Deepening geopolitical worries held down stocks and, together with mixed US economic data, sent shares lower in Asia and Europe. US stocks, after retreating in the morning, rallied and ended the day barely higher.

 

 

 

United States

 

 

United States markets recorded tiny gains Tuesday afternoon amid domestic and international concerns. The price of oil jumped as traders worried that Turkey’s downing of a Russian fighter plane could lead to worsening tensions in the Middle East. The Dow Jones industrials and S&P edged up 0.1% while the Nasdaq was virtually unchanged (up 0.33 point). 

Turkey shot down a Russian warplane that it said had violated Turkish airspace and ignored repeated warnings, increasing geopolitical tensions and sending investors scrambling out of stocks in search of safe havens. Russia denied the plane crossed Syria’s border into Turkey and said the pilots parachuted but that there had been no contact with them. NATO, of which Turkey is a member, will hold an emergency meeting later today.

Consumer confidence plunged in November as Americans became more worried about the state of the jobs market. The Conference Board says its confidence index fell to 90.4, a big drop from October and far lower than expected. That came in spite of a rebound in hiring in October, which suggested the economy would keep growing. Consumer discretionary stocks slipped following the report. Shares of Amazon and Netflix were lower.

Energy stocks rose. Marathon Oil and Murphy Oil advanced. Chesapeake Energy shares were up. Airline stocks fell on the prospect that fuel would cost more. United and Southwest declined. Priceline Expedia retreated. Cruise line stocks including Royal Caribbean and Carnival were down. Hormel Foods jumped to a nominal high after it surprised with strong results for the fourth quarter and offered a better-than-expected earnings outlook for the year. Hormel said there was strong demand for its Dinty Moore canned stew, Hormel chili and packages of Wholly Guacamole dips. Dollar Tree was up despite mixed third-quarter results. The jewelry company Signet was down. The owner of brands including Kay Jewelers, Jared and Zale reported lower than expected profit and revenue.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$5.90 to US$1,076.40. Copper futures were up 2.6% to US$2.07. WTI spot crude was up US$1.14 to US$42.89. Dated Brent spot crude was up US$1.27 to US$46.10. The US dollar was up against the pound. However, it retreated against the euro, yen, Swiss franc and the Canadian and Australian dollars. The Dollar Index was down 0.2%. The yield on US Treasury 30 year bond unchanged at 3.00% while the yield on the 10 year note slipped 2 basis points to 2.23%.

 

 

 

 

Europe

 

 

Stocks declined Tuesday. Geopolitical concerns dominated the trading day after Turkey shot down a Russian jet near the border with Syria. The Russian-made SU-24 was reportedly shot down after receiving repeated warnings about entering Turkish air space, although Russia claims the jet remained in Syria for the duration of its flight. The FTSE was down 0.4%, the SMI lost 1.3% and both the CAC and DAX dropped 1.4% each.

Travel related stocks were again under pressure as warnings over the potential for further terrorist attacks have resulted in travel warnings. Luxury goods companies were also under pressure. Investors are concerned that reduced travel will translate into lower sales of luxury items to tourists.

UK interest rates are likely to remain low for some time according to Bank of England Governor Mark Carney in his testimony to the Treasury Committee. In its Inflation Report, the BoE dampened the prospect of an interest rate increase in the near term and suggested that interest rates are unlikely to rise until late 2016 as inflation is expected to remain low.

Volkswagen advanced. There were apprehensions that the emission scandal concerning the company could affect business confidence, which however was dispelled by the Ifo business confidence data. Lufthansa dropped on a weak day for travel stocks. Air France-KLM also retreated in Paris. LVMH, Kering and L’Oréal also finished down. In London, Babcock International climbed after its first-half profit increased. Rolls-Royce gained after the company said it expects incremental gross cost savings of £150 million to £200 million per year, with benefits accruing from 2017 onwards, targeting a 1 to 2 year payback. Burberry retreated after a broker downgrade. EasyJet, Carnival and International Consolidated Air Group were lower. Swatch declined on a broker downgrade. Intercontinental Hotels Group and tourism company TUI retreated. Pearson declined on a broker downgrade.

German business confidence unexpectedly rose in November to its highest level since the middle of last year. The Ifo business confidence index rose to 109 from 108.2 in October, marking its best reading since June 2014's 109.4. Final third quarter GDP advanced 0.3% from the prior quarter and was up 1.7% from the same quarter a year ago.

 

 

 

 

 

 

 

 

 

 

 

Asia Pacific

 

 

 

Stocks in this region were mixed Tuesday. Australian shares succumbed to profit taking after recent gains and Chinese shares recouped early losses while Japanese stocks gained for a fifth straight trading session.

The Shanghai Composite was up 0.2% after China's securities regulator changed the rules on brokerage proprietary trading. The Hang Seng lost 0.3%.

The Nikkei added 0.2% in a choppy session amid expectations the government will soon announce a supplementary budget for the current fiscal. Sharp soared following media reports that major Japanese banks may waive some of the ailing company's debt as part of a restructuring program, opening the door for potential investment by a state-backed fund. Nitto Denko surged after announcing Friday that US regulators have decided to fast-track their approval process for the chemical company's drug technology aimed at treating a liver disorder. Watami climbed after announcing during the day it will resume dividend payments for the current business year ending March using some of the returns from the sale of its nursing care operation. Obayashi gained after the Nikkei business daily reported Tuesday that a consortium of Japanese companies including the construction giant is expected to clinch a major bridge-building contract in Bangladesh. Japan's November manufacturing activity expanded at the fastest pace in 20 months according to the latest flash manufacturing PMI survey. The PMI climbed to 52.8 from 52.4 in October.

Both the S&P/ASX and All Ordinaries retreated 0.9% on profit taking and as a stronger dollar weighed on commodity markets. BHP Billiton, Rio Tinto and Fortescue Metals Group were down as iron ore prices hovered near 7-year lows. Santos gained as crude prices got a boost on talk Saudi Arabia will work toward oil price stability.

The Kospi added 0.6% on institutional buying. The Sensex was 0.2% lower, weighed down by mixed global news and portfolio churning ahead of the expiry of F&O contracts on Thursday in a holiday-shortened week. The Indian markets will be closed on Wednesday on account of Gurunanak Jayanti.

 

Looking forward

 

 

US October durable goods orders, personal income and spending, September FHFA house price index, flash November services PMI and final consumer sentiment will be released along with weekly jobless claims.

 

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.