On 25 July, 2017 – Favorable earnings reports sent European and US stocks higher
Rising commodity prices pushed up energy sector shares.
United States
Both the S&P and Nasdaq closed at new highs again thanks to gains in energy and financial stocks. The Dow Jones industrials were up 0.5 percent, the S&P gained 0.3 percent and the Nasdaq edged up 1.37 points.
Stocks were lifted by string of positive corporate earnings results in pre-market trading, which included McDonald’s and Caterpillar. However gains in the energy sector, lifted by oil prices, led the S&P. The gains were closely followed by those in financial stocks, which rose after Citi set out a $60 billion capital return plan. Citigroup, Bank of America and JPMorgan rallied. The healthcare sector, held back by stalled reforms in Washington, was the biggest laggard on Tuesday. Utilities and technology stocks were also lower. Nasdaq’s gains were crimped by declines in Google parent Alphabet.
McDonald’s rose after it posted its biggest jump in global sales at established restaurants in five years. Caterpillar surged after the company raised its full-year outlook for the second time this year. Eli Lilly dropped after it outlined a lengthy delay for its experimental rheumatoid arthritis drug. Freeport-McMoRan jumped as soaring metal prices and progress in a permit dispute with Indonesia buoyed investor sentiment.
General Motors reported a better-than-expected quarterly net profit from continuing operations despite falling revenue and the company promised to cut production in the second half to curtail its burgeoning inventory of unsold vehicles. GM reported second-quarter net income of $2.4 billion, down from $2.8 billion a year earlier. The company reported revenue for the quarter of $37 billion, down from $37.4 billion a year earlier.
DuPont which is merging with Dow Chemical beat estimates for both profit and revenue helped by higher sales in its agriculture business. Total revenue rose 7 percent, as the company sold more insecticides and fungicides. DuPont also said higher soybean sales in North America and increased demand for sunflower and corn seeds in Europe helped its agriculture business in the first half of the year. However, 3M and United Technologies declined after releasing their quarterly results. AT&T’s net income rose to $3.9 billion from $3.4 billion a year earlier. Revenue declined to $39.8 billion from $40.5 billion in the year-ago period.
The Conference Board said its consumer confidence index climbed to 121.1 in July from a revised 117.3 in June.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$1.15 to US$1,254.40. Copper futures were up 3.9 percent to US$2.84. WTI spot crude was up US$1.58 to US$47.92. Dated Brent spot crude was up US$1.61 to US$50.21. The US dollar was up against the yen and Swiss franc. It was down against the Australian dollar. The currency was virtually unchanged against the euro, pound and the Canadian dollar. The Dollar Index was up 0.1 percent. The yield on US Treasury 30 year bond was up 8 basis points to 2.91 percent while the yield on the 10 year note was up 7 basis points to 2.32 percent.
Europe
European stocks rebounded from a three day losing streak. Investors were encouraged by stronger than expected German Ifo business confidence data and by the progress that is being made in Greece. The FTSE added 0.8 percent, the CAC was up 0.7 percent, the DAX advanced 0.5 percent and the SMI was 0.4 percent higher.
Bank stocks were broadly higher after ECB Executive Board member Yves Mersch said a substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation. Energy stocks climbed along with rising crude oil prices while miners received a boost from the rising price of copper.
According to European Commission Economic and Financial Affairs Commissioner Pierre Moscovici, Greece has made much progress since 2010 and investor confidence is returning to the country as the country held a sale of its government bonds for the first time since 2014. He also expressed hope that Greece will be able to stand on its feet within a year and become a ‘normal’ member of the euro area again.
Aixtron rose after narrowing its first-half loss. Technip declined after it announced that it would have to restate some results due to errors. Segro advanced after reporting a rise in first-half pretax profit. Informa jumped after posting positive first-half results. Jimmy Choo soared after US retailer Michael Kors agreed to buy the British fashion house for $1.2 billion.
Lindt & Sprüngli dropped after reporting half year results that fell short of expectations. Julius Baer climbed adding to its gains from the previous session after its half year report. Credit Suisse and UBS advanced. Zurich Insurance, Swiss Re and Swiss Life were higher. Nestlé and Novartis advanced but Roche finished lower. Miners Anglo American, Antofagasta, BHP Billiton, Glencore and Rio Tinto gained.
July Ifo German business confidence strengthened to a fresh record high as companies became more satisfied with their current situation amid the improving business outlook. The business confidence index rose to 116 from a revised 115.2 in June.
Asia Pacific
Stocks were mixed Tuesday — oil extended overnight gains and the Japanese yen weakened before the Federal Reserve FOMC announcement on Wednesday. Oil rose further in Asian deals after climbing overnight as Saudi Arabia pledged to curb exports from August and Nigeria agreed to curb production to rein in global oversupply.
The Shanghai Composite slid 0.2 percent on profit taking. Investor sentiment was dented after China’s top decision-making body emphasized stricter financial discipline for the rest of 2017. The Hang Seng was virtually unchanged (up 5.22 points).
The Nikkei retreated 0.1 percent and the Topix was 0.3 percent lower in choppy trade. They drew little support from a weaker yen. NTT DoCoMo was lower on a Nikkei report that its April to June group operating profit probably sank nearly 10 percent from last year. Mitsubishi Tanabe Pharma advanced after saying it would buy Israel’s Neuroderm for $1.1 billion. Rival Shionogi was higher on news that it would submit a new drug application to the PMDA in Japan later this year. Tokyo Electron, Advantest and Sharp advanced along with SoftBank Group. The Bank of Japan’s June 15 to 16 meeting minutes revealed that there was heated discussion among board members on how much information they should disclose to the public about a potential exit from quantitative easing.
The S&P/ASX and All Ordinaries rebounded 0.7 percent and 0.6 percent respectively. Firmer commodity prices helped lift miners and energy stocks, with BHP Billiton, Rio Tinto, Fortescue Metals Group, Beach Energy and Santos advancing. Gold miners Evolution, Regis Resources and Newcrest rallied as gold prices hit a one-month high. The big four banks were higher.
The Kospi retreated 0.5 percent on profit taking after recent sharp gains. The Sensex slipped 0.1 percent in choppy trading prior to the FOMC announcement.
Looking forward
New Zealand June merchandise trade will be released. Second quarter consumer price index for Australia will be posted. The UK reports its first estimate of second quarter gross domestic product. In the US, June new home sales will be released along with the weekly EIA petroleum status report. The Federal Reserve announces its monetary policy decision.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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