On 23 May, 2017 – Shares were mixed after the terrorist attack in the UK
Economic data in Europe pleased while the data in the US disappointed.
United States
US stocks edged higher Tuesday in lackluster trading as investors digested President Donald Trump’s budget plan. However a decline in consumer discretionary stocks offset a boost from the financial sector. The Dow Jones industrials were up 0.2 percent while the Nasdaq was 0.1 percent higher. While Tuesday’s economic data were weak, investors appeared relieved that there were no large surprises in the administration’s budget plan. The market appeared to have shrugged off news of a suicide attack in Britain.
AutoZone declined after its quarterly results missed expectations. Advance Auto Parts, O’Reilly Automotive and Genuine Parts also were lower. Toll Brothers pared back their gains in afternoon trade after gloomy data on new home sales took the shine off of the luxury homebuilder’s earnings beat. Morgan Stanley, Goldman Sachs Group and Huntington Bancshares gained. Regions Financial, Zions Bancorp and Cullen/Frost also were higher. AK Steel, Mechel, Gerdau and US Steel advanced.
April new single-family home sales tumbled from near a nine-and-a-half-year high, while the manufacturing PMI for May fell to the lowest level since September. New single family home sales tumbled 11.4 percent to an annualized rate of 569,000. However, March sales were revised upward by 40,000. May flash composite PMI reading was 53.9, up from 52.7.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$1.35 to US$1,260.20. Copper futures were up 0.1 percent to US$2.60. WTI spot crude was up 41 US cents to US$51.54. Dated Brent spot crude was up 36 US cents to US$54.23. The US dollar was up against the yen, euro, pound, Swiss franc and the Canadian dollar. The currency was virtually unchanged against the Australian dollar and yuan. The Dollar Index was up 0.4 percent. The yields on US Treasury 30 year bond and the 10 year note were up 4 basis points to 2.95 percent and 2.29 percent respectively.
Europe
Most indices advanced Tuesday despite the news of the terrorist attack in Manchester, England Monday night. Early gains began to erode in the afternoon, but most held on to small gains. Upbeat economic reports from Germany, France and the Eurozone helped investors to shrug off worries over US political risks and the lack of progress on Greek debt talks. The CAC and DAX added 0.5 percent and 0.3 percent respectively. The FTSE edged down 0.1 percent and the SMI was 0.3 percent lower.
Eurozone finance ministers failed to reach an agreement on Greece debt relief with the International Monetary Fund on Monday. However, they hope to do so at their June meeting. Greek lawmakers approved a reforms package last Thursday that includes pension cuts and tax hikes as demanded by the country’s creditors to pave the way for the disbursement of bailout funds totaling more than €7 billion and to begin talks on debt relief. Discussions over providing more bailout funds had stalled after a review mission to Athens returned in December without reaching a deal. The country is in dire need of bailout cash to meet debt repayment of more than €7 billion due in July or risk default.
BMW and Volkswagen finished higher. Vivendi advanced on a Wall Street Journal report that the media firm could float a minority stake in Universal Music Group. Severn Trent rallied after the water utility upgraded its dividend policy after reporting an increase in annual profits. HomeServe rallied after the repair and insurance firm posted a big jump in full-year profits and raised its dividend for the year by 20 percent. Clariant dropped in Zurich after announcing a tie-up with US competitor Huntsman. Nokia jumped in Helsinki after the network giant settled a patent dispute with Apple.
Eurozone flash composite PMI edged up to a 56.8 in May, unchanged from April’s six-year high. Germany’s May flash reading rose to a 73-month high of 57.3 from 56.7 in April. In France, the May flash composite PMI climbed to a 72-month high of 57.6 from 56.6. The May Ifo business sentiment index strengthened to a record high 114.6 from a revised 113.0 in April. German first quarter gross domestic product expanded 0.6 percent on the quarter and was up 1.7 percent from the same quarter a year ago.
Asia Pacific
Asian shares were mixed — investors digested news of the Manchester northern England terrorist attack. The continuing tumult in the US administration also added some downward pressure.
The Shanghai Composite was down 0.4 percent on renewed concerns over a regulatory crackdown on shadow banking and speculative trading. The Hang Seng added 11.81 points.
The Nikkei was down 0.3 percent and the Topix slipped 0.2 percent on the news from the UK and events in the US. May flash manufacturing PMI declined to 52.0 from 52.7 in April. An advisor with the People’s Bank of China (PBoC) said the central bank will continue to implement reasonable adjustments to monetary policy.
The S&P/ASX was down 0.2 percent and the All Ordinaries lost 0.1 percent. The big four banks declined as concerns about the government’s new bank levy persisted. Rio Tinto declined after launching an offer to buy back up to $2.5 billion of its U.S. dollar-denominated bonds. BHP Billiton and Fortescue Metals Group were also lower. Bio-pharmaceutical firm CSL and gold miners were among the prominent gainers.
The Kospi was up 0.3 percent with financials and brokerages pacing the gains. The Sensex dropped 0.7 percent and the rupee hit its lowest level since April 3 against the US dollar amid heightened geopolitical tensions after the Indian Army claimed it had destroyed many Pakistani posts along the line of Control (LoC) recently.
Looking forward
The Bank of Canada announces its monetary policy decision. In the US, the Federal Reserve publishes minutes from its FOMC meeting held earlier this month. March FHFA house price index and April existing home sales will be posted along with the weekly EIA petroleum status report.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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