On 05 December, 2016 – Global markets were mixed
Italy’s ‘no’ vote had little impact on European and US stock markets; Asian markets fell.
United States
US stock indices advanced with the Dow Jones industrials closing at yet another record high. Banks rallied even though Italian lenders retreated after the ‘no’ vote to constitutional reforms. As a result, Italy’s Prime Minister Matteo Renzi resigned. The Dow was up 0.2 percent, the S&P added 0.6 percent and the Nasdaq was 1.0 percent higher on the day.
Goldman Sachs Group and JPMorgan Chase advanced. Nike, Abercrombie and Michael Kors Holdings rallied. Amazon.com was up after it said it opened a brick-and-mortar grocery store in Seattle without lines or checkout counters. FairPoint jumped after Consolidated Communications said it would buy the broadband service provider for $1.5 billion, including debt. Aetna and Humana tumbled as a trial over their proposed merger kicked off.
The ISM nonmanufacturing index climbed to 57.2 in November from 54.8 in October.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$11.30 to US$1,162.20. Copper futures were up 2.55 percent to US$2.69. WTI spot crude was down 60 US cents to US$51.08. Dated Brent spot crude was down 15 US cents to US$54.31. The US dollar was down against the euro, pound, Swiss franc and the Canadian and Australian dollars. However, it advanced against the yen. The Dollar Index dropped 1.3 percent. The yields on both the US Treasury 30 year bond and the 10 year note were up 1 basis point to 3.07 percent and 2.39 percent respectively.
Europe
Most share markets, after a rocky start, were positive on the day following the ‘no’ vote in Italy and Prime Minister Matteo Renzi’s subsequent plans to resign. The FTSE was up 0.2 percent, the CAC gained 1.0 percent, the DAX climbed 1.6 percent and the SMI added 0.8 percent. After sinking when markets opened, the MIB closed down only 0.2 percent.
The reaction to the news was much more subdued than had been expected. Traders did not react as dramatically as they had to the election of Donald Trump in the U.S. presidential election, or as they did to the Brexit. The Austrian election result may have helped to calm investors, as far-right candidate Norbert Hofer was defeated.
Italian Prime Minister Matteo Renzi plans to resign following the Sunday’s defeat over his proposals for constitutional reform. The ‘no’ vote threatens to destabilize the country’s shaky banking system and ultimately usher in an anti-EU government. However, the reaction among investors outside of the Italian market was rather muted. The vote did not cause the weakness that many expected the result would have.
ThyssenKrupp and Salzgitter advanced. BMW, Daimler, Volkswagen, Peugeot and Renault were higher. Shire gained on a broker upgrade. Royal Bank of Scotland Group climbed after saying it has concluded a full and final settlement with three out of the five shareholder groups representing 77 percent of the claims by value in the 2008 Shareholder Rights Issue litigation. Mining including Antofagasta, Glencore and Anglo American were up on the day. However, gold stocks were under pressure with Randgold Resources, Fresnillo and Polymetal International declining. Novartis rose in Zurich after presenting results from first global registration trial of CTL019 in an experimental cancer therapy. Italian banks were under pressure after Sunday’s referendum. Banca Popolare di Milano, Banca Monte dei Paschi and UniCredit all tumbled.
Asia Pacific
Most Asian shares fell on Monday as concerns over Italy’s future in the euro area overshadowed positive data from China, Japan and Australia. Worries related to Italy’s banking sector deepened after Italian voters rejected constitutional reform in a referendum Sunday, triggering the resignation of Prime Minister Matteo Renzi who had staked his political career on the result.
The Shanghai Composite index tumbled 1.2 after China’s top securities regulator sharply criticized the practice of using borrowed funds to build stakes in companies. The Hang Seng was down 0.3 percent despite the long-awaited Shenzhen-Hong Kong Stock Connect becoming a reality. Investors ignored the latest Caixin PMI which indicated that growth in the services sector accelerated to a 16-month high in November. The Nikkei Hong Kong PMI also rose slightly but remained in contractionary territory at 49.5.
The Nikkei was 0.8 percent lower and the Topix was down 0.7 percent on concerns about political and economic uncertainty in Europe. Banks and property developers led the declines. Japan’s November services PMI reading was 51.8, up from 50.5.
Both the S&P/ASX and All Ordinaries dropped 0.8 percent. The big four banks tumbled along with energy majors Origin Energy, Oil Search and Woodside Petroleum. Duet Group soared after Hong Kong’s Cheung Kong Infrastructure Holdings made an A$7.3 billion bid for the Australian energy utility operator. On the economic front, reports on services sector, consumer prices and job advertisements painted a mostly positive picture of the economy.
The Kospi was down 0.4 percent. New Zealand’s NZX-50 index dropped 0.7 percent as Prime Minister John Key unexpectedly announced his resignation, saying he was never a “career politician” and it was the “right time” to go after eight years in the job. The Sensex was up 0.5 percent.
Looking Forward
The Reserve Bank of Australia announces its monetary policy decision. Germany releases October manufacturers’ orders. The Eurozone posts revised third quarter gross domestic product. The US and Canada release October international trade data. In the US, October factory orders will be reported.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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