On 15 February, 2017 – Most global stocks continued their rallies
The Dow, S&P and Nasdaq scored new highs yet again.
United States
US shares climbed further into record-high territory Wednesday. The S&P was up for the seventh consecutive day thanks to a round of robust economic data and ongoing optimism that President Donald Trump will cut corporate taxes. The Dow Jones industrials and S&P both were up 0.5 percent while the Nasdaq added 0.5 percent.
Financial stocks rallied as investors expect that rising interest rates will boost profits at lenders. Utilities retreated along with bonds. Procter & Gamble advanced following news that Trian Fund Management has built up a more than $3 billion stake in the company. JPMorgan Chase gained. American International Group tumbled after the company posted a larger-than-expected $5.6 billion pretax charge, leading to one of the worst quarterly results since the financial crisis.
Fed Chair Janet Yellen delivered her second day of testimony to Congress, this time to the House of Representatives House Financial Services Committee. Her prepared remarks were the same as those to the Senate Banking Committee. During the question & answer period, little new ground was covered. Dr Yellen said she had confidence in the FOMC’s structure. She does not support tying the committee to monetary policy rules. She reiterated that the labor market is “quite close” to maximum employment and noted that immigration is an important part of the nation’s labor growth. On wages, she repeated that most measures have been on the upswing. She said lack of borrowing among small businesses reflects lack of strength in overall economic growth and not lack of access to funding. She expects the FOMC to continue to remove accommodation and repeated that the best way to do this is with rate increases, not through balance-sheet fluctuations.
January consumer prices were up 0.6 percent on the month and 2.5 percent on the year. January retail sales were up 0.4 percent and are now up 5.6 percent from a year ago. The Empire State general business conditions index rose 12 points to 18.7, its highest level in more than two years. Partly reflecting a decrease in buyer traffic, the NAHB/Wells Fargo Housing Market Index dropped to 65 in February from 67 in January. Business inventories increased 0.4 percent in December after climbing by an upwardly revised 0.8 percent in November.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$6.35 to US$1,224.40. Copper futures were up 1.2 percent to US$2.74. WTI spot crude was down 16 US cents to US$53.04. Dated Brent spot crude was down 26 US cents to US$55.71. The US dollar was up against the pound. It was down against the yen, euro, Swiss franc and the Australian dollar. The currency was unchanged against the Canadian dollar. The Dollar Index was down 0.2 percent. The yield on US Treasury 30 year bond was up 2 basis points to 3.08 percent while the yield on the 10 year note was up 3 basis points to 2.50 percent.
Europe
Most stock markets gained Wednesday. Bank stocks gained driven by investor hopes that the Federal Reserve will increase rates sooner than previously expected. A series of better than expected US economic reports and Fed Chair Janet Yellen’s testimony before the US Congress fueled the rate increase speculation. The FTSE added 0.5 percent, the CAC was up 0.6 percent, the DAX edged up 0.2 percent and the SMI was 0.7 percent higher.
Deutsche Bank climbed even though a judge refused to dismiss a lawsuit seeking to save the German lender from being held liable to investors for delaying forex trades to profit at its clients’ expense. Rival Commerzbank gained. MorphoSys was higher after the biotechnology firm said it has added a second patent to its lawsuit against Janssen Biotech and Genmab. In Paris, Danone slipped after unveiling a €1 billion cost-cutting plan over three years, saying the turnaround of its European dairy division was taking longer than expected. Air Liquide climbed after its full year adjusted earnings per share grew 2.4 percent to €5.11 from €4.99 last year.
Credit Agricole advanced after its fourth quarter underlying net income Group share came to €1.65 billion, an increase of 9.5 percent from last year. BNP Paribas and Société Générale were higher. Crédit Agricole jumped after it forecast with a smaller than expected earnings drop in the fourth quarter. In London, IAG increased despite British Airways cabin crew announcing four more days of strikes starting February 22. Banks Barclays, Lloyds Banking Group, Standard Chartered and Royal Bank of Scotland advanced. Heineken was higher in Amsterdam after the brewer forecast growth in sales and earnings this year.
UK employment grew to a record high while wage growth unexpectedly eased at the end of 2016. ILO employment for the three months to December was up 37,000 while the unemployment rate remained at 4.8 percent.
Asia Pacific
Asian stock indices were mostly higher Wednesday after Federal Reserve Chair Janet Yellen painted a largely upbeat picture of the US economy during the first day of her two-day Congressional testimony and indicated the central bank could raise short-term interest rates at its next policy meeting in March.
The Nikkei was up 1.0 percent and the Topix added 0.9 percent thanks to a weaker yen that lifted exporters. The prospects of a US interest rate increase lifted US Treasury yields and helped spur a broad-based rally in banks and insurers. Exporters Canon, Hitachi, Honda and Panasonic rallied while banks Mitsubishi UFJ financial, Mizuho Financial and Sumitomo Mitsui Financial also gained. Insurers Dai-ichi Life Holdings and MS&AD Insurance were also higher. SoftBank advanced after the company said it would acquire US-based private equity firm and asset manager Fortress Investment Group for about $3.3 billion in cash. Toshiba declined after reports of potential misconduct in its US nuclear unit.
The S&P/ASX and All Ordinaries were up 0.9 percent and 0.8 percent respectively. Banks were among the best performers with Commonwealth climbing after it posted a record first-half cash profit. The other three big banks also were higher. BHP Billiton and Fortescue Metals Group gained. Origin Energy retreated after the oil & gas producer announced it is taking an A$1.9 billion non-cash impairment charge on its half-year results. Wesfarmers rallied after it reported solid first-half results and outlined plans for an initial public offering of OfficeWorks.
The Shanghai Composite retreated 0.2 percent while the Hang Seng rallied 1.2 percent. The Kospi was up 0.4 percent after Yellen sounded upbeat on the economy during testimony on Capitol Hill. The Sensex dropped 0.6 percent after a slew of disappointing corporate earnings, worrying WPI data and a weaker rupee weighed on markets.
Looking Forward
Australia labour force survey for January will be released. French ILO unemployment rate for the fourth quarter will be reported. The European Central Bank publishes minutes of its most recent meeting. In the US, January housing starts, the February Philadelphia Fed survey and weekly jobless claims, 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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