On 13 July, 2016 – Global stock mixed
After heady stock gains, investors took a breather on Wednesday.
United States
US shares were little changed at the end of Wednesday’s trading as investors paused after a torrid rally. The Dow Jones industrials were up 0.1 percent to a new high while the S&P was virtually unchanged (up 0.29 point) but also at a new high. The Nasdaq slipped 0.3 percent. Investors were relieved that a period of political uncertainty in Britain came to an end when Theresa May was sworn in as the new prime minister. Hopes of further stimulus in Britain and Japan also shored up markets.
Traders may also have been reluctant to make significant moves ahead of the release of a slew of U.S. economic data over the coming days, including reports on retail sales, industrial production and producer and consumer prices. And the pace of earnings season picks up steam with JPMorgan Chase, Citigroup and Wells Fargo due to release their quarterly results in the next couple of days.
Utility companies gained while energy companies retreated with the price of oil. Teva Pharmaceutical Industries advanced after it gave strong projections for the second quarter and moved closer to completing a $40.5 billion deal for Allergan’s generic drug business.
The Federal Reserve published its Beige Book in preparation for its FOMC meeting on July 26 and 27. According to anecdotal evidence, 11 of 12 Fed districts reported modest to moderate growth. It said that the consumer sector was positive but with signs of softening. The labor market, however, remained stable. Both manufacturing and agricultural are described as mixed with commercial construction up modestly and housing continuing to strengthen. Oil prices are not giving a lift to overall prices as yet. Price pressures are slight but increased oil prices are improving the general outlook for the Kansas City and Dallas districts. Brexit does not appear to be a major concern, cited as a negative by only 2 districts.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up 35 US cents to US$1,342.75. Copper futures were up 1.2 percent to US$2.24. WTI spot crude was down US$1.80 to US$45.00. Dated Brent spot crude was down US$1.99 to US$46.48. The US dollar was up against the pound and the Australian dollar. However, it declined against the yen, euro, Swiss franc and the Canadian dollar. The Dollar Index was down 0.3 percent. The yield on US Treasury 30 year bond was down 6 basis points to 2.18 percent while the yield on the 10 year note slipped 4 basis points to 1.47 percent.
Europe
Stocks were mixed Wednesday following four consecutive days of gains. Disappointing Chinese merchandise trade and Eurozone industrial output data dampened investor spirits. Investors also took the opportunity to take profits following the recent gains. The FTSE slipped 0.2 percent and the DAX retreated 0.3 percent. The CAC added 0.1 percent while the SMI was virtually unchanged (down 0.8 point).
The Bank of England monetary policy committee holds its first post-Brexit meeting with most market analysts expecting a cut in the current 0.5 percent interest rate. After markets here closed on Wednesday, David Cameron handed over the UK the prime minister’s role to Theresa May.
RWE and E.ON were higher. Banks including Deutsche Bank, Commerzbank, BNP Paribas, Société Générale and Credit Agricole were lower. In Paris, Alstom climbed after reporting a 9 percent increase in sales for the first quarter 2016/17. Accor Hotels jumped after acquiring FRHI Hotels & Resorts and its three luxury hotel brands. In London, Burberry Group advanced after reporting a 4 percent rise in first-quarter retail revenue. J D Wetherspoon gained after the pub operator predicted an improved performance for this financial year after trade increased in the 11 weeks to July 10. Homebuilder Barratt Developments declined after saying it would slow down its construction plans amid challenging market conditions following the Brexit vote. Rivals Taylor Wimpey and Persimmon also were lower.
May Eurozone industrial production dropped 1.2 percent on the month.
Many are expecting the BoE to announce an interest rate cut following its first post-Brexit policy meeting. U.K. politics remained in focus, as newly sworn in prime minister Theresa May selects her senior ministers.
Asia Pacific
Most Asian stocks advanced Wednesday, even though the gains remained capped somewhat prior to the release of China’s merchandise trade data which was released after the major markets had closed.
Both imports and exports declined more than expected in June. In US$ terms, exports dropped 4.8 percent and imports declined 8.4 percent from a year ago. Investors are waiting for June industrial output and second quarter gross domestic product data on Friday for underlying indications on the direction of the economy. The Shanghai Composite was up 0.2 percent while the Hang Seng added 0.5 percent.
The Nikkei climbed 0.8 percent but ended off the day’s highs after the government denied the possibility of using “helicopter money” to shore up the country’s output and end over a decade of deflation. The yen climbed and oil prices declined. Nomura Holdings, Sumitomo Mitsui Financial, Mitsubishi UFJ Financial, Honda Motor, Mazda Motor, Suzuki Motor and Toyota Motor advanced. Nintendo retreated on profit taking after climbing as much as 56.65 percent since Thursday last week following the release of its instant hit mobile game Pokemon Go.
Australian shares extended gains for a fifth straight day as rising commodity prices supported stocks in the resources sector. Investors shrugged off the latest survey from Westpac Bank and the Melbourne Institute, which showed that a measure of Australian consumer sentiment eased in July in the run up to the 2016 federal election. The S&P/ASX and All Ordinaries both added 0.7 percent. BHP Billiton, Rio Tinto and Fortescue Metals Group climbed after iron ore prices jumped almost 7 percent overnight. The big four banks advanced on hopes of further monetary stimulus from Japan and the UK.
The Kospi was up 0.7 percent while the Sensex was virtually unchanged (up 7.04 points).
Global Stock Markets
Looking forward
Australia posts its labour force survey for June. The Bank of England announces in monetary policy decision. The US releases its PPI-FD and weekly jobless claims, money supply and Fed balance sheet data.
*Note — all releases are listed in local time.
Source: Fidelity
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