On 12 December, 2016 – Global stocks were mixed
Investors were cautious prior to the Federal Reserve fed funds rate announcement on Wednesday.
United States
The Dow Jones industrials were up 0.2 percent while the S&P edged down 0.1 percent and the Nasdaq retreated 0.6 percent in quiet trading. A rally in energy shares petered out as crude oil gains narrowed.
Banks declined prior to the Federal Reserve FOMC two day meeting which ends Wednesday. Traders took profits on bank stocks ahead of the meeting, even if a rate increase, which on paper would benefit banks, is all but priced in. Lockheed Martin declined after US President-elect Donald Trump tweeted that the company’s F-35 program and costs were “out of control”. Other defense stocks, such as General Dynamics, Raytheon, and Northrop Grumman, were also lower. Viacom declined after National Amusements withdrew its merger proposal for CBS and Viacom. National Amusements is privately held and controlled by Sumner Redstone and his daughter, Shari Redstone.
Energy shares rallied after the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC oil producers agreed to cut production. Exxon Mobil, Marathon Oil and ConocoPhillips advanced.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$7.50 to US$1,156.10. Copper futures were down 1.5 percent to US$2.61. WTI spot crude was up 84 US cents to US$52.34. Dated Brent spot crude was up 93 US cents to US$55.29. 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 0.6 percent. The yield on the US Treasury 30 year bond was up 1 basis point to 3.16 percent while the 120 year note yield remained at 2.47 percent.
Europe
European markets were mixed Monday with investors exercising caution prior to the FOMC announcement on Wednesday. Energy stocks were among the best performers as crude oil prices surged above $53 a barrel after Russia and Saudi oil ministers announced concrete plans to cut oil production. The FTSE lost 0.9 percent, the SMI was down 0.7 percent and the CAC and DAX both edged down 0.1 percent.
Fitch Ratings maintained the sovereign ratings of the UK with a ‘negative’ outlook, while France’s ‘AA’ rating was affirmed with a ‘stable’ outlook. The agency kept the UK’s credit rating at ‘AA’ on Friday. The ratings balance a high-income, diversified and advanced economy against comparatively high public sector indebtedness, the agency said. Fitch noted that deep capital markets and sterling’s international reserve currency status and high governance and human development indicators further support the ratings. However, the ‘Brexit’ vote has ushered a period of heightened uncertainty.
Germany’s economic growth is likely to pick up again in the fourth quarter after slowing in the third quarter according to the Economy Ministry. The ministry observed that the indicators point to some recovery in the manufacturing sector in the coming months. Further, the ministry noted that the outlook for the global economy improved somewhat overall. However, global growth will be lower in 2016 than in the previous year due to the weak first half-year. Uncertainties remain high, however, not least because of Brexit, but also uncertainties of future US policy and the political situation in Italy.
RWE increased on a broker upgrade. In Paris, both Total and Technip gained. Sky retreated after soaring at the end of the previous week after 21st Century Fox offered to acquire the remaining shares of Sky that it does not already own. Royal Dutch Shell, BP and Tullow Oil advanced. Miners BHP Billiton, Antofagasta and Rio Tinto climbed. Capita fell for a third day and after a profit warning late last week and its decision to sell its asset management business left analysts questioning the British outsourcing group’s strategy. Russian gold and silver miner Polymetal retreated on a broker downgrade and as gold prices slipped to a 10-month low on expectations of a US rate increase this week. Randgold and Fresnillo also declined.
Asia Pacific
Shares were mixed in the Asia Pacific Monday. While a jump in oil prices supported energy shares, underlying sentiment remained largely cautious before Wednesday’s Federal Reserve meeting. Crude oil prices jumped in Asia after OPEC and non-OPEC producers reached their first deal since 2001 to cut oil output on Saturday.
The Shanghai Composite tumbled 2.5 percent and the Hang Seng lost 1.4 percent after China’s insurance regulator suspended Evergrande Life from further investing in stocks, saying its asset allocation plan is not clear and capital operation is not standardized.
The Nikkei was up 0.8 percent and the Topix added 0.4 percent as the yen continued to weaken against the US dollar ahead of an expected rate increase by the Federal Reserve Wednesday. Higher oil prices and upbeat core machinery orders data also boosted investor sentiment. Core machinery orders rose for the first time in three months in October to beat expectations.
The All Ordinaries edged up 0.1 percent while the S&P/ASX was virtually unchanged (up 2.21 points). A surge in oil prices on news of a further supply cut pledge from Saudi Arabia over the weekend helped push energy stocks sharply higher. Santos, Origin Energy and Woodside Petroleum advanced.
The Kospi edged up 0.1 percent. The Sensex retreated 0.9 percent.
Looking Forward
China posts November retail sales and industrial output data. China releases November CPI. The UK reports November consumer and producer price indices. Germany releases December ZEW survey. In the US November import/export price index will be posted.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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