On 18 July, 2017 – Shares were mixed as investors waited for earnings reports
Monetary policy announcements from the ECB and BoJ loom.
United States
Stocks were mixed Tuesday with the Dow Jones industrials retreating 0.3 percent while the S&P edged up 0.1 percent and the Nasdaq added 0.5 percent. Netflix’s rally added to Nasdaq’s gains while at the same time, Goldman Sachs weighed on the Dow, with earnings taking investors’ focus. Stocks’ reaction to the collapse in the US Senate of a key healthcare bill was muted.
Goldman Sachs reported an increase in second quarter profit despite tough conditions in its core trading businesses. The firm reported earnings of $3.95 per share. Revenue of $7.89 billion declined from $7.93 billion in the second quarter of last year. Goldman Sachs declined after it reported a worse slump in bond trading revenue than many analysts expected and posted the weakest commodities results in its history as a public company.
Bank of America’s second-quarter profit increased to $5.27 billion from $4.78 billion a year ago. Per-share earnings totaled 46 cents. Revenue climbed to $23.07 billion from $21.51 billion a year ago. But the bank warned that trading revenue would be under pressure. Excluding adjustments, sales and trading revenue fell 9 percent, hurt by a 14 percent slide in the fixed-income division.
Netflix rallied a day after it reported 5.2 million new streaming customers in the second quarter. Chipotle Mexican Grill declined after it closed a restaurant in Virginia due to a suspected norovirus outbreak among some diners. Biotech firm Capricor Therapeutics climbed after the Federal Drug Administration granted a Rare Pediatric Disease designation to CAP-1002, the company’s cardiac cell therapy for the treatment of Duchenne muscular dystrophy.
International Business Machines’ sales declined on the year for the 21st consecutive quarter but the company’s cloud revenue continued to grow. IBM reported profit of $2.3 billion or $2.48 per share on sales of $19.3 billion for its second quarter. Earnings declined 7 percent from the same quarter a year ago and revenue dropped 5 percent. Cloud revenue gained 15 percent from last year to $3.9 billion. IBM maintained its outlook for the full year.
Homebuilder confidence unexpectedly declined in July — NAHB/Wells Fargo Housing Market Index dropped to a reading of 64 in July from a revised 66 in June. June import prices dropped 0.2 percent after edging down by a revised 0.1 percent in May.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$6.65 to US$1,240.65. Copper futures were up 0.11 percent to US$2.73. WTI spot crude was up 44 US cents to US$46.46. Dated Brent spot crude was up 48 US cents to US$48.90. 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 0.5 percent. The yields on both the US Treasury 30 year bond and the 10 year note were down 5 basis points to 2.84 percent and 2.26 percent respectively.
Europe
Stock indices in Europe declined Tuesday — mixed corporate earnings both weighed on investor sentiment and strengthened the euro. The euro reached a 14-month high against the US dollar. The FTSE slipped 0.2 percent, the CAC declined 1.1 percent, the DAX tumbled 1.2 percent and the SMI was 0.7 percent lower.
Deutsche Lufthansa declined after a warning that its unit revenue will be lower in the second half of the year. British peer International Consolidated Airlines Group and easyJet also retreated. Online fashion store Zalando sank after its second quarter sales growth slowed from the previous quarter. Royal Mail rallied after reporting slightly improved revenues for the first quarter. British Land increased after announcing a £300 million share buyback. Spread-betting firm IG Group soared after it reported an uptick in annual profits despite regulatory clampdown.
Novartis climbed after it confirmed its full-year guidance despite reporting a decline in second quarter core earnings. Roche also declined. Ericsson sank in Stockholm after it announced fresh cost-cutting measures after delivering weak second-quarter results. Nestlé was lower after a broker confirmed its downgrade of the stock. Kuehne + Nagel jumped after the company reported financial results for the first half of the year and announced a pair of acquisitions. Clariant and Richemont declined. Credit Suisse was lower after US rival Goldman Sachs reported disappointing financial results. Barclays and Deutsche Bank which are also major players in the bond market declined after the Goldman results.
July ZEW indicator of economic sentiment reading was 17.5 down from 18.6 in June. UK June inflation slowed to a three-month low and factory gate inflation skid to its weakest level in six months. Consumer prices advanced 2.6 percent on the year following a 2.9 percent increase in May.
Asia Pacific
Stocks were mixed in Asia and the US dollar extended losses after two more Republican Senators opposed the Republican healthcare bill. This cast doubts over prospects for reforms backed by U President Donald Trump.
Chinese stocks ended on a steady note as investors hunted for bargains after sharp drop in small-cap shares the previous day. The Shanghai Composite added 0.3 percent while the Hang Seng was 0.2 percent higher.
The Nikkei dropped 0.6 percent and the Topix lost 0.3 percent as trading resumed after a long holiday weekend. The Nikkei declined to its lowest level since July 7, as the yen gained against the dollar on concerns about Trump’s economic agenda and cautious rhetoric from Fed Chair Janet Yellen. The Topix was dragged down by automakers and banks. Toshiba soared after a US hedge fund said it had added a stake in the company. Mitsubishi UFJ Financial Group and Mizuho Financial Group declined. Both Toyota Motor and Honda Motor retreated.
The S&P/ASX and All Ordinaries tumbled 1.2 percent and 1.1 percent respectively. Investors waited for clarification on new bank capital rules and Rio Tinto declined after it lowered its export guidance for iron ore. The big four banks retreated. Oil Search was down after reporting a drop in second-quarter production due to maintenance. Rival Woodside Petroleum and Santos were lower after oil prices declined. The Australian dollar recovered from recent lows against other major currencies after the July Reserve Bank of Australia’s Board minutes portrayed an upbeat picture of the economy, citing growth in the labor market, public investment and household consumption.
The Kospi added 0.94 point. The Sensex tumbled 1.1 percent.
Looking forward
The Bank of Japan announces its monetary policy decision. Canada posts May manufacturing sales. The US reports June housing starts.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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