On 25 July, 2016 – Global stocks mostly lower
Investors wait for the Federal Reserve and Bank of Japan policy meeting announcement.
United States
Shares were lower as the market pulled back after a four week gain. Investors assessed corporate earnings as they waited for the FOMC announcement on Wednesday. The Dow Jones industrials were down 0.4 percent, the S&P retreated 0.3 percent and the Nasdaq was virtually unchanged (down 2.5 points).
Yahoo declined after the company announced that Verizon would buy Yahoo’s advertising, media and email businesses for $4.8 billion, ending a five-month auction. Verizon will add Yahoo to its portfolio of recently purchased media companies, which includes AOL. After the deal is complete, Yahoo will be a shell of its former self, existing mainly as a holding company for its Alibaba and Yahoo Japan investments, as well as its patent portfolio. Verizon also declined. Sprint soared after the company reported a wider than expected loss but added a larger number of subscribers than expected. SoftBank of Japan bought a controlling stake in Sprint nearly three years ago.
Over the weekend, finance ministers of the Group of 20 major economies, meeting in China, promised to protect the world economy from the shock waves of Britain’s decision to leave the European Union and to increase sluggish growth, while rejecting trade protectionism. While the statement was short of concrete promises, the tone seemed to have reassured some investors at a time of heightened uncertainty.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$7.60 to US$1,313.15. Copper futures were down 0.4 percent to US$2.23. WTI spot crude was down US$1.14 to US$43.05. Dated Brent spot crude was down US$1.01 to US$44.68. The US dollar was down against the yen, euro, pound, Swiss franc and the Australian dollar. However, it advanced against the Canadian dollar. The Dollar Index slipped 0.1 percent. The yields on both the US Treasury 30 year bond and 10 year note were up 1 basis point to 2.29 and 1.57 percent.
Europe
European stocks were mixed Monday after getting off to a positive start following the release of a better than expected German Ifo business sentiment report. However, the markets pared their gains in the afternoon. The late reversal was partly due to the pullback in crude oil prices. Weakness in metal prices also weighed on mining stocks, while financial stocks also struggled. Investors were also in a cautious mood ahead of this week’s policy meetings for both the Bank of Japan and the Federal Reserve. The FTSE was 0.3 percent lower while the CAC and DAX added 0.2 percent and 0.5 percent respectively. The SMI was virtually unchanged.
In Paris, household equipment manufacturer SEB jumped after saying it expects to achieve organic sales growth above 5 percent and an increase in operating results from activity above 10 percent in 2016. LVMH increased after it sold Donna Karan International to US company G-III Apparel Group for $650 million. L’Oréal gained after it agreed to buy IT Cosmetics for a cash purchase price of $1.2 billion. LafargeHolcim advanced after the cement giant signed a pact with Siam City Cement Public Company Limited for the divestment of its interest in Holcim Lanka for an enterprise value of $400 million.
Air France KLM retreated as its cabin crew unions prepare to begin a seven-day walkout this week. In London, casino operator Rank Group declined while online gambling operator 888 Holdings gained. Bookmaker William Hill jumped after it said it received a “highly preliminary” approach from 888 Holdings and Rank Group regarding a potential combination. Julius Baer Group climbed in Zurich after the private banking group reported an increase in its first-half profit. Royal Dutch Shell, Tullow Oil, BP and Cairn Energy declined.
German July Ifo survey showed a surprisingly small deterioration in economic sentiment. The headline business climate index dropped just 0.4 points to 108.3, reflecting slightly weaker business expectations and masking a minimal improvement in the assessment of current conditions.
Asia Pacific
Asian stocks were mixed Monday, although lower commodity prices on a firmer dollar and caution before two key central bank meetings served to limit the upside. Underlying sentiment remained supported after G20 finance chiefs and central bankers pledged to use all policy tools to boost global economic growth.
Both the Shanghai Composite and Hang Seng edged up 0.1 percent as investors wait for the US Federal Reserve’s policy announcement on Wednesday (US EDT). While no policy change is anticipated, the accompanying statement will be parsed carefully by analysts.
The Nikkei was virtually unchanged (down 6.96 points). Investors turned cautious before the Bank of Japan’s policy meeting announcement on Friday (JT). The yen was almost flat and trade data signaled improvement in the economy, helping limit the downside. Meanwhile, the government kept its assessment of the economy unchanged in July but adopted a weaker view on corporate sentiment due to a strengthening yen. Nintendo plunged after the company said the financial impact from the worldwide hit Pokemon Go will be “limited” and that it doesn’t expect to revise its annual forecast higher based on “current conditions.” McDonald’s Holdings Japan, the game’s sponsor, tumbled.
Both the S&P/ASX and All Ordinaries added 0.6 percent. Investors are anticipating an interest rate cut next week when the Reserve Bank of Australia next meets. The big four banks advanced. Woolworths climbed after announcing it would cut 500 jobs and take a one-time charge of A$959 million amid a restructuring of its operations.
The Kospi was up 0.1 percent as foreign investors extended their buying streak to a 13th consecutive session. The Sensex added 1.1 percent thanks in part to sustained foreign fund inflows on optimism over the passage of the GST (Goods and Services Tax) Bill in Parliament’s ongoing monsoon session.
Looking forward
In the US, June new home sales and July consumer confidence will be reported.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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