On 06 June, 2017 – Shares were mostly lower on geopolitical concerns
Investors were risk averse before key events on Thursday.
United States
US stocks declined Tuesday as traders became risk averse ahead of major political and economic events on Thursday. The lineup for Thursday includes Britain’s general election, the European Central Bank’s policy meeting and former FBI Director James Comey’s testimony before a US Senate panel. The Dow Jones industrials were down 0.2 percent while the Nasdaq and S&P were 0.3 percent lower. Concerns about rising tensions in the Middle East also weighed on the markets amid news Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have severed diplomatic ties with Qatar.
Walmart declined after Amazon said it would offer its Prime subscription service at a discount to US customers on government aid. Amazon also retreated. Macy’s dropped after it warned its margins could shrink further. The news hit other department stores including JC Penney, Sears and Nordstrom. Boeing declined. Francesca’s Holdings dropped after the apparel retailer reported weaker than expected fiscal first quarter results and provided disappointing guidance. Arts and crafts retailer Michaels also was lower after reporting fiscal first quarter results that missed estimates on both the top and bottom lines. G-III Apparel advanced after the apparel company reported a much narrower than expected fiscal first quarter loss and raised its full-year guidance.
According to the April JOLTS report, job openings are nearly 1 million ahead of hirings. This points to a widening skill scarcity in the labor market. Job openings, representing labor demand, is a complementary statistic to unemployment, which represents labor supply. The gap between openings and hiring first opened up about 2 years ago signaling that employers are having a hard time finding people with the right skills.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$13.55 to US$1,293.50. Copper futures were down 0.3 percent to US$2.55. WTI spot crude was up 87 US cents to US$48.27. Dated Brent spot crude was up 72 US cents to US$50.19. The US dollar was down against the yen, euro, Swiss franc and the Canadian and Australian dollars. The currency was up against the pound. The Dollar Index was down 2 percent. The yield on US Treasury 30 year bond was down 3 basis points to 2.81 percent while the yield on the 10 year note was down 4 basis points to 2.14 percent.
Europe
Stocks were mostly lower as investors took a more defensive posture. They fled riskier investments in favor of safe havens. Sentiment has soured from the continued weakness in crude oil prices along with the rising tensions in the Middle East. Traders continue to be risk averse prior to a series of potentially market moving events later this week. Thursday will be a heavy news day including the European Central Bank policy announcement, the UK national election and former FBI Director James Comey’s congressional testimony. The FTSE was down 0.81 point, the CAC declined 0.7 percent, the DAX lost 1.0 percent and the SMI was 1.5 percent lower.
Société Générale was down after the bank unveiled plans to sell 23 percent of shares in its car leasing arm ALD Automotive in an initial public offering. Airbus slipped on reports that it is preparing to cut production further of the A380 superjumbo aircraft due to soft sales. Burberry retreated on a broker downgrade. Convatec was lower after Nordic Capital and Avista raised £805 million by selling significant stakes in the British medicinal products and technologies company.
Roche dropped in Zurich after findings in its Aphinity study for a key breast cancer treatment showed the combination therapy was only marginally better than an older medicine. In an early sign of Qatar’s isolation affecting companies operating there, Norsk Hydro declined after it said exports from the Qatalum aluminum plant in Qatar, a joint venture with Qatar Petroleum, were blocked by the dispute. The company said it was seeking other routes. EasyJet was lower even after the budget airline said passenger traffic rose 9.5 percent in May. Deutsche Lufthansa advanced on a broker upgrade.
Eurozone April retail sales edged up 0.1 percent on the month after increasing a revised 0.2 percent in March.
Asia Pacific
Stocks were mostly lower Tuesday. A combination of Middle East geopolitical tensions and caution before the European Central Bank policy announcement and the UK election kept investors risk averse. The US dollar hit a six-week low against the yen and gold prices rose on safe haven demand as investors looked ahead to Thursday and the UK election, the ECB meeting and former FBI Director James Comey’s testimony before the US Senate Intelligence Committee. Oil declined as investors shifted their focus back on a supply glut and speculation mounted that the diplomatic rift among some of the most powerful Arab states could hamper a global deal to reduce oil production.
The Shanghai Composite was up 0.3 percent prior to May merchandise trade and inflation data later in the week. The Hang Seng added 0.5 percent.
The Nikkei and Topix tumbled 0.9 percent and 0.8 percent respectively with the Nikkei sliding below the 20,000 level. NTN, Isuzu Motors, Mitsui Engineering & Shipbuilding, Hitachi Construction Machinery, Chugai Pharmaceutical and Astellas Pharma retreated. Toshiba rallied on reports that US chipmaker Broadcom is first in line to buy its chip unit. Export-related shares widened their losses in the afternoon. Hino Motors, Isuzu Motors and Fujitsu declined.
Both the S&P/ASX and All Ordinaries dropped 1.5 percent after the Reserve Bank of Australia kept its interest rate at 1.5 percent where it has been since August 2016. Financials led the losses, with the big four banks and investment bank Macquarie Group declining. Weak commodity prices weighed on mining and energy stocks, with BHP Billiton, Rio Tinto, Fortescue Metals Group and Woodside Petroleum retreating. Santos, Oil Search and Origin Energy tumbled.
Markets in South Korea were closed for Memorial Day. The Sensex lost 0.4 percent as investors were cautious before the Reserve Bank of India’s monetary policy announcement on Wednesday. No change is expected.
Looking forward
Australia posts first quarter gross domestic product. The Reserve Bank of India publishes its monetary policy decision. Germany releases April manufacturers’ orders. The UK reports May Halifax house price index. The US posts weekly EIA petroleum inventories and April consumer credit.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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