On 29 June, 2016 – Brexit fears lessen
Global rebound in stocks from the Brexit selloff continued for a second day.
United States
US stocks followed global stocks higher for a second day as investors continued to scour for bargains and digest the fallout from Britain’s stunning vote to leave the European Union. Traders also received encouraging data on consumer spending in the United States. The Dow Jones industrials were up 1.6 percent, the S&P advanced 1.7 percent and Nasdaq added 1.9 percent.
May consumer spending was up 0.4 percent after surging 1.1 percent in April. Personal income increased 0.2 percent on the month.
The Canadian Imperial Bank of Commerce agreed to buy the bank holding company PrivateBancorp for $47 per share in cash and stock or $3.73 billion. PrivateBancorp shares rallied. Mallinckrodt, the specialty pharmaceuticals company, advanced. Shares of several oil and gas production and transportation companies including Murphy Oil and Kinder Morgan were higher. Tesaro more than doubled after the company said its pill for recurrent ovarian cancer prevented the disease from worsening for many months after chemotherapy ended. There is no approved maintenance treatment to keep ovarian cancer at bay after chemotherapy. Shares in Myriad Genetics, which makes the companion test given to patients before treatment with Tesaro’s drug, also climbed. Nimble Storage, Seagate Technology and NetApp advanced. American Express, Nike and JPMorgan climbed higher.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$11.80 to US$1,321.50. Copper futures were up 0.8 percent to US$2.19. WTI spot crude was up US$1.43 to US$49.28. Dated Brent spot crude was up US$1.32 to US$49.90. The US dollar was up against the yen. However, it was down against euro, pound and the Canadian and Australian dollars. The currency was unchanged against the Swiss franc. The Dollar Index was down 0.4 percent. The yield on US Treasury 30 year bond was up 4 basis points to 2.31 percent while the yield on the 10 year note was up 5 basis points to 1.51 percent.
Europe
Stocks continued their rally for a second day following the Brexit sell off last Friday and this Monday after UK voters shocked investors around the globe by voting in favor of an exit from the European Union. The FTSE recovered all of its two day losses. Rising commodity prices also helped to fuel the recovery. A weakening in the US dollar also provided a boost to precious metal prices, driving mining and resource stocks higher. The FTSE jumped 3.6 percent, the DAX gained 1.7 percent and the CAC and SMI both added 2.6 percent.
Insurance stocks added to the strong gains of the previous session and telecoms also turned in a strong performance. Siemens gained on a report it plans to invest €1 billion over the next five years in a new startups unit. E.ON and RWE advanced. In Paris, Technip jumped after signing a pact with GE Oil & Gas to explore digital solutions for new LNG projects. Total also gained. Vodafone Group rose after saying it is considering moving its headquarters out of the UK.
BT Group jumped after revising financials to reflect organizational changes that came into effect on April 1, 2016. Dixons Carphone declined after its full year 2016 earnings per share fell to 15.1 pence from 21.2 pence a year ago. Fresnillo, Anglo American, Antofagasta, BHP Billiton and Glencore surged. However, travel-related stocks remained under selling pressure, with TUI retreating after three suspected Islamic State group suicide bombers targeted the international terminal of Istanbul’s Ataturk airport.
Eurozone June economic sentiment eased slightly in June before the Brexit vote. After rising for two straight months, the economic sentiment index slid marginally to 104.4 from revised 104.6 in May. UK house price growth accelerated more than expected in June according to Nationwide Building Society. House prices climbed 5.1 percent on the year following a 4.7 percent rise in May.
Asia Pacific
Stocks here also rallied Wednesday thanks to higher energy prices and hopes for stimulus offset worries about the economic effects of Brexit on the global economy. Safe-haven assets retreated after strong overnight gains across the US and Europe. Japanese Prime Minister Shinzo Abe today pledged broad policy support to achieve market stability. Oil extended overnight gains, with the threat of union strikes by Norwegian oil and gas workers and expectations of another drop in US crude inventories providing support to prices.
The Shanghai Composite was up 0.7 percent to a three-week high as authorities moved to calm investors. The Hang Seng was up 1.3 percent following a rally in global equities. The yuan held steady, hovering near its 5-1/2-year low against the US dollar after China’s two main official securities newspapers said market expectations for the currency remained basically stable with no signs of panic selling.
The Nikkei climbed 1.6percent as the safe-haven yen steadied and the global markets returned to a semblance of normality. Exporters Toyota Motor, Sharp, Sony and Toshiba climbed along with banks Mitsubishi UFJ Financial and Mizuho Financial. Oil refiner Idemitsu Kosan slumped on news that its founding family is opposed to its planned merger with Showa Shell Sekiyu KK. May retail sales fell more than expected and underscored the challenge Prime Minister Shinzo Abe faces in stimulating growth. Retail sales dropped 1.9 percent from a year ago. Expectations were for a decline of 1.6 percent.
Both the S&P/ASX and All Ordinaries were up 0.8 percent as Brexit fears faded and commodities gained ground on a weaker US dollar. The big four banks advanced. Asset manager BT Investment Management, which has exposure to the UK, rallied 5 on bargain hunting after having lost nearly 27 percent since the Brexit verdict. Rio Tinto gained after a broker upgrade. BHP Billiton and Fortescue Metals Group also were higher. Gold miner Evolution Mining dropped after the precious metal fell for the first time in three sessions. Property stocks GPT Group and Dexus Property dropped after data showed the sale of new homes in Australia declined for a second consecutive month in May.
The Kospi added 1.0 percent after governments and central banks the world over pledged liquidity support to absorb Brexit shock. The Sensex advanced 0.8 percent as the rupee climbed and the Union Cabinet approved with some changes the recommendations of 7th Pay Commission that will raise salaries of over 10 million government staff and pensioners by about 23 percent, a move that is expected to help boost consumption. The good progress of monsoon rains also buoyed investors.
Global Stock Markets
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.
Looking forward*
Japan posts May industrial production. May German retail sales and French consumer spending on manufactured goods will be released. German June unemployment rate will be reported. The UK reports its final estimate of first quarter GDP. The Eurozone releases flash June harmonized index of consumer prices. The European Central Bank publishes minutes from its recent monetary policy meeting. Canada post May monthly GDP. In the US, June Chicago PMI and weekly jobless claims, money supply and Fed balance sheet will be released.
*Note — all releases are listed in local time.
Source: Fidelity
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