On 03 May, 2017 – Stocks were mixed in Europe and Asia as investors waited for the FOMC announcement
Shares were little changed in the US after the FOMC left its policy on hold.
United States
US stock markets were little moved by the FOMC policy announcement mid-afternoon. The Dow Jones industrials were virtually unchanged (up 8.01 points) while the S&P and Nasdaq were 0.1 percent and 0.4 percent lower respectively.
As universally expected, the Federal Reserve kept its policy fed funds rate range at 0.75 percent to 1.00 percent. The Fed lifted rates by a quarter point at its March 15 meeting and signaled that more rate increases were to come in 2017. In its May statement, the FOMC said it believes the recent slowdown in US growth is likely temporary. The committee acknowledged that household spending growth had grown “only modestly” lately, but they emphasized that the “fundamentals” behind consumption growth remained solid. There was no mention of future fiscal policy stimulus, global developments and no mention of unwinding the Fed’s $4.5 trillion balance sheet. The vote was 10 to 0.
In its latest statement, the Federal Open Market Committee said: “The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term.” The Fed did not offer an explicit signal that a second 2017 rate increase is imminent, keeping existing language describing the risks to the outlook as roughly balanced.
Apple declined, weighing on indexes, but recovered from steeper losses folllowing the company’s quarterly report in which it reported a surprise drop in iPhone sales. Sprint slid after the wireless carrier did not give specifics on deals it would pursue, even as its quarterly loss narrowed. Delphi Automotive jumped after the company said it plans to spin off operations tied to internal combustion engines and focus on technology for electrically powered and self-driving vehicles. The New York Times rallied after the newspaper publisher reported its biggest quarterly revenue growth in six years.
Facebook reported a 76.6 percent surge in quarterly profit fueled by robust growth in its mobile ad business. Mobile ad revenue accounted for 85 percent of the company’s total advertising revenue of $7.86 billion in the first quarter ended March 31, compared with 82 percent a year earlier.
ADP said private sector employment climbed by 177,000 in April after surging by a revised 255,000 in March. The April ISM nonmanufacturing index rose to 57.5 from 55.2 in March.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$5.15 to US$1,250.30. Copper futures were down 4.4 percent to US$2.52. WTI spot crude was up 6 US cents to US$47.72. Dated Brent spot crude was up 22 US cents to US$50.68. The US dollar was up against its major counterparts including the yen, euro, pound, Swiss franc and the Australian dollar. The currency was virtually unchanged against the Canadian dollar. The Dollar Index was up 0.4 percent. The yield on US Treasury 30 year bond was down 1 basis point to 2.97 percent while the yield on the 10 year note was up 3 basis points to 2.32 percent.
Europe
Stocks were mixed in Europe as investors waited for the Federal Reserve monetary policy decision after markets here were closed for the day. The FTSE was down 0.2 percent and the CAC was 0.1 percent lower. The DAX and SMI advanced 0.2 percent and 0.3 percent respectively. Traders continued to digest a high volume of corporate earnings reports.
Several Apple suppliers declined after the firm reported a surprise dip in sales of its flagship iPhone. Dialog Semiconductor declined after its main client Apple reported lower-than-expected revenue and iPhone unit sales for its second quarter. AMS and STMicro also fell. Hugo Boss was lower after like-for-like sales for the first quarter came in slightly below estimates. E.ON declined — the utility is partnering with Google to introduce Sunroof, a solar-energy data platform, outside the United States. Fresenius rallied after lifting its full-year guidance after posting double-digit growth in first quarter earnings and sales.
BNP Paribas gained after the bank’s first quarter profit beat expectations amid a surge in bond trading. Sainsbury retreated after it cautioned over “challenging” trading and ongoing price pressures. Sage Group climbed after it reported that its first-half pretax profit grew 41.1 percent to £180 million from £128 million in the previous year. Ericsson was lower in Stockholm after Moody’s Investors Service cut its credit rating to junk. Both Daimler and BMW retreated after disappointing April auto sales in the US.
First quarter flash gross domestic product expanded 0.5 percent on the quarter in the Eurozone for a second quarter. Eurozone March industrial producer prices rose 3.9 percent on the year after increasing 4.5 percent in February.
Asia Pacific
Asian stocks were mixed after Apple posted a surprise decline in iPhone sales in the second quarter and investors waited to hear the Federal Reserve’s monetary policy decision. French politics also remained in focus prior to the May 7 runoff election for a new president. Markets in Hong Kong and South Korea were closed for the Buddha’s birthday, while Japanese financial markets remain closed for the rest of the week for the Golden Week holiday.
The S&P/ASX was down 1.0 percent while the All Ordinaries lost 0.9 percent as banks tumbled on earnings concerns. ANZ, which reported its interim profit result Tuesday, and three other banks — National Australia Bank, Westpac and Commonwealth Bank — were lower. Miners also lost ground after Chinese steel futures dropped after five days of gains. Rio Tinto, Fortescue Metals Group and BHP Billiton declined. Australia’s service sector activity expanded at a faster rate in April.
The Shanghai Composite declined 0.2 percent on concerns over a tighter regulatory environment. The Sensex slipped 0.1 percent.
Looking Forward
Australia posts March merchandise trade data. India and the UK report services PMI for April. The Eurozone, France and Germany release composite PMIs for April. The Eurozone also posts March retail sales. Canada and the US release March international trade data. The US also posts first quarter productivity and costs, March factory orders and weekly jobless claims, money supply and Fed balance sheet.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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