On 02 August, 2016 – Global stocks retreat
Investors wait for the important Bank of England policy announcement Thursday and the US employment report on Friday amid sinking oil prices.
United States
US stocks tumbled Tuesday. Consumer companies took big losses as investors worried about the health of the American economy. Machinery companies were also down, while concerns about Europe’s banks hurt financial stocks. The price of oil continued to slide. The Dow Jones industrials were down 0.5 percent, the S&P declined 0.6 percent and the Nasdaq lost 0.9 percent.
Royal Caribbean declined after it cut its forecast for the year as the strong dollar continued to affect its results. Auto companies reported their United States sales in July. General Motors said its sales fell 2 percent and Ford Motor said its sales fell 3 percent. The drop in sales was expected because of hot weather, but investors are worried that after setting records, American auto sales may have peaked. GM and Ford retreated. Airline stocks fell after Delta Air Lines said a revenue measurement fell in July. Delta and American Airlines were lower.
Emerson Electric declined after it posted disappointing quarterly results. Citigroup and Morgan Stanley declined, following European banks lower for a second day. The losses extended to banks that were effectively given a clean bill of health by the European Banking Authority in last Friday’s stress tests. CVS Health advanced after it raised its 2016 forecast as specialty drug prices keep rising and deals for Omnicare and Target’s pharmacy and clinic unit bolstered its results. Biogen shares rose after The Wall Street Journal reported that the company had drawn takeover interest from drug companies including Merck and Allergan. Pfizer tumbled after the company reported better-than-expected quarterly results but revenue from its branded patent-protected medicines disappointed.
June personal income rose 0.2 percent while personal spending was up 0.4 percent.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$14.10 to US$1,363.75. Copper futures were up 0.4 percent to US$2.21. WTI spot crude was down 42 US cents to US$39.64. Dated Brent spot crude was down 26 US cents to US$41.88. The US dollar was down against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was down 0.9 percent. The yield on US Treasury 30 year bond was up 6 basis points to 2.30 percent while the yield on the 10 year note was up 3 basis points to 1.54 percent.
Europe
European stocks tumbled Tuesday, falling to a two week low. Banks weighed on the indices. The latest round of EU bank stress tests failed to ease worries about profitability in the sector, coupled with weak results from Germany’s Commerzbank. Continued weakness in crude oil prices also weighed on investor sentiment. Investors also appear to be hesitant to make major moves ahead of the Bank of England announcement on Thursday and the US employment report at the end of the week. The FTSE was down 0.7 percent, the SMI lost 1.4 percent and both the CAC and DAX were 1.8 percent lower.
Commerzbank dropped after reporting a grim set of quarterly results amid persistently low interest rates. Deutsche Bank and Crédit Suisse retreated on news that they will be dropped from the STOXX Europe 50 index next Monday. Infineon Technologies declined after its third-quarter sales and profit missed estimates. Deutsche Lufthansa was down after the airline lowered its full-year forecast for adjusted earnings before interest and taxes.
Metro was lower after reporting an unexpected loss in its fiscal third quarter due to restructuring costs. In Paris, BNP Paribas, Société Générale and Crédit Agricole declined. In London, Travis Perkins was lower despite reporting an 11 percent rise in first-half pretax profit. Intercontinental Hotels Group advanced after the owner of the Holiday Inn and Crowne Plaza brands sounded confident about the outlook for the full-year after reporting a rise in first-half operating profit. Barclays, Royal Bank of Scotland, Lloyds Banking Group and Standard Chartered declined. Banca Monte dei Paschi di Siena tumbled in Milan. UniCredit declined on growing worries over bad loans.
Asia Pacific
Asian stocks were mostly lower in cautious trading given recent yen strength, the continued downturn in oil prices and lackluster US data weighing on markets. Japanese Prime Minister Shinzo Abe’s cabinet approved a ¥28 trillion ($274 billion) stimulus package late in the day in a bid to lift growth and inflation. The package includes ¥7.5 trillion in new, direct spending by the national and local governments.
The Shanghai Composite added 0.6 percent as small-cap stocks rebounded from recent losses on concerns about slowing economic growth and regulatory crackdown on speculative trading. Property developers also gained ground after a report showed home prices in China rose for the 15th consecutive month in July. Trading in Hong Kong was suspended for the day after a typhoon warning.
The Nikkei retreated 1.5 percent as the yen held on to its recent gains and banks succumbed to selling pressure after recording big gains in the previous two sessions. Automakers Honda Motor, Nissan and Toyota along with Fast Retailing and Fanuc were lower while Softbank advanced after unveiling fund-raising plans. Energy stocks Inpex Corp, JX Holdings and Japan Petroleum tumbled. Among banks, Mitsubishi UFJ Financial, Mizuho Financial Group and Sumitomo Mitsui Financial retreated.
Both the S&P/ASX and All Ordinaries lost 0.8 percent after sluggish building approvals and trade balance figures. The Reserve Bank of Australia cut its policy interest rate by 25 basis points to a record low of 1.5 percent. The big four banks were down as were miners Fortescue Metals Group and BHP Billiton. Woodside Petroleum, Oil Search, Origin Energy and Santos also declined after crude oil prices fell overnight.
The Kospi was down 0.5 percent in thin trading as tumbling oil prices dented investors’ appetite for risk. The Sensex slipped 0.1 percent in lackluster trading.
Looking forward
China posts July general services PMI. Japan, the Eurozone, France and Germany release July composite PMIs. India, the UK and US report July services PMIs. The Eurozone releases June retail sales. In the US, July ADP employment report, ISM nonmanufacturing index and the weekly EIA petroleum status report will be released.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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