On 05 January, 2017 – US retail sales disappoint
Stocks were mixed in Asia and Europe but down in the US.
United States
Stocks were mixed with the Dow Jones industrials and S&P retreating as investors sold department stores after they reported dismal holiday sales. Investors are waiting to see evidence that the president-elect’s campaign promises will be approved by Republican lawmakers and come to fruition. The Dow was down 0.2 percent and the S&P slipped 0.1 percent. The Nasdaq however, advanced 0.2 percent. Investors were typically cautious prior to Friday’s employment report.
Department stores Macy’s and Kohl’s dropped after the companies said their holiday sales fell more than expected. The warnings swept up other department stores in their wake – Nordstrom and J.C. Penney also declined. However, Amazon.com which has been eating into the sales of brick-and-mortar retailers, advanced. Banks JPMorgan, Wells Fargo and Bank of America retreated along with Travelers, Goldman Sachs Group and American Express.
A report released by payroll processor ADP showed weaker than expected private sector job growth in the month of December. ADP said private sector employment climbed by 153,000 jobs in December after jumping by a revised 215,000 jobs in November. Meanwhile, a separate report from the Labor Department said first-time claims for U.S. unemployment benefits fell by much more than expected in the week ended December 31st. The report said initial jobless claims dropped to 235,000, a decrease of 28,000 from the previous week’s revised level of 263,000. The Institute for Supply Management also released a report showing that service sector activity maintained its rate of growth in December. The ISM said its non-manufacturing index was 57.2 in December, unchanged from the November figure. A reading above 50 indicates growth in the service sector.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$12.45 to US$1,176.70. Copper futures were down 0.8 percent to US$2.54. WTI spot crude was up 40 US cents to US$53.66. Dated Brent spot crude was up 32 US cents to US$56.78. 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 1.0 percent. The yield on US Treasury 30 year bond was down 8 basis points to 2.95 percent while the yield on the 10 year note declined 9 basis points to 2.35 percent.
Europe
European markets fluctuated between small gains and losses Thursday in choppy trading. The FTSE edged up 0.1 percent while the SMI added 0.5 percent. Both the CAC (up 1.24 points) and DAX (up 0.63 point) were virtually unchanged. Investors had their first opportunity to react to the December FOMC minutes which were published after markets here were closed for the day on Wednesday. Investors were cautious before Friday’s closely watched U.S. employment report for December.
Bank of England Chief Economist Andrew Haldane said that British consumer spending could be dampened this year by high inflation that is largely driven by a weaker pound. He also said that the full economic impact of ‘Brexit’ is yet to be known. Haldane also said that there was no single policy act that will lift the spirits of the economy, or create a more even recovery. He also noted that political uncertainty was clearly higher now though markets are relatively placid. There will be a reconciliation between the two at some point, he said.
Deutsche Bank declined after the lender agreed to pay $95 million to resolve a tax fraud case brought by the US Justice Department. Volkswagen advanced after a judge ruled on Wednesday that the automaker must face American investor claims over Diesel gate in the US. Air Liquide finished higher after it agreed to buy the Serdex division of Bayer for an undisclosed amount. Airbus increased after a broker upgrade. In London, homebuilder Persimmon jumped after issuing a positive trading update for the second half of 2016. Taylor Wimpey and Barratt Development also advanced. Rolls Royce declined on a broker downgrade. Randgold Resources and Fresnillo surged while gold prices climbed.
The UK service sector expanded at the fastest pace since July 2015, fueled by strong new order growth. The CIPS services PMI rose to 56.2 in December from 55.2 in November.
Asia Pacific
Most stock indices advanced Thursday with widespread gains across the region and as the US dollar retreated from 14 year highs and the FOMC minutes were less hawkish than expected.
The Shanghai Composite was up 0.2 percent after the Caixin services PMI accelerated to a 17-month high in December, adding to recent signs of stability in China’s economy. The focus remained on the offshore yuan, which rose sharply for a second day on a Bloomberg report that the government is making all efforts to support the currency and stem capital outflows. The Hang Seng was up 1.5 percent.
The Nikkei lost 0.4 percent while the Topix inched up 0.1 percent while the yen extended gains on uncertainty over the path of US fiscal policy. Investors ignored the latest survey from Nikkei showing that activity in Japan’s services sector expanded in December at the fastest pace in 11 months.
Both the S&P/ASX and All Ordinaries were up 0.3 percent thanks to higher commodity prices and encouraging service sector data underpinning investor sentiment. Santos, Oil Search and Origin Energy advanced after oil prices rose nearly 2 percent overnight. Gold miners Newcrest and Evolution climbed as gold prices hovered near a four-week high on a weaker dollar. TPG Telecom gained after a broker upgrade.
The Kospi declined 0.2 percent on institutional selling as market participants awaited Samsung Electronics’ guidance for its four-quarter earnings. The Sensex added 0.9 percent as the India Today Opinion Poll conducted in Uttar Pradesh predicted a big victory for the BJP and Finance Minister Arun Jaitley.
Looking Forward
Australia posts November merchandise trade data. Germany posts November manufacturers’ orders and retail sales. The Eurozone posts December EC economic sentiment and November retail sales. Canada reports November international trade and December labour force survey. In the US, the December employment situation report and November factory orders will be released.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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