On 19 October, 2016 – Most global stocks continued to climb

Rising oil prices bolstered energy stocks.
United States
Stocks advanced for a second day led by a sharp increase in energy companies as the price of crude oil surged. Consumer focused companies and utilities were among the biggest laggards. Investors evaluated the latest company earnings along with new economic data. The Dow Jones industrials and the S&P added 0.2 percent while the Nasdaq was virtually unchanged (up 2.57 points).
Morgan Stanley gained after quarterly earnings rose to $1.6 billion or 81 cents per share from $1.02 billion or 48 cents per share in the year-earlier period. Revenue was $8.91 billion, up from $7.77 billion a year earlier when sluggish trading activity and losses in its Asia private-equity portfolio caused Morgan Stanley to post one of its worst quarters under Chief Executive and Chairman James Gorman.
American Express reported its lowest quarterly revenue in more than five years as it struggled to make up for the loss of its contract with Costco Wholesale. Total revenue net of interest expense fell 5 percent to $7.77 billion in the three months ended September 30 — the first quarter with no revenue from the Costco partnership. Net income attributable to common shareholders fell about 10 percent to $1.11 billion. On a per share basis, AmEx earned $1.20.
Ebay reported a 5.6 percent rise in quarterly revenue. The company, known best as an auction site, said its revenue rose to $2.22 billion from $2.10 billion. Net income fell to $413 million or 36 cents per share in the third quarter ended September 30, from $539 million or 45 cents per share a year earlier.
Transocean, Halliburton, Newfield Exploration, Noble Energy, Chesapeake Energy and Occidental Petroleum rallied. Intel slid 5 after the company issued pessimistic guidance for the current quarter. Manhattan Associates declined after the company reported weak quarterly sales and cut its revenue outlook. Cree dropped after it posted another quarter of weak sales and its guidance missed estimates. Reynolds American slid after the company disclosed weak results and lower sales volumes.
Housing starts dropped in September thanks to the volatile multi-unit component of the report which was down 38 percent. However, the more important single family homes component was 8.1 percent higher.
The Federal Reserve’s Beige Book did not raise any red flags for market participants. Prepared by the Dallas Fed for the November 1 and 2 FOMC meeting, the report said that the pace of economic growth remains modest to moderate which is also the general outlook. And unlike the September Beige Book, the October version does not highlight increases in wage pressure. But it does describe labor conditions as remaining “tight” though wage growth is described as “modest.” Inflation in general is described as “mild”. Most of the 12 districts report higher retail sales but also continue to describe consumer spending as mixed. Manufacturing is being held down by the strong US dollar and weak exports. However, the Beige Book sees signs of stabilization in energy. It said residential real estate expanded further despite low inventories and that commercial activity improved as well, though noting that uncertainty surrounding the November election continued to hold back expectations for sales and construction.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$10.85 to US$1,269.05. Copper futures were down 0.1 percent to US$2.10. WTI spot crude was up US$1.09 to US$51.38. Dated Brent spot crude was up 80 US cents to US$52.48. The US dollar was up against the euro, pound, and the Canadian dollar. However, it declined against the yen and Australian dollar. The currency was unchanged against the Swiss franc and yuan. The Dollar Index was up 0.1 percent. The yields on both the US Treasury 30 year bond and the 10 year note slipped 1 basis point to 2.50 percent and 1.74 percent.
Europe
After a negative start to the day’s trading, stocks managed to advance for the day. The strong performance of the energy stocks was largely responsible for pushing the markets into positive territory. Investors were cautious before the European Central Bank’s policy announcement on Thursday. A mixed batch of corporate earnings results also failed to spark much in the way of buying interest. The FTSE and CAC both added 0.3 percent, the DAX edged up 0.1 percent and the SMI was 0.2 percent higher.
Crude oil prices rose above $52 a barrel Wednesday after Saudi Arabia’s oil minister said certain non-OPEC countries will join OPEC and Russia in curbing supplies. The US EIA also reported that US crude inventories dropped by 5.2 million barrels last week.
Metro advanced after the retail giant reported a slight dip in fourth quarter sales. Carrefour climbed after its third quarter revenue topped estimates. Thales gained after raising its order intake outlook. Both Total and Technip were higher. In London, Travis Perkins sank after a profit warning. Reckitt Benckiser Group tumbled after the consumer goods giant narrowed its revenue growth outlook after reporting a bigger than expected decline in third quarter sales. BHP Billiton rose after reporting a slide in quarterly iron ore production. Royal Dutch Shell, BP and Tullow Oil advanced. Shares of Barclays, Lloyds Banking Group and Royal Bank of Scotland were up. Burberry rebounded from recent declines.
UK unemployment rate remained unchanged at a near 11-year low in the three months to August, signaling the resilience of the British labor market despite Brexit. The ILO jobless rate was 4.9 percent for the fourth consecutive period. The September claimant count unemployment rate was 2.3 percent for a second month.
Asia Pacific
Most Asian stock indices rose Wednesday as oil extended overnight gains, the US dollar was steady against the yen and Chinese economic data were as expected. Upbeat earnings also buoyed investor sentiment prior to the European Central Bank meeting Thursday.
The Shanghai Composite was virtually unchanged while the Hang Seng retreated 0.4 percent. China’s third quarter gross domestic product expanded 6.7 percent from a year ago for the third consecutive quarter. September industrial output was up 6.1 percent on the year, down from 6.3 percent in August. Retail sales were up 10.7 percent about as expected.
The Nikkei added 0.2 percent while the Topix was virtually unchanged as investors looked ahead to a slew of corporate earnings results next week. Sharp jumped on a Nikkei report that the electronics maker expects to report its first group operating profit in three years for the fiscal year ending in March 2017. Terumo closed higher after two US companies agreed to sell portions of their businesses to the medical device maker. Maruha Nichiro rallied on expectations of strong earnings results. Hitachi dropped after a rating downgrade.
Both the S&P/ASX and All Ordinaries were up 0.5 percent on higher commodity prices and news of an A$11.3 billion mega merger between two of Australia’s biggest listed gambling businesses supported sentiment. Tabcorp Holdings and Tatts Group soared after they agreed to merge. Gold miners Newcrest Mining and Evolution Mining climbed as gold held on its overnight gains in Asian markets. Woodside Petroleum, Santos and Oil Search rose after expectations of OPEC output curbs helped oil prices inch back above $50 a barrel Tuesday.
The Kospi was virtually unchanged but the Sensex slipped 0.2 percent.
Looking Forward
Australia posts its September labour force survey. The UK releases September retail sales. The European Central Bank announces its monetary policy decision followed by President Mario Draghi’s press conference. In the US, the October Philadelphia Fed survey, September existing home sales and leading indicators along with the weekly jobless claims, money supply and Fed balance sheet will be reported.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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