the previous quarter respectively. Inpex, Japan Petroleum Exploration and JX Holdings declined after oil prices slipped from six-month high. Suzuki Motor advanced after tumbling in the previous session following its admission that it had used improper fuel economy tests for some cars it sold in Japan.
Both the S&P/ASX and All Ordinaries were down 0.6 percent as a stronger US dollar weighed on commodity prices and the employment report showed job creation rose by less than expected in April. The unemployment rate remained at 5.7 percent while employment was 10,800 higher. Miners were among the worst hit, with BHP Billiton, Rio Tinto and Fortescue Metals Group retreating while gold miner Newcrest Mining and Evolution Mining tumbled as gold prices hovered near three-week low.
The Kospi was down 0.5 percent and the local currency fell sharply against the US dollar on worries over a possible US interest rate increase. Singapore’s Straits Times tumbled 1.3 percent while the Sensex lost 1.2 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*
Germany posts April producer price index. Canada releases March retail sales and April consumer price index. The US reports April existing home sales. Finance ministers and central bank governors from the Group of 7 will meet in Sendai, Japan on Friday and Saturday.
*Note — all releases are listed in local time.

Source: Fidelity

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