On 28 September, 2016 – Global stocks mixed

US stocks rallied before the close on the OPEC announcement.
United States
United States markets were lower for most of Wednesday as dividend-paying stocks skidded and health care stocks lost ground. However, stocks jumped on news of an OPEC agreement on oil production. The Dow Jones industrials were up 0.6 percent, the S&P gained 0.5 percent and the Nasdaq edged up 0.2 percent.
Shares AB InBev and Molson Coors rose after SABMiller’s shareholders approved a $103 billion merger that will combine InBev with SABMiller forming the world’s largest brewer. Nike’s profit and sales were stronger than expected, but its stock slipped anyhow as investors worried about challenges, including slower orders in North America. An analyst said orders in that market had slowed as competition grew and were now at their slowest pace in five years. Under Armour however advanced. Tempur Sealy International sank after the company said third-quarter sales were not meeting its expectations. It cut its guidance and said it expected revenue to fall as much as 3 percent this year. Cintas advanced after it reported a bigger profit than expected in its fiscal first quarter and it raised its projections for the year. Energy companies including Exxon Mobil and Chevron rallied.
Janet Yellen said in prepared testimony to the House Financial Services Committee regulators have to be on the watch for new risks to the financial system and be ready to adjust their approach when necessary. She also cited the need to monitor the impact of post-crisis regulatory reform that includes capital surcharges and stress tests. Yellen’s assessment of the nation’s banking sector is positive noting that common equity capital at the eight most systemically important banks has doubled since 2008. Though her statement centered on regulatory issues, she did address economic conditions and monetary policy when responding to Committee members’ questions. She said job creation this year has been “well above” sustainable levels though she sees no meaningful upward pressure on prices. She does expect the unemployment rate to move lower and she said accommodation will need to be gradually removed.
Crude oil prices jumped over 5 percent after OPEC agreed on the need to cut production. The 14 member group reached a consensus that output cuts are needed to help lift prices and rebalance the market, according to the Financial Times. The news surprised traders who did not expect any agreement to emerge from this week’s informal meeting of OPEC ministers. The size of the cut or how the reduction will be achieved is not yet clear. Reports suggested the cartel would drop output to 32.5 million barrels a day, nearly 750,000 barrels per day lower than the level it pumped in August, with country quotas to be agreed at November’s formal meeting. The last time OPEC lowered production was during the global financial crisis in 2008.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$4.50 to US$1,322.50. Copper futures were up 1.3 percent to US$2.20. WTI spot crude was up US$2.03 to US$46.70. Dated Brent spot crude was up US$2.36 to US$48.33. The US dollar was up against the euro, yen and Swiss franc. It retreated against the Canadian and Australian dollars. It was unchanged against the pound. The Dollar Index was virtually unchanged. The yields on both the US Treasury 30 year bond and 10 year note edged up 1 basis point to 2.29 percent and 1.57 percent respectively.
Europe
Stocks advanced Wednesday after declining for three days. Banks stabilized and recovered some lost ground. Energy stocks also were higher on investor hopes for an agreement to curb production at Wednesday’s informal OPEC meeting in Algiers. The FTSE was up 0.6 percent, the CAC gained 0.8 percent, the DAX added 0.7 percent and the SMI was 0.5 percent higher.
Speaking in the German parliament Bundestag, ECB President Mario Draghi said “The ECB is vigorously counteracting risks to price stability using all necessary tools within its mandate.” He also said that low interest rates are necessary today for a return to higher rates in the future and other policy areas must contribute much more decisively to reap the full benefits of monetary policy. Bank of England Deputy Governor Minouche Shafik said that the UK would need more monetary policy easing at some point to avoid a more pernicious economic slowdown in the wake of EU referendum. Further she said that the likely timing of stimulus will depend on the continued evolution of the data over the coming weeks and months. So far, data suggests that the slowdown may not be as sharp or as sudden as feared earlier.
Deutsche Bank climbed after it announced it has reached an agreement with Phoenix Life Holdings Limited, a subsidiary of Phoenix Group Holdings Limited, to sell its Abbey Life business for £935 million. Commerzbank also increased. In Paris, Credit Agricole, Société Générale and BNP Paribas advanced. In London, Royal Bank of Scotland Group gained after it agreed to pay $1.1 billion to settle National Credit Union Administration claims it miss-sold faulty mortgage backed securities in the run-up to the financial crisis. Total and Technip were higher. Tullow Oil, BP and Royal Dutch Shell also gained.
TUI was higher after the tour operator updated investors on recent trading and lifted its 2015/16 core profit guidance. UK Mail Group rallied after Germany’s Deutsche Post DHL agreed to buy the British letter and parcel delivery service. Smiths Group advanced after its fiscal 2016 pre-tax profit increased to £346 million from £325 million last year. J Sainsbury retreated after reporting a 1.1 percent decline in second-quarter sales. SABMiller increased after its shareholders approved its merger with Anheuser-Busch InBev. Anheuser-Busch InBev also gained. Rio Tinto, Anglo American and BHP Billiton all gained — analysts cited increased nickel prices following the suspension of mines in the Philippines as giving the sector a boost.
Asia Pacific
Most Asian stocks retreated Wednesday, as the Japanese yen fluctuated and oil prices turned flat after steep losses overnight on doubts that OPEC would reach a deal at its informal meeting in Algiers. Investors were waiting to hear from the informal OPEC meeting later in the global market day, Federal Reserve Chair Janet Yellen’s testimony before the House Financial Services Committee and ECB President Mario Draghi’s speech before the German parliament.
The Shanghai Composite was 0.3 percent lower in thin trading, as caution crept in ahead of the upcoming National Day holidays. The Hang Seng reversed early losses and was up 0.2 percent.
The Nikkei and Topix tumbled 1.3 percent and 1.4 percent respectively as ex-dividend price adjustments overshadowed comments by Prime Minister Shinzo Abe suggesting further policy action to defeat deflation and boost growth. Exporters Canon, Honda Motor, Nissan, Panasonic and Toyota Motor declined. Banks Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial also retreated, hit by concerns over Deutsche Bank as well as falling bond yields in the US, Germany, Japan and the UK.
Both the S&P/ASX and All Ordinaries inched up 0.1 percent. Woolworths rallied after the retailer won a legal battle against American retail giant Lowe’s on its Masters disinvestment. Banks NAB, Commonwealth and ANZ were higher while mining stocks ended narrowly mixed.
The Kospi retreated 0.5 percent as foreign investors turned net sellers ahead of a meeting of OPEC ministers later in the day. The Sensex was 0.2 percent higher on the day.
Looking Forward
Japan posts August retail sales. Germany releases September unemployment rate and preliminary consumer price index. September EC business and consumer confidence is reported. In the US, the final estimate of second quarter GDP will be posted along with corporate profits. August international trade in goods
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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