On 23 August, 2017 – Stocks retreated from Tuesday’s highs on comments by the US President
Asian and European shares declined despite positive economic data.
United States
Stocks retreated Wednesday after Tuesday’s rally. The Dow Jones industrials were down 0.4 percent while both the S&P and Nasdaq were 0.3 percent lower. The pullback came as traders reacted to President Donald Trump’s comments at a rally in Phoenix, Arizona Tuesday. Trump pledged that he would build the controversial wall on the border with Mexico even if it meant shutting down the government. The president also indicated he’s likely to terminate the North American Free Trade Agreement, raising concerns about the impact on global trade.
Negative sentiment was also generated by the July new home sales report. It unexpectedly showed a steep drop of 9.4 percent in sales to an annualized rate of 571,000 from an upwardly revised June rate of 630,000. This series is volatile and is subject to large revisions. However, selling pressure waned after an initial move to the downside as traders looked ahead to the Federal Reserve’s upcoming Economic Policy Symposium in Jackson Hole, Wyoming with both Fed Chair Janet Yellen and European Central Bank President Mario Draghi scheduled to speak on Friday.
Disappointing earnings news also weighed. Lowe’s was lower after reporting weaker than expected second quarter results and forecasting full-year earnings below estimates. Southwest Airlines, JetBlue and American Airlines tumbled. CSX dropped after a report from the Wall Street Journal said the railroad operator is being hit by congestion, delays and erratic service. Coty declined after reporting weak sales in the most recent quarter.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$2.45 to US$1,286.65. Copper futures were down 0.1 percent to US$3.01. WTI spot crude was up 55 US cents to US$48.38. Dated Brent spot crude was up 70 US cents to US$52.57. The US dollar was up against the pound and was unchanged against the Australian dollar. The currency declined against the yen, euro, Swiss franc and the Canadian dollar. The Dollar Index was down 0.4 percent. The yield on US Treasury 30 year bond was down 5 basis points to 2.94 percent while the yield on the 10 year note was down 4 basis points to 2.17 percent.
Europe
Stocks retreated Wednesday. European economic data were positive but traders were concerned by comments made by President Donald Trump at a rally in Phoenix, Arizona Tuesday. Trump pledged to a crowd of supporters that he would build the controversial wall on the border with Mexico even if it meant shutting down the government. He also indicated he’s likely to terminate the North American Free Trade Agreement, raising concerns about the impact on global trade. The FTSE was up 0.91 point while the CAC was down 0.3 percent, the DAX declined 0.5 percent and the SMI slipped 0.1 percent.
In a speech on Wednesday, European Central Bank President Mario Draghi said that monetary and regulatory policy actions and steps in supervision undertaken over the last decade have made the world more resilient. However, he also said that central banks must continue preparing for new challenges. Draghi is due to speak at the Jackson Hole economic policy symposium on Friday along with Federal Reserve Chair Janet Yellen.
Air Berlin slid after Ryanair said it would be interested in bidding for the whole of the insolvent German carrier. Publicis Groupe dropped after WPP cut its full-year revenue forecast, citing economic uncertainty and a “rise of populism” in the UK and the US. WPP sank. Vedanta Resources rallied after its quarterly core earnings rose about 48 percent on higher commodity prices. Julius Baer, UBS and Credit Suisse declined.
Nestlé rose while Novartis slipped and Roche was unchanged. AstraZeneca, GlaxoSmithKline and Shire gained. Fiat Chrysler ended the day at an all-time high on continued speculation about potential tie-ups. One day after China’s Great Wall Motor cooled down prospects of a possible deal with Fiat, Bloomberg reported that the Italian American automaker is considering options including a plan to spin off the upscale Maserati and Alfa Romeo brands.
Flash August Eurozone composite PMI was steady at 55.8 while manufacturing climbed to 57.4 and services slipped to 54.9 — all healthy readings. In Germany, the flash composite climbed to 55.7 with its manufacturing and service sector component readings at 59.4 and 53.4 respectively. In France, private sector activity expanded at a marked pace though the rate of growth stagnated. The composite output index was 55.6, the same as in July. Manufacturing was at 55.8 and services, 55.5.
Asia Pacific
Asian stocks ended mixed Wednesday as US President Donald Trump’s comments that he may end the North American Free-Trade Agreement raised concerns over its impact on global trade. Geopolitical risks also remained in focus after the United States announced new sanctions on Chinese and Russian entities for their alleged ties to North Korea’s nuclear weapons program.
The Shanghai Composite edged down 0.1 percent as steelmakers succumbed to profit taking, offsetting gains in the banking sector on optimism over earnings. Trading in Hong Kong was suspended due to tropical cyclone Hato.
The Nikkei was up 0.3 percent while the Topix added 0.2 percent. The gains snapped a five day losing streak thanks to a weakening of the yen and the flash manufacturing PMI continued to expand in August and at a faster pace. The PMI was 52.8, up from 52.1 in July. Toshiba jumped on reports that it is prioritizing talks with Western Digital on the sale of its memory chip business.
The S&P/ASX and All Ordinaries both lost 0.2 percent. IAG shares dropped after the general insurer warned that high-risk regions such as Wellington may see further insurance premium increases. Healthscope fell after posting weaker than expected full-year results. Energy stocks posted broad-based gains after oil prices rose overnight.
The Kospi was up 1.07 points. The Sensex was up 0.9 percent.
Looking forward
The UK releases its second estimate of second quarter gross domestic product and the August CBI distributive trades survey. In the US, July existing home sales and weekly jobless claims, money supply and Fed balance sheet will be released. The Kansas City Fed’s Jackson Hole symposium begins — it concludes on Saturday.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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