On 12 October, 2016 – Global stocks mostly lower
Investors waited for the minutes of the latest FOMC meeting.
United States
US stocks barely moved in either direction both before the release of the FOMC minutes or after. The Dow Jones industrials and S&P edged up 0.1 percent while the Nasdaq slipped 0.1 percent. Shares of energy companies were lower along with oil prices.
LM Ericsson tumbled after the company forecast disappointing quarterly results and said it did not expect improvement any time soon. Juniper Networks and Cisco Systems also were lower. Stanley Black & Decker advanced after it agreed to buy the tools business of the consumer products maker Newell Brands for $1.95 billion. Newell Brands also gained. Valero Energy and Chevron were lower. Consumer companies including Lowe’s and Best Buy were higher. Fortinet fell after the company released disappointing third-quarter estimates. The company said its customers were taking their time before buying and its new sales organization struggled in North America.
Humana was down after it said its plans received lower ratings from the Centers for Medicare and Medicaid Services, which could affect the bonus payments the company receives from the government. Barracuda Networks gained after it reported a larger profit and better sales than expected. Novavax, Juno Therapeutics and Agios Pharmaceuticals were down.
The Federal Reserve published the minutes from its September 21 FOMC meeting. According to minutes some members warned that the labor market could tighten too much and that delaying a hike would only increase the need to increase rates at a faster pace going forward. But the majority of voting FOMC members argued that inflation signs were few and that more time was needed to see if inflation was improving. Reaction was muted with expectations continuing to point to no action in November and solid chances for an increase in December.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$3.05 to US$1,256.50. Copper futures were down 0.5 percent to US$2.17. WTI spot crude was down 78 US cents to US$50.01. Dated Brent spot crude was down 71 US cents to US$51.70. The US dollar was up against the yen, euro, Swiss franc and the Canadian dollar. However, it declined against the pound and the Australian dollar. The Dollar Index was up 0.3 percent. The yield on US Treasury 30 year bond was down 1 basis point to 2.50 percent while the yield on the 10 year note was unchanged at 1.77 percent.
Europe
Stocks retreated Wednesday. Technology stocks were under pressure after a profit warning by Ericsson. Energy stocks also struggled — investors were concerned that Russia may not follow through with production cuts. Traders were also in a cautious mood ahead of the release of the minutes from the Federal Reserve’s September meeting. Investors were hopeful that the minutes, which were released after the markets closed in Europe, will provide some clues regarding the outlook for US interest rates. The FTSE was down 0.7 percent, the CAC declined 0.4 percent, the DAX lost 0.5 percent and the SMI was 0.8 percent lower.
Investor concerns over a “hard Brexit” eased after UK Prime Minister Theresa May allowed the UK Parliament to decide on the Brexit strategy. Bloomberg reported that May has accepted the motion from the opposition Labour Party calling for a “full and transparent debate on the government’s plan for leaving the EU.” The UK Parliament will debate a motion that enables the MPs to “properly scrutinize that plan” before triggering Article 50, the formal mechanism of withdrawing from the European Union. Late Tuesday, May approved an amendment that effectively accepted the motion, while suggesting that the government will reject any attempt to block Brexit or “undermine the negotiating position of the government.”
BASF slipped after reporting better-than-expected results for the third quarter of 2016. Deutsche Bank gained on reports that it boosted its private bond sale to $4.5 billion. Deutsche Lufthansa climbed on a broker upgrade. Sanofi was down after it said it expects to record $100 million charge in the third quarter to reflect litigation related to Cipro generic. Premier Foods sank after it lowered its full year revenue outlook after posting a drop in second-quarter sales due to warm weather. Domino’s Pizza Group tumbled despite reporting a rise in third quarter underlying sales in the UK. Fresnillo was lower after the miner backed its full-year output forecast after reporting higher gold and silver output in the third quarter. Ericsson plunged in Stockholm after a profit warning. Peer Nokia also retreated.
Asia Pacific
Most stock indices retreated Wednesday thanks to Federal Reserve interest rate increase worries, Alcoa’s disappointing quarterly results, Samsung’s woes over Galaxy Note 7 and concerns that OPEC will be able to hammer out an output deal. The pound stabilized after recording its worst four-day performance since the Brexit vote on Tuesday amid concerns over the prospect of a “hard Brexit.”
The Shanghai Composite was down 0.2 percent after the People’s Bank of China weakened the reference rate of the yuan for the sixth day in a row. The yuan briefly hit a fresh six-year low amid signs of increasing volatility in global markets, as investors fret about the long-term consequences of Brexit, a possible Fed rate hike in December and the outcome of upcoming US presidential elections. The Hang Seng lost 0.6 percent.
The Nikkei and Topix lost 1.0 percent and 1.1 percent respectively on profit taking. The yen was little changed after August core machinery orders declined less than expected. Exporters were mostly lower with Canon, Honda Motor, Nissan, Panasonic, Sony, Toyota and Mazda declining. Softbank, Dainippon Screen Manufacturing, Kobe Steel, Nippon Steel & Sumitomo Metal, Advantest and TDK also declined on the day.
Both the S&P/ASX and All Ordinaries were down 0.1 percent. Miners and energy stocks retreated. Investors ignored the Westpac-Melbourne Institute survey, which showed that a measure of consumer sentiment rose for a third month in October. BHP Billiton, Fortescue Metals Group, South32, Santos, Oil Search and Origin Energy were lower. Tabcorp Holdings after the Australian state of New South Wales reversed a ban on greyhound racing.
The Kospi added 0.1 percent even though Samsung Electronics remained under selling pressure on worries that its recall of one of its most advanced smartphones could cost the company as much as $17 billion. The Sensex was closed for a second day for a holiday.
Looking Forward
China posts September merchandise trade data. India releases September consumer price data. In the US, September import and export prices along with weekly jobless claims, EIA natural gas and petroleum reports, money supply and Fed balance sheet will be released.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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