On 04 October, 2016 – US dollar rallies
Stocks in Asia and Europe advanced while those in the US were lower.
United States
Stocks declined in afternoon trading after an early gain drifted away. Shares of utilities and real estate companies were down the most after bond yields rose sharply. However, bank stocks moved higher. Both the Dow Jones industrials and the S&P were down 0.5 percent while the Nasdaq slipped 0.2 percent. Steady dividend payers like phone and real estate companies and utilities appear to have fallen out of favor as investors anticipate higher rates and the yields on bonds to rise. Sterling continued to tumble, falling to its lowest level against the dollar in 31 years early Tuesday.
MDarden Restaurants advanced after the company reported strong first quarter results that beat expectations. The company also raised its annual projections and said it would buy back more of its stock. The United States-listed shares of Deutsche Bank rose. Apple, Goldman Sachs Group and JP Morgan advanced. Google unveiled its two newest phones — the Pixel and the Pixel XL at an event in San Francisco, California on Tuesday. Cargill reported that its net earnings for the fiscal 2017 first quarter ended August 31, 2016 were $852 million, up 66 percent from $512 million a year ago.
The International Monetary Fund cut its estimate for United States economic growth in 2016 to 1.6 percent from the 2.2 percent it predicted in July. A slower growing economy could mean the Federal Reserve will move more gradually to increase interest rates, which would help stocks.
The corporate earnings season unofficially kicks off when Alcoa reports results next week.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$30.00 to US$1,283.30. Copper futures were down 1.1 percent to US$2.17. WTI spot crude was down 18 US cents to US$48.63. Dated Brent spot crude was down 7 US cents to US$50.82. The US dollar was up against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was up 0.5 percent. The yield on US Treasury 30 year bond was up 7 basis points to 2.41 percent while the yield on the 10 year note was up 6 basis points to 1.68 percent.
Europe
Stocks advanced Tuesday as investor concerns over Deutsche Bank continued to ease and the stock recovered some of its recent losses. The FTSE broke through the 7,000 barrier as the nation’s exporters benefitted from a weakening pound. The pound sank to a 31-year low against the US dollar following Prime Minister Theresa May’s speech to the Conservative party conference on Sunday. The FTSE added 1.3 percent, the DAX advanced 1.0 percent, the CAC gained 1.1 percent and the SMI was 0.8 percent higher.
TDeutsche Bank rose, recovering further after recent steep losses on speculation that the lender is negotiating a much lower fine than expected with the US Department of Justice. Volkswagen gained after the automaker agreed to pay $1.2 billion to its 652 US dealers as compensation for the diesel emissions scandal. BMW jumped after a broker upgrade. Peugeot climbed on a report that it is working on a strategy to make another entry into India.
In Paris, LVMH advanced after it agreed to buy a majority stake in German luggage maker Rimowa for €640 million. In London, Glencore increased after the company launched an offer to buy back up to $1.25 billion debt as part of efforts to strengthen its balance sheet. Intertek Group surged after a broker upgrade. Greggs advanced after reporting a rise in third-quarter sales in line with expectations. Both Randgold Resources and Fresnillo dropped after gold prices fell to their lowest level since June.
Eurozone August producer prices decreased 0.2 percent on the month. Spain’s unemployment in September declined at a record annual pace to reach its lowest level in seven years. The UK construction sector expanded for the first time since May largely due to a recovery in residential building. The construction PMI rose unexpectedly to 52.3 in September from 49.2 in August.
Asia Pacific
Asian stocks advanced Tuesday after oil futures settled at a multi-week high overnight and solid US manufacturing data helped weaken the yen.
The Nikkei and Topix were up 0.8 percent and 0.7 percent after then yen declined against the US dollar and a measure of Japan consumer confidence topped forecasts. Exporters Sony, Mazda Motor, Toshiba, Panasonic and Honda Motor climbed. Mitsubishi UFJ Financial advanced. Olympus jumped after the camera maker said it would sell subsidiary Nippon Outsourcing to Longreach Group. Hitachi Construction Machinery gained after it made an A$689 million offer to acquire Australia’s Bradken.
Both the S&P/ASX and All Ordinaries advanced 0.1 percent. Shares reversed early losses to close marginally higher after the Reserve Bank of Australia kept its interest rate unchanged at 1.5 percent, citing an overheating housing market, low inflation and the stubbornly high Aussie dollar. The big four banks turned in a mixed performance while miners and energy producers closed mostly higher. Rio Tinto and Santos climbed.
The Kospi added 0.5 percent as foreign investors bought heavyweight auto and tech shares. The Hang Seng was 0.4 percent higher. Mainland China indices remained closed for a week-long holiday. The Sensex was up 0.3 percent after the Reserve Bank of India reduced the key policy rate or the repo rate by 25 basis points and hinted at future rate cuts, citing softening inflation outlook amid a good monsoon.
Looking Forward
Australia posts August retail sales. September composite PMIs will be released for Japan, France, Germany and the Eurozone. Services PMIs will be reported for the UK, India and the US. The Eurozone releases August retail sales. In the US, September ADP private employment and ISM nonmanufacturing index will be posted along with August international trade and factory orders.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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