On 21 September, 2016 – Global stocks mixed

The Bank of Japan and the FOMC kept their interest rates unchanged sending stocks higher but the US dollar lower.
United States
Stocks advanced prior to the Federal Reserve announcement and then continued to climb throughout the afternoon after the FOMC kept its monetary policy unchanged as expected. The Dow Jones industrials were up 0.9 percent, the S&P climbed 1.1 percent and the Nasdaq added 1.0 percent.
US markets were higher Wednesday after the Federal Reserve said it would keep its fed funds interest rate range unchanged at 0.25 percent to 0.50 percent. The Bank noted the economy was improving, and broadly hinted at a rate increase later in the year. The statement sent dividend-paying stocks higher. Energy companies were higher thanks to an increase in the price of oil.
Adobe Systems climbed after it raised its forecasts for the year. Adobe also reported solid third-quarter results. FedEx advanced after it increased its forecasts for the year projecting a record holiday season. The company also posted better first quarter results than expected. KB Home gained after the company disclosed strong results. Biotech drug companies traded lower as the chief executive of the drug maker Mylan addressed Congress about the rising price of Mylan’s emergency allergy shot EpiPen. Drug companies, especially ones that make costly biotech products, have been hit over the last year by repeated controversies over drug prices. Amgen and Alexion Pharmaceuticals retreated. Walgreens Boots and CVS also slipped. CarMax was lower after the company reported weaker than expected sales. Target said it planned to buy back $5 billion in company stock. Microsoft said it would buy back $40 billion in stock and also raised its quarterly dividend.
The Bank of Japan left its policy interest rate minus 0.1 percent as expected. The BoJ will also continue to purchase JGBs at an annual rate of ¥80 trillion, again as expected. However, now there is an explicit undertaking to adjust these purchases to target a zero percent yield for the 10-year JGB. This means that the BoJ will use the shape of the yield curve to implement policy rather than the pace of monetary expansion. The BoJ is aiming to push inflation above its 2.0 percent target as soon as possible so that its average level will be closer to the target over the longer term.
As expected, the Federal Reserve left its key fed funds rate range at 0.25 percent to 0.50 percent. The vote by the FOMC was 6 to 3. The three that voted against the decision — Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren — were looking for a rate increase at this meeting. The FOMC said the economy had gotten a bit stronger after some shaky results in the spring. The Fed said the argument for raising rates has “strengthened.” The Fed last raised interest rates in December 2015.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$12.30 to US$1,326.10. Copper futures were virtually unchanged at US$2.16. WTI spot crude was up 55 US cents to US$43.85. Dated Brent spot crude was up US$1.20 to US$47.08. 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 0.65 percent. The yield on US Treasury 30 year bond was down 5 basis points to 2.38 percent while the yield on the 10 year note declined 4 basis points to 1.65 percent.
Europe
Markets rallied Wednesday following the Bank of Japan monetary policy announcement. However, gains were pared in afternoon trading — traders turned more cautious prior to the Federal Reserve policy announcement which will occur after markets here are closed for the day. The FTSE edged up 0.1 percent and the SMI inched 0.1 percent lower. The CAC and DAX were up 0.5 percent and 0.4 percent respectively.
Bank and financial stocks were among the strongest performers in Europe, thanks to the new measures announced by the Bank of Japan. Insurance stocks also benefitted from the announcement. Evotec gained but Bayer retreated after they entered into a five-year, multi-target research partnership for the development of multiple clinical candidates for the treatment of kidney diseases. Commerzbank, BNP Paribas, Société Générale and Crédit Agricole finished higher.
In Paris, video-game maker Ubisoft was lower after it unveiled plans to sell €400 million of convertible bonds in a private placement. In London BHP Billiton was up after saying it would fight the Australian Tax Office over an A$1 billion tax bill dating back to 2003. Diageo increased after starting its 2017 fiscal year on a positive note. Barclays climbed on a broker upgrade. Standard Chartered, Lloyds Banking Group and HSBC also finished up. Zurich Insurance Group gained after the company announced that it would combine its corporate and commercial businesses into a single global business as part of its process to simplify and strengthen its organization.
Asia Pacific
Most Asian stock indices advanced Wednesday after the Bank of Japan announced an overhaul of its massive monetary stimulus program. The BoJ kept its key interest rate steady at minus 0.1 percent and announced substantial changes to its monetary policy framework, including adopting quantitative and qualitative easing with yield curve control across different maturities. Investors here too were waiting for the Federal Reserve’s announcement later in the global market day.
The Shanghai Composite index inched up 0.1 percent with steelmakers rallying after Baosteel Iron and Steel announced it would acquire debt-ridden smaller rival Wuhan Iron and Steel via an equity swap. The Hang Seng added 0.6 percent.
The Nikkei jumped 1.9 percent after the Bank of Japan’s actions. The broader Topix index closed 2.7 percent higher after the central bank announced it would adjust its exchange-traded fund purchases to buy more ETFs tracking the Topix. Banks Mizuho Financial, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial soared as Japan’s 10-year government bond yields rose into positive territory for the first time since March. A weaker yen boosted exporters, with Honda Motor, Mazda, Panasonic and Sharp advancing. Takata dropped on reports it has received bids from potential suitors including buyout firm KKR & Co. and Japanese peer Daicel. Investors shrugged off weak merchandise trade data.
The S&P/ASX climbed 0.7 percent while the All Ordinaries was up 0.6 percent. Banks NAB, ANZ and Westpac advanced after the Bank of Japan decided not to delve further into negative interest rates. BHP Billiton gained for the fifth straight session after saying it would fight the Australian Tax Office over an A$1 billion tax bill dating back to 2003. Rival Rio Tinto also was higher.
The Kospi added 0.5 percent and the won rose against the US dollar after the Bank of Japan shifted its main policy target to the yield curve from the monetary base. The Sensex slipped 0.1 percent.
Looking Forward
The Reserve Bank of New Zealand announces its monetary policy decision. September flash EC consumer confidence will be posted. In the US, Existing home sales and leading indicators for August will be released. July FHFA house price index will be posted. Weekly jobless claims, money supply and Fed balance sheet will be reported.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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