On 27 July, 2017 – Investors waded through a deluge of earnings reports as well
Stocks were mixed in Asia and positive in Europe as investors reacted to Wednesday’s FOMC announcement.
United States
US stocks were mixed Thursday, pulling back from the record highs recorded in intraday trading. The Dow Jones industrials however managed to close at a new record high. The index was up 0.4 percent. The S&P and Nasdaq succumbed to a swoon in technology shares and were down 0.1 percent and 0.6 percent respectively.
The early strength reflected a positive reaction to earnings news from companies such as Verizon and Facebook. However, profit taking took over pressuring technology stocks lower. Southwest Airlines posted a loss despite reporting second quarter results that exceeded estimates. Both UPS and FedEx were lower. Verizon shares surged as its quarterly revenue topped expectations. Twitter retreated after the company disappointed investors with stagnant monthly active user growth. Johnson Controls tumbled after it reported weaker-than-expected revenue for the latest quarter and trimmed the upper end of the range for its forecast for full-year earnings per share.
Starbucks reported global sales growth of 4 percent at established locations, fueled by higher average spending per visit. But the frequency of customer visits was flat from a year ago. Sales at established locations in its Asia unit rose just 1 percent. For the quarter, Starbucks earned $691.6 million. Total revenue was $5.66 billion, less than the $5.76 billion expected. Starbucks plans to shutter all its Teavana stores over the coming year.
Intel reported a 9.1 percent rise in quarterly revenue, helped by strength in its data center and personal computer businesses. Net income rose to $2.81 billion in the second quarter ended July 1 from $1.33 billion a year earlier. Revenue rose to $14.76 billion from $12.53 billion.
Amazon.com Inc reported a 77 percent slump in quarterly profit as the company invests heavily in areas such as video content and in fast-growing economies such as India. The company said net income fell to $197 million in the second quarter ended June 30, from $857 million a year earlier. Net sales rose 24.8 percent to $37.96 billion.
A number of key economic reports were released today. June durable goods orders jumped 6.5 percent primarily due to civilian aircraft orders. Excluding the volatile transportation sector, orders were up 0.2 percent on the month. The June trade deficit for only goods narrowed to $63.9 billion from May’s revised deficit of $66.3 billion. Exports were up a monthly 1.4 percent while imports retreated 0.4 percent. Weekly jobless claims were up 10,000 mostly offsetting the prior week’s 14,000 decline.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$13.00 to US$1,261.10. Copper futures were down 0.2 percent to US$2.87. WTI spot crude was up 39 US cents to US$49.14. Dated Brent spot crude was up 62 US cents to US$51.59. The US dollar was up against its major counterparts including the euro, pound, Swiss franc and the Canadian and Australian dollars. The currency was unchanged against the yen. The Dollar Index was up 0.55 percent. The yield on US Treasury 30 year bond was up 4 basis points to 2.93 percent while the yield on the 10 year note was up 2 basis points to 2.31 percent.
Europe
European stock markets were mixed as they fluctuated between small gains and losses over the course of the trading session. Investors had to contend with a deluge of corporate earnings reports which were mixed. This was traders’ first opportunity to react to Wednesday’s FOMC announcement. The Fed’s dovish statement sent the euro and the British pound higher against the US dollar which pressured the European markets. The FTSE and CAC edged down 0.1 percent while the DAX retreated 0.8 percent. The SMI added 0.3 percent.
Deutsche Bank tumbled after the lender reported a 10 percent decline in second-quarter revenue thanks to a negative impact from the tightening of spreads on its own debt. BASF declined after the company said its earnings growth will slow down over the rest of the year on account of slower expansion in its chemicals division and a weaker dollar. Bayer retreated after lowering its annual sales guidance. Allianz advanced after the insurer reported solid second quarter earnings and sounded confident of hitting its full-year targets. Airbus declined after it reported a 34 percent fall in second-quarter profit on lower plane deliveries.
LVMH was lower after it issued a cautious outlook after reporting a robust 23 percent rise in first-half operating profit. Schneider Electric gained after the power-equipment supplier raised its full-year guidance and said it was buying automatic transfer switch maker Asco Power Technologies for $1.25 billion in an all-cash deal. AstraZeneca tumbled after suffering a setback to its new lung cancer drug. Lloyds Banking was down after its first-half profit missed estimates due to charges relating to payment protection insurance claims.
Diageo rallied after a share buyback announcement. Anglo American advanced after the company resumed dividend payments six months early after reporting a surge in first-half profit. Thomas Cook climbed after the travel firm backed its full-year guidance after narrowing its third-quarter loss before tax. Nestlé slid in Zurich after reporting lower sales during the first half of the year ahead of a strategy revamp this year. ArcelorMittal advanced in Amsterdam after it raised its outlook for global steel demand. Anheuser-Busch InBev advanced in Brussels after its second quarter report. Roche was up after its profit for the first half of the year topped expectations and raised its outlook for the full year 2017. Novartis was higher.
Asia Pacific
Asian stocks were higher Thursday thanks in part to strong earnings from Samsung Electronics and Nintendo, oil prices held near eight-week highs and the Fed’s dovish statement prompted investors to reduce their rate increase bets. While keeping interest rates unchanged, the Federal Reserve on Wednesday said it would begin to unwind its bloated balance sheet “relatively soon”.
The Shanghai Composite edged up 0.1 percent even though data showed China’s major industrial firms posted increased profit growth in June. The Hang Seng added 0.7 percent.
The Nikkei was up 0.1 percent and the Topix gained 0.4 percent on expectations that the Bank of Japan would maintain its monetary stimulus program longer than most other global central banks. Nintendo jumped after posting stronger than expected profits. Hitachi Kokusai Electric rallied after raising its earnings outlook for fiscal year 18.
The S&P/ASX and All Ordinaries added 0.1 percent and 0.2 percent respectively thanks to firmer commodity prices and the Fed’s dovish inflation view offering support. BHP Billiton and Rio Tinto gained after copper surged to the highest level in more than two years on reports of a potential ban on scrap metal imports in China. Banks including ANZ, Commonwealth and NAB along with investment bank Macquarie Group gained on healthy earnings. Woodside Petroleum and Santos retreated as oil paused after rallying on Wednesday.
The Kospi was up 0.4 percent. South Korea’s second quarter GDP was up 0.6 percent on the quarter. The Sensex was virtually unchanged (up 0.84 point).
Looking forward
Japan posts June data for household spending, retail sales, consumer prices and unemployment. France reports initial estimate of second quarter gross domestic product. France also releases June consumer spending on manufactured goods. The Eurozone posts July EC economic sentiment. Canada reports May monthly GDP. The US releases the initial estimate of second quarter GDP and employment cost index. Final July consumer sentiment will also be released.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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