On 21 June, 2017 – Stocks continued to slide on lower crude prices
A flattening yield curve pressured banks.
United States
Both the S&P and Dow Jones industrials were weighed down by energy and banking stocks Wednesday. The indexes lost 0.1 percent and 0.3 percent respectively. However, the Nasdaq added 0.7 percent thanks to climbing healthcare and technology stocks. Energy stocks tumbled after oil prices reversed course and US crude touched its lowest point since August despite larger-than-expected declines in US petroleum inventories.
Biotechnology stocks including Immune Design, Esperion Therapeutics and Concordia International rallied along with Celgene, Regeneron and Biogen. Bank stocks retreated on concerns about interest rate margins due to a flattening yield curve. However, CenturyLink and AT&T declined. Caterpillar declined. FedEx hit a record high after the company forecast higher fiscal 2018 earnings. Red Hat, an open-source software company, surged to one of the biggest gains on the S&P after reporting better-than-expected earnings for its latest quarter. Its forecast for revenue and earnings this fiscal year also topped expectations.
La-Z-Boy jumped after reporting quarterly earnings that easily topped expectations. Its customers have been shifting toward higher-priced and more profitable products. Adobe Systems rose after reporting stronger revenue and earnings for its latest quarter than expected. Oracle fourth quarter earnings totaled $3.76 billion or $0.89 per share. This was up from $3.42 billion or $0.81 per share in last year’s fourth quarter. The company said revenue for the quarter rose 3.2 percent to $10.94 billion, up from $10.60 billion last year.
May existing home sales increased a solid 1.1 percent to a higher than anticipated annualized rate of 5.620 million. The median house price was up a monthly 3.2 percent and an annual 5.8 percent.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up 30 US cents to US$1,242.50. Copper futures were up 1.5 percent to US$2.61. WTI spot crude was down US$1.02 to US$42.49. Dated Brent spot crude was down US$ 1.27 to US$44.75. The US dollar was up against the Canadian and Australian dollars. The currency declined against the yen, euro, pound and Swiss franc. The Dollar Index was down 0.2 percent. The yield on US Treasury 30 year bond was down 1 basis point to 2.73 percent while the yield on the 10 year note was unchanged at 2.16 percent.
Europe
Stocks retreated on Wednesday with energy and financial shares among those that declined. The continued weakness in crude oil prices weighed on energy stocks, while a profit warning from Provident Financial dragged bank stocks lower. Only the MIB managed to increase 1.3 percent. The FTSE and DAX were down 0.3 percent while the CAC and SMI lost 0.4 percent.
According to the European Central Bank, existing risks to global growth such as an abrupt tightening of financial conditions have likely eased over the past year, thanks to careful communication by the US Federal Reserve. However, new threats have emerged due to high policy uncertainty surrounding the fiscal and trade plans of the Trump administration. The ECB said: “Careful communication by the Federal Reserve System, coupled with a very gradual course of monetary policy tightening and the decline in vulnerabilities in major emerging market economies, appears to have eased the risk of a disorderly tightening of global financial conditions.”
Bank of England Chief Economist Andrew Haldane said he considered the case for a rate increase at the June monetary policy meeting. However, he voted to maintain the bank rate citing few signs of higher wage growth despite upward pressure on inflation and chances of a sharper than expected slowing in the economy. “Provided the data are still on track, I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year,” he said.
Grand City Properties was down after announcing a capital increase. Air Berlin gained after a German newspaper quoted its CEO as saying the airline no longer needs state guarantees. Provident Financial plunged after the subprime lender warned that its consumer credit division would see profits nearly halve in 2017. Whitbread advanced after it reported a 7.6 percent rise in first-quarter sales as expected.
Berkeley Group Holdings rallied after the homebuilder reported better-than-expected full-year profits, defying a slowdown in its key London market. Centrica advanced after the gas and electricity supplier agreed to sell its two biggest gas plants to a subsidiary of Czech energy company EPH. In Switzerland, insurers Swiss Life, Zurich Insurance, Bâloise and Swiss Re finished lower. In Italy, banks jumped after Intesa offered to buy the good assets of two troubled Veneto banks.
Asia Pacific
Most Asian Pacific stocks retreated Wednesday as they followed share indices in the US lower after crude oil prices tumbled. US crude futures fell more than 2 percent to enter into bear market territory on concerns about oversupply amid indications of rising production in Nigeria and Libya. A decision by index provider MSCI to add mainland China-listed shares to its widely followed stock indexes failed to boost investors’ risk appetite.
The Shanghai Composite was up 0.5 percent following MSCI’s decision to add mainland stocks to one of its key benchmarks. However, the Hang Seng was down 0.6 percent. The inclusion brings to an end a period of intense market scrutiny after MSCI decided to keep the A-shares out of its benchmarks over the past three years.
The Nikkei and Topix were down 0.5 percent and 0.4 percent respectively. A stronger yen combined with falling oil prices sapped traders’ appetite for risk. Inpex dropped along with Japan Petroleum. Toshiba declined after announcing it has chosen a US-Japan consortium as the preferred bidder for its lucrative memory chip business. The Bank of Japan released the minutes of its April policy meeting which showed that members of the monetary policy board were more optimistic about exports and industrial production despite relatively weak wage gains and stubbornly low inflation.
The S&P/ASX dropped 1.6 percent and the All Ordinaries tumbled 1.5 percent — banks extended losses after Moody’s downgrade and falling prices of commodities from crude oil to iron ore weighed on material and energy stocks. The big four banks declined. QBE Insurance Group plunged after flagging higher claims in its emerging markets businesses. Energy majors Woodside Petroleum, Santos, Origin Energy and Oil Search retreated as oil prices hit seven-month lows. Rio Tinto declined after the company snubbed a counter bid for its Australian coal assets from rival Glencore and urged shareholders to approve a previous bid by a Chinese company. BHP Billiton and Fortescue Metals Group dropped.
The Kospi dropped 0.5 percent amid selling by foreign investors after reports that US spy satellites have detected new activity at an underground site in North Korea used to test nuclear weapons. The Sensex was down 13.89 points. Geopolitical tensions weighed on the rupee and investors waited for the release of Reserve Bank of India’s (RBI) minutes of the last policy meeting for clues about the future path of interest rates.
Looking forward
The UK June CBI industrial trends survey will be released. The Eurozone reports flash EC consumer confidence for June. Canada posts April retail sales. In the US, April FHFA house price index, May leading indicators and the 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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