On 28 August, 2017 – Stocks were mixed to begin the last week of August
Investors tried to assess the impact of hurricane Harvey on the US economy.
United States
The Dow Jones industrials and the S&P were slightly lower Monday after oil stocks slipped further as Tropical Storm Harvey bore down on Texas oil producing and refining area. Harvey was the most powerful hurricane to strike Texas in more than 50 years when it came ashore on Friday and continued to pelt the Houston area with rain. The rain continued Monday, worsening the flooding that has paralyzed the city. The catastrophic disaster pushed investors toward safe-haven assets. The Dow Jones industrials were down 5.27 points, the S&P gained 1.19 points while the Nasdaq added 0.3 percent.
Exxon and Chevron were down while refiner Valero Energy advanced. Insurer Travelers and Allstate were lower as investors assessed the likely impact of Harvey on the sector. Flood damage from Harvey may equal that from 2005’s Hurricane Katrina, which resulted in more than $15 billion in flood insurance losses, according to an insurance research group.
Both JPMorgan and Goldman Sachs retreated. Apple and Gilead Sciences were higher. Both Home Depot and Lowe’s gained as investors expected the two largest US home improvement chains to be among the biggest beneficiaries of post-Harvey recovery. Kite Pharmaceuticals surged after Gilead Sciences agreed to buy the immunotherapy developer in a deal valued at $11.9 billion.
Oil prices were hurt as reduced refining capacity lowered demand for crude. Some companies such as ExxonMobil and Royal Dutch Shell shut down refineries as a result of the flooding. Anadarko Petroleum and Helmerich & Payne tumbled.
July international trade in goods merchandise trade gap widened to $65.1 billion. Exports dropped 1.3 percent — they were pulled down by a sharp decline in vehicles along with consumer goods which are two weak categories for the US. Imports declined 0.3 percent. Foreign vehicles declined 2.8 percent while industrial supplies were down 1.7 percent.
These data reflect observations at 4:00 PM US ET. There was no gold fixing on Monday — London markets were closed. Copper futures were up 1.1 percent to US$3.09. WTI spot crude was down US$1.22 to US$46.65. Dated Brent spot crude was down 46 US cents to US$51.95. The US dollar declined against the euro, pound, Swiss franc and the Australian dollar. The US dollar was up against the Canadian dollar while it was unchanged against the yen. The Dollar Index was down 0.3 percent. The yield on US Treasury 30 year bond was up 1 basis point to 2.76 percent while the yield on the 10 year note was down 1 basis point to 2.16 percent.
Europe
European stock markets retreated Monday. Shares were pressured as the euro rose to a two year high against the US dollar. The euro jumped after European Central Bank President Mario Draghi on Friday refrained from talking down the euro at the Jackson Hole conference as some market participants had expected. Energy stocks were under pressure Monday as crude oil prices declined. Crude prices weakened due to reduced Texas refining capacity in Texas. Refineries remain shut because of severe flooding in the key refining areas on the Gulf of Mexico. The CAC and SMI were down 0.5 percent while the DAX lost 0.4 percent. Markets in the UK were closed for a holiday. Trading was light.
Volkswagen was unchanged after a federal judge in Detroit sentenced a former engineer to 40 months in prison for his role in a nearly 10-year conspiracy to defraud US regulators and Volkswagen customers. Vonovia slid after its supervisory board Chairman resigned for health reasons. SGL Carbon climbed on a broker upgrade. Sanofi retreated after completing the acquisition of Protein Sciences, a vaccines biotechnology company based in Connecticut.
Altice rose in Amsterdam after announcing a €1 billion share buyback. Novartis and Roche were down. Stada declined as investors took profits after the stock surged to an all-time high Friday when hedge fund Elliott increased its stake in the company. Reinsurance stocks were down after flooding triggered by Tropical Storm Harvey devastated Houston. Hannover and Munich Re were lower as was French reinsurer Scor.
July M3 money supply climbed 4.5 percent on the year, weaker than the 5.0 percent growth logged in June. Italy’s August consumer confidence improved to its highest level in eight months.
Asia Pacific
Asian stocks were mixed Monday after the annual meeting of central bankers in Jackson Hole, Wyoming, offered little surprises, with both Fed Chair Janet Yellen and ECB President Mario Draghi sticking to the script of the conference rather than discussing the course of monetary policy. Both warned against dismantling tough post-crisis financial rules that the Trump administration blames for stifling US growth.
Chinese shares hit 20-month highs after July industrial firms maintained a profit surge, though the pace of growth eased from the previous month. Investor sentiment was also helped by reports that China’s securities regulator will continue to support the mixed ownership reform of State-owned enterprises. The Shanghai Composite climbed 0.9 percent while the Hang Seng edged up 0.1 percent.
The Nikkei was virtually unchanged (down 2.71 points) while the Topix was 0.2 percent higher in choppy trading. Energy explorer Inpex and Japan Petroleum declined. Mazda Motor and Toyota were lower. Insurer Tokio Marine Holdings was down as investors assessed losses from the flood damage in Texas from Hurricane Harvey.
Both the S&P/ASX and All Ordinaries declined 0.6 percent. The indices were dragged down by banks after the country’s prudential regulator announced the launch of an inquiry into Commonwealth Bank of Australia following allegations the bank breached laws to combat money laundering and terrorism funding. Commonwealth Bank along with the other three big banks were lower. Weakness in base metal prices weighed on miners including Rio Tinto and Fortescue Metals Group. Oil stocks posted broad-based gains as investors digested the impact of Hurricane Harvey on the US oil industry.
The Kospi was down 0.3 percent. The Sensex advanced 0.5 percent.
Looking forward
Japan releases July household spending and unemployment data. France posts final second quarter gross domestic product and July consumption of manufactured goods. Canada releases July industrial product price index. In the US, June Case Shiller house price index and August consumer confidence will be released.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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