On 18 January, 2017 – Global stocks were mixed Wednesday

Investors are waiting for the European Central Bank monetary policy decision and the US inauguration.
United States
The US stock indices traded in a narrow range Wednesday. The Dow Jones industrials slipped 0.1 percent while the S&P edged up 0.2 percent and the Nasdaq was 0.3 percent higher. Bond yields and the US dollar climbed. Stocks are in a wait-and-see period following their torrid run since Election Day.
A notable area of weakness in the stock market was retail. This past holiday shopping season was weaker than many traditional retailers were expecting. Target retreated after it became the latest to cut its forecast for fourth quarter sales and profits as a result. The discounter said that traffic levels at its stores were disappointing in November and December. Fastenal advanced after it reported stronger fourth-quarter earnings growth than expected. Citigroup and Goldman Sachs both reported stronger earnings for the fourth quarter than expected. UnitedHealth Group retreated a day despite reporting a 56 percent increase in profit in the latest quarter, powered by growth in its insurance unit and Optum health-services arm.
The Federal Reserve published its Beige Book in preparation for its FOMC meeting to be held on January 31 and February 1. It was prepared by the Boston District Bank. The publication notes that economic growth is moderate to modest but the outlook is suddenly upbeat. The report says firms across the nation are optimistic about 2017 and cites expectations for increasing tightness in the labor market and increasing wage pressure to go with it.
Companies in the 12 districts acknowledged the uncertainty surrounding the change of administrations in Washington, with a healthcare firm in the Boston region expecting “a possible headwind” from the battle over Obamacare. Others worried about the potential fallout from trade tensions. Labor markets were reported to be tightening with widespread difficulties in finding skilled workers.
Janet Yellen, in remarks at the Commonwealth Club in San Francisco, said that it makes sense to gradually withdraw monetary support at the pace of “a few times a year”. The fed funds rate is currently at a median 0.625 percent which she sees rising by the end of 2019 to about 3 percent — the rate she describes as the longer-run neutral rate. She said the economy is near full employment, though she noted there may be room for further progress. She also said that inflation, though still “fairly low”, is moving toward the Fed’s 2 percent inflation target. She repeated that the December increase in the fed funds rate, when the Fed raised the funds target range by 25 basis points, reflects the Fed’s confidence that the economy will continue to improve.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$1.30 to US$1,214.75. Copper futures were down 0.4 percent to US$2.62. WTI spot crude was down US$1.19 to US$51.29. Dated Brent spot crude was down US$1.30 to US$54.17. The US dollar was up against the yen, euro, pound, yuan and the Canadian dollar. However, it declined against the Swiss franc and Australian dollar. The Dollar Index was up 0.9 percent. The yield on US Treasury 30 year bond was up 7 basis points to 3.00 percent while the yield on the 10 year note jumped 10 basis points to 2.42 percent.
Europe
The European markets finished the trading day with mixed results. Investors were in a typically cautious mood ahead of the European Central Bank’s monetary policy announcement Thursday. The FTSE was up 0.4 percent, the DAX added 0.5 percent and the SMI edged up 0.1 percent, The CAC slipped 0.1 percent.
Economic data in Europe were on the light side while a trio of US economic reports had little impact on trading. Investors reacted to a series of corporate events but appeared reluctant to make any major moves before the day’s speech from Federal Reserve Chair Janet Yellen. The upcoming inauguration of Donald Trump as the new President of the United States on Friday also has investors in a cautious mood.
The US Justice Department, along with federal partners, announced a $7.2 billion settlement with Deutsche Bank resolving federal civil claims that the Bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities between 2006 and 2007. Gerresheimer jumped on a broker upgrade. In Paris, Sanofi rose after the company announced that the European Commission has granted marketing authorization in Europe for Suliqua, a treatment of adults with type 2 diabetes.
Banks BNP Paribas, Société Générale and Crédit Agricole retreated. In London, Pearson plunged after the company said it expects to deliver operating profit in line with guidance for 2016, despite a further unprecedented decline in the fourth-quarter 2016 in North American higher education courseware business. The company also withdrew its operating profit goal for 2018 reflecting portfolio changes and challenging and uncertain markets.
December Eurozone inflation climbed 1.1 percent on the year, up from 0.6 percent in November. In the UK, claimant count unemployment decreased 10,100 in December and the claimant count unemployment rate remained at 2.3 percent. The ILO unemployment rate was unchanged at 4.8 percent for the three months ended November, the lowest since September 2005. In the same period of 2015, the jobless rate was 5.1 percent.
Asia Pacific
Stocks were mixed Wednesday as investors studied British Prime Minister Theresa May’s statement that her country will leave the European single market when it quits the European Union. They also remained cautious amid uncertainty about the US President-elect’s economic policies.
The Nikkei was up 0.4 percent and the Topix added 0.3 percent after the yen weakened against the US dollar. Toshiba rose after the Nikkei business daily reported that the company is considering spinning off its semiconductor operations and selling a partial stake in the unit to Western Digital Corp. Both Panasonic and Sony were lower but automakers Toyota and Honda advanced.
Both the S&P/ASX and All Ordinaries were 0.4 percent lower as banking stocks once again dragged the market lower. ANZ, Commonwealth, National Australia Bank and Westpac were down. Miners were mixed with BHP Billiton and Fortescue metals declining but Rio Tinto climbing. Wesfarmers advanced after the conglomerate raised its first-half earnings outlook for its coal mining business.
The Shanghai Composite edged up 0.1 percent while the Hang Sang added 1.1 percent. The Kospi slipped 0.1 percent. The Sensex edged up 0.1 percent — upbeat corporate earnings boosted investor sentiment.
Looking Forward
Australia posts December labour force survey. The European Central Bank announces its monetary policy decision followed by President Mario Draghi’s press conference. The US posts December housing starts and the January Philadelphia Fed business outlook survey. Weekly data will be posted for jobless claims, EIA petroleum and natural gas reports and money supply and Fed balance sheet.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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