On 11 July, 2016 – Stocks stage a global rally
Investors celebrated Friday’s positive US employment report along with Australian and Japanese election results.
United States
Stocks closed higher following market rallies overseas after the ruling party in Japan won a key election and Australia’s tight election results were announced. The Dow Jones industrials were up 0.4 percent, the S&P added 0.3 percent and the Nasdaq climbed 0.6 percent. The S&P ended the day at a record high, 2,137. A better than anticipated employment report Friday continued to boost investors’ spirits.
Technology and bank stocks were up sharply, while utilities, phone companies and consumer goods makers that investors have favored lost ground. Boeing and JPMorgan Chase advanced. Kinder Morgan rallied after it said it is selling a stake in a 7,600-mile natural-gas pipeline system to Southern for $1.47 billion.
Alcoa reported better-than-expected quarterly results. Adjusted second-quarter profits were 15 cents per share, beating estimates. Revenues slid 10 percent from a year ago to $5.3 billion, also topping forecasts. Alcoa said a decline in revenue due to lower aluminium and alumina pricing, along with the impact of divested and closed business, “more than offset” an increase in sales from recent acquisitions and organic growth.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$2.85 to US$1,357.10. Copper futures were up 1.2 percent to US$2.14. WTI spot crude was down 98 US cents to US$44.43. Dated Brent spot crude was down 75 US cents to US$46.01. The US dollar was up against the yen, and the Canadian and Australian dollars. However, it declined against the pound and Swiss franc. The currency was unchanged against the euro. The Dollar Index was up 0.3 percent. The yield on US Treasury 30 year bond was up 5 basis points to 2.15 percent while the yield on the 10 year note was up 7 basis points to 1.43 percent.
Europe
European stock indices rallied Monday on hopes for further global central bank stimulus and the continued euphoria from Friday’s strong US jobs report. The FTSE was up 1.4 percent, the CAC gained 1.8 percent, the DAX was 2.1 percent higher and the SMI added 1.0 percent.
Investors are expecting that the Bank of England will cut interest rates when it reviews its monetary policy on Thursday. Britain will have a new Prime Minister on Wednesday. Home Secretary Theresa May was confirmed as the new Conservative Party leader after consulting the board.
ThyssenKrupp jumped after the steelmaker on Saturday defended merger talks with Indian rival Tata Steel. Deutsche Börse gained after it said it is considering lowering the shareholder approval threshold for its proposed merger with London Stock Exchange Group from 75 percent. Volkswagen, BMW and Daimler finished higher. In Paris, LafargeHolcim advanced after the company said it had agreed to divest its interest in Lafarge India for an enterprise value of approximately $1.4 billion. Airbus Group advanced after Bloomberg reported that Airbus Group and Go Airlines (India) are in discussions regarding an additional order for 70 A320s worth around $7.5 billion.
In London, Burberry Group increased after appointing Marco Gobbetti as Chief Executive Officer while Christopher Bailey will take on the new role of President and Chief Creative Officer. Barratt Development, Persimmon and Taylor Wimpey climbed. The Sunday Telegraph paper said late on Saturday that Bank of England officials are considering imposing curbs on withdrawals from property investment funds. Miners Anglo American, Glencore, Fresnillo and Antofagasta gained. Banca Monte dei Paschi di Siena climbed in Milan after announcing last week it was working with European banking authorities to devise a solution to quickly resolve its bad-loan burden.
Asia Pacific
Asian stock markets rallied on Monday as they celebrated the latest US employment report. The US added 287,000 jobs in June, far more than expected and the most since October. The report put to rest lingering worries about the strength of the labor market and the broader economy. Investors now have the view that the Federal Reserve will not increase interest rates in the near term, given the uncertain consequences of Brexit and the November presidential election. Investor sentiment was also bolstered by election results in Australia and Japan, a weaker yen and hopes of further policy easing in China.
Japanese shares led regional gains as Prime Minister Shinzo Abe’s ruling coalition won a landslide victory in an election for Parliament’s Upper House and the yen fell sharply against the dollar and euro on hopes for stimulus and economic revival. Investors shrugged off May’s dismal core machinery orders report — orders unexpectedly fell for a second straight month. The Nikkei added 4.0 percent. Exporters Panasonic, Sony, Honda Motor and Toyota rallied along with banks Mizuho Financial Group and Mitsubishi UFJ Financial Group. Nintendo soared a week after its new Pokemon GO videogame for smartphones debuted in the US, Australia and New Zealand.
The Shanghai Composite added 0.2 percent as tepid inflation data boosted stimulus hopes. The Hang Seng gained 1.5 percent. The consumer price index was up 1.9 percent — its slowest pace since January and the producer price index extended its decline, pointing to continued weak domestic demand.
The S&P/ASX added 2.0 percent while the All Ordinaries was 1.9 percent higher. Prime Minister Malcolm Turnbull declared victory for the ruling conservatives after a closely-fought election. BHP Billiton, Rio Tinto and Fortescue Metals Group advanced. Mineral sands explorer Iluka Resources and Whitehaven Coal were higher. Gold miners Newcrest, Evolution and Regis Resources jumped — gold prices held steady in Asia despite a rally in global equities. The big four banks rallied.
The Kospi was 1.3 percent. The Sensex added 1.8 percent thanks to Friday’s US employment report. Investor sentiment was also bolstered by gains in the rupee after the Congress indicated it could drop its objections to the GST Bill if the government suggests ways for legal ring-fencing of the tax rate.
Global Stock Markets
Looking forward
Japan releases June producer price index. India reports June consumer prices and May industrial production. Germany releases final June CPI. In the US, May JOLTS and wholesale trade will be released.
*Note — all releases are listed in local time.
Source: Fidelity
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