On 05 April, 2017 – Global stocks were mixed

US shares reversed direction and declined after the FOMC minutes were released.
United States
US shares rallied for most of the day but changed direction after the Federal Reserve published the minutes from the last FOMC meeting. The Dow Jones industrials were down 0.2 percent, the S&P declined 0.3 percent and the Nasdaq lost 0.6 percent. Federal Reserve published minutes from its March policy meeting that showed officials agreed that they might begin reducing the Fed’s balance sheet later this year. The initial reaction to the Fed minutes was muted but became more bearish as the afternoon wore on. Utilities which are bond proxies that tend to increase when things are uncertain advanced. At the same time, financials, which have soared since the November election retreated.
Panera advanced after it agreed to be acquired by JAB Holding of Europe for $315 per share. JAB has quietly become a rival to Starbucks in recent years as it owns, or has a large stake in, a series of brands that include Peet’s Coffee & Tea, Caribou Coffee, Stumptown Coffee, Keurig Green Mountain and Krispy Kreme Doughnuts. Dow Chemical and DuPont, which plan to combine, both advanced. Monsanto reported profit and sales that were far better than expected. Monsanto said profits from its corn and soybean businesses grew in the fiscal second quarter. It also backed its forecasts for the year and said its sale to Bayer of Germany should close by the end of the year. Greenbrier, which makes railroad freight car equipment, announced a bigger profit and better sales than expected. It also said rail traffic is growing and announced a $1 billion agreement with a key customer.
Economic data released earlier in the day included the ISM nonmanufacturing index. The March reading declined to 55.2 — still a strong reading — from 57.6 in February.
The Federal Reserve published the minutes of its March 14 & 15 FOMC meeting. At that time, the Fed increased its fed fund rate by 25 basis points to a range of 0.75 percent to 1.00 percent. Part of the discussions at that meeting involved how the Fed would wind down its $4.5 trillion balance sheet. Most of the participants saw a change in their reinvestment program sometime this year, one that would include the phasing out of both the Fed’s holdings of Treasuries and mortgage-backed securities. And in a line that may have triggered some selling in the stock market, members noted that stock valuations are “quite high.”
Nearly all FOMC members agreed the economy is at or near full employment but nearly all also agreed that they have yet to hit their sustained 2 percent inflation target. With the PCE index at 2.1 percent and the core at 1.75 percent, several said their inflation target will likely be hit this year which could necessitate faster rate increases. The outlook for fiscal policy has not been emphasized by the FOMC but most say increased government spending could result in greater economic growth. About half the members factored in higher government spending in their economic targets.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$11.85 to US$1,245.80. Copper futures were up 2.6 percent to US$2.68. WTI spot crude was down 12 US cents to US$50.91. Dated Brent spot crude was down 3 US cents to US$54.14. The US dollar was up against the Swiss franc and the Canadian dollar. The currency declined against the euro, pound and the Australian dollar. The US dollar was virtually unchanged against the yen. The Dollar Index was virtually unchanged. The yield on US Treasury 30 year bond was down 2 basis points to 2.98 percent while the yield on the 10 year note was down 3 basis points to 2.33 percent.
Europe
Stocks were mostly lower Wednesday in choppy trading. Energy stocks were among the best performers as crude oil prices climbed above $51 a barrel. However, energy stocks pared their gains after the US EIA crude inventories unexpectedly increased. Bank stocks also climbed after US President Donald Trump said that his administration is working on changes to the 2010 Dodd-Frank Act which will make it easier for banks to loan money. The FTSE edged up 0.1 percent while the CAC was 0.2 percent lower, the DAX lost 0.5 percent and the SMI slipped 0.1 percent.
Commerzbank advanced on reports that it plans to cut 7,800 jobs in Germany as part of a restructuring plan announced last year. Total was up after it extended an option with British shale gas developer Egdon Resources to buy a stake in one of Egdon’s shale gas licenses. Bovis Homes Group increased after confirming its rejection of the merger proposal from a rival. John Wood Group gained after the oil services company said it expects about 36 percent more cost savings from its proposed merger with Amec Foster Wheeler than it first estimated when announcing the deal on 13 March 2017. BP and Royal Dutch Shell were higher.
GlaxoSmithKline was higher after saying it is voluntarily recalling nearly 600,000 units of Ventolin asthma inhalers in the US following a number of complaints about a bulging of the outside wrapper. Syngenta increased in Zurich after the company’s proposed takeover by ChemChina gained approval from US antitrust officials. BHP Billiton advanced after declaring force majeure for coal deliveries from its mines in Australia’s Bowen Basin after a cyclone damaged railway lines. Disruption from Cyclone Debbie has spurred worries of tighter supply, sending coking coal futures higher.
Eurozone March composite PMI rose to a 71-month high of 56.4 from 56.0 in February. The index has signaled expansion in each of the past 45 months. UK’s March services PMI grew at the fastest pace in three months, driven by a solid rise in new orders. The CIPS/Markit PMI for the services sector rose to 55.0 from February’s 5-month low of 53.3.
Asia Pacific
Most Asian stocks advanced Wednesday in cautious trading after North Korea fired a ballistic missile into the Sea of Japan and the US said it is considering all options to tackle the threat posed by the country’s repeated nuclear arms test. Investors continued to look ahead to several key events this week, including the release of minutes of the latest Federal Reserve meeting later in the Wednesday global market day, the US-China summit starting Thursday, and the closely-watched monthly US employment report on Friday.
Mainland Chinese shares resumed trading Wednesday after a two day holiday. The Shanghai Composite was up 1.5 percent after China announced it would establish a new special economic zone in Hebei province that has been hit by massive job layoffs. The Hang Seng added 0.6 percent.
The Nikkei advanced 0.3 percent while the Topix was virtually unchanged (up 0.12 point). Automakers Honda Motor, Mazda, Nissan and Toyota retreated. Sumitomo Mitsui Financial, Mitsubishi UFJ Financial and Mizuho Financial were lower.
Both the S&P/ASX and All Ordinaries were up 0.3 percent as commodity prices surged and a report showed activity in the country’s service sector swung to expansion in March. A rally in copper prices lifted mining stocks, with BHP Billiton, South32, Rio Tinto and Fortescue Metals Group climbing. Energy majors Woodside Petroleum, Oil Search, Origin Energy and Santos also gained after oil prices rose above $51 a barrel to hit a one-month high due to an unplanned production outage in the North Sea and expectations for a decline in weekly US crude inventories. Banks ANZ, NAB and Westpac declined after RBA’s governor criticized banks for relaxed lending standards and cautioned that regulators stand ready to take more steps.
The Kospi was virtually unchanged (down 0.25 point) after a ballistic missile launch by North Korea. The Sensex added 0.2 percent in advance of the Reserve Bank of India’s monetary policy decision Thursday.
Looking Forward
The Reserve Bank of India will announce its monetary policy decision. Germany releases February manufacturing orders. The European Central Bank publishes its minutes from its most recent policy meeting. In the US, weekly jobless claims, money supply and Fed balance sheet will be released. US President Donald Trump will meet with Chinese President Xi Jinping on Thursday and Friday.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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