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Global Round Ups  - 26.09.2017

On 25 September, 2017 - Stocks were mostly lower Monday after a weekend of election news and an escalation of geopolitical rhetoric

Another election — this one in Japan — will be held on October 22.

United States

Technology stocks led the US indices lower Monday in part on geopolitical rhetoric. The tech losses overshadowed gains for energy producers and elsewhere. The Dow Jones industrials and S&P were down 0.2 percent while Nasdaq tumbled 0.9 percent.

Among the broad losses among tech stocks, Facebook, Micron, Nvidia and video-game developer Electronic Arts tumbled. Microsoft and Apple dropped. Genuine Parts jumped after it said it would buy Alliance Automotive Group, a European distributor of auto parts, tools and workshop equipment. Genuine Parts valued the deal at $2 billion, including the repayment of debt. Allergan advanced after the drug maker authorized a $2 billion buyback of its shares and said its chief financial officer would retire. Shares of energy companies including Chesapeake Energy and Helmerich & Payne rose with oil prices.

New York Fed President William Dudley said further interest rate increases are “likely” given that recent weakness in inflation may be mostly temporary. In a speech on Monday, Dudley said he expected US inflation — which has been held back by “a number of temporary, idiosyncratic factors” — will rise and stabilize around the Fed’s 2 percent target “over the medium term”. This along with continued strength in the US economy and the tightening labor market means the Fed will likely continue to remove monetary policy accommodation gradually. Mr Dudley also downplayed the impact that the three recent hurricanes that struck the US could have on the country’s economic growth. Mr Dudley’s comments are likely to reinforce market expectations that the Fed will raise interest rates for a third time before the year ends.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$1.50 to US$1,293.30. Copper futures were down 0.2 percent to US$2.94. WTI spot crude was up US$1.52 to US$52.18. Dated Brent spot crude was up US$2.27 to US$59.13. The US dollar was up against all of its major counterparts including the euro, pound, and the Canadian and Australian dollars. The currency declined against the yen and Swiss franc. The Dollar Index was up 0.5 percent. The yields on both the US Treasury 30 year bond and 10 year note were down 3 basis points to 2.75 and 2.22 percent respectively.

European markets

European stock indices mostly retreated Monday in the aftermath of Germany’s election results. The FTSE edged down 01 percent while the CAC was 0.3 percent lower. The DAX inched up 2.46 points while the SMI was 3.75 points higher. Investors were in a cautious mood due to the results of the German election over the weekend. German Chancellor Angela Merkel won a fourth term in office on Sunday, but will have to govern with a far less stable coalition. French President Emmanuel Macron also suffered a defeat at the Senate elections on Sunday.

ECB President Mario Draghi said that the European Central Bank is growing increasingly confident that inflation will rise but remain below the 2 percent the target — but patience is still needed. Draghi singled out currency volatility as a source of uncertainty which requires monitoring and noted that the economy still needed to absorb slack, requiring “ample” ECB accommodation. With the economy growing for the 17th straight quarter, the ECB is expected to reduce stimulus from next year.

Deutsche Lufthansa climbed after reports that the airline group is offering to pay €200 million to buy its bankrupt smaller opponent Air Berlin. Alstom rose after the firm confirmed that it was in discussions with Siemens about a possible combination of Alstom with Siemens Mobility Division. Airbus Group advanced — the company is in talks to sell a part or all of Premium Aerotec, a subsidiary that makes large plane components according to Die Welt. Roche, Novartis and Nestlé finished higher. LafargeHolcim was among the weakest performers along with Credit Suisse and UBS.

Imagination Technologies Group soared after the chip designer agreed to a takeover by Canyon Bridge. Indivior rose after it entered into a settlement agreement with Mylan Pharmaceuticals to resolve a patent dispute. Unilever advanced after the company agreed to acquire Carver Korea, a Seoul-based maker of toners and moisturizers, for €2.27 billion from Bain Capital Private Equity and Goldman Sachs. British bank shares were lower as the Bank of England ramped up its warning about growth in household debt.

German Ifo business sentiment dropped for the second straight month in September as companies were less satisfied with their current business situation and their short-term outlook. The business confidence index slid to 115.2 in September from a revised 115.7 in August.

Asia Pacific

Shares were mostly lower Monday as geopolitical tensions persisted and elections in Germany and New Zealand set the stage for periods of political uncertainty in both countries. German Chancellor Angela Merkel won a fourth term in office Sunday, but will have to govern with a far less stable coalition. In New Zealand, Prime Minister Bill English's National Party won the most votes, but failed to secure a majority in parliament.

Japan’s Prime Minister Shinzo Abe called a snap general election for October 22 as he seeks to secure power to the 2020 Tokyo Olympics and beyond. Speaking at a press conference in his official residence, Mr Abe said he would dissolve parliament on September 28th and go to the public. He said the security threat from North Korea could not be allowed to prevent a democratic election. The election will decide whether Japan continues with stimulative economic policies and whether Mr Abe has the political strength to revise Japan’s pacifist constitution. Mr Abe starts with a massive opinion poll lead, but the election is full of risks, with Tokyo governor Yuriko Koike declaring she will lead a new Party of Hope in opposition to the prime minister. Mr Abe said he would raise the consumption tax from 8 to 10 per cent in 2019 as planned but redirect part of the revenue to provide free childcare for 3 to 5 year-olds.

The Shanghai Composite was down 0.3 percent with property developers succumbing to heavy selling pressure, after officials imposed a new round of curbs over the weekend to rein in the heated housing market. The Hang Seng tumbled 1.4 percent.

The Nikkei and Topix added 0.5 percent each on speculation that Japan's prime minister will compile a new economic stimulus package of around ¥2 trillion alongside his expected call for a snap election. As the end of Japan’s fiscal first half looms on September 30 for a majority of listed companies, the market was also underpinned by investors buying up stocks before they go ex-dividend on Wednesday. Also helping buoy investor sentiment, the September flash manufacturing PMI continued to expand at a faster rate to reach a four-month high as output, new orders, new export orders and input prices all accelerated.

The S&P/ASX was up 1.59 points and the All Ordinaries added 1.17 points led by energy stocks as oil extended Friday's gains after oil producers said their commitment to cut production is working. Santos and Beach Energy rallied. Banks were mixed while miners closed flat to slightly higher.

The Kospi was down 0.3 percent amid selling by foreign investors following a week of heated rhetoric between the leaders of the US and North Korea. The Sensex dropped 0.9 percent on concerns over the fiscal deficit after reports emerged that the government is thinking of massive spending program to boost the country's slowing economy.

Looking forward

Singapore posts August industrial production. Hong Kong reports August merchandise trade. In the US, August new home sales and September consumer confidence will be released along with September’s Richmond Fed manufacturing index. Fed Chair Janet Yellen speaks in Cleveland, Ohio on Inflation, Uncertainty, and Monetary Policy.

Global Stock Markets

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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