On 30 October, 2017 – Shares end lower as investors await policy decisions
This week is a heavy week for economic data and earnings reports as well.
United States
Stocks retreated Monday as investors assessed the administration’s proposal for cuts in corporate tax rates. Stocks extended losses after a Bloomberg report that the House of Representatives was discussing a gradual phase-in for a corporate tax cut. Investors were also assessing the impact to the administration’s agenda in light of the indictment of President Trump’s former campaign manager, Paul Manafort. The Dow Jones industrials were down 0.4 percent, the S&P lost 0.3 percent and the Nasdaq was 2.30 points lower.
Apple gained after analysts pointed to strong demand for the iPhone X. Merck retreated after a setback to its key cancer medicine. Japan’s SoftBank Group Corp is planning to break off negotiations on a merger between subsidiary Sprint Corp and T-Mobile US, according to a Nikkei report. Sprint and T-Mobile were lower on the day. JC Penney and Macy’s were lower after broker downgrades. Nordstrom and Kohl’s also retreated.
Merck was lower on a broker downgrade after the company on Friday posted a third-quarter loss and said the lost sales and costs of responding to a June cyberattack would likely weigh on fourth-quarter results, too. Lennar will buy CalAtlantic Group in a $5.7 billion deal that will create the country’s largest home builder by revenue, the companies said. The deal comes as major home builders are looking to control rising costs for land, labor and materials as the housing market continues to expand.
In September personal income was up a monthly 0.4 percent while consumer spending jumped 1.0 percent. Spending was driven to a 2.1 percent jump in durable goods purchases tied to vehicle replacement in the wake of Hurricanes Harvey and Irma.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$555 to US$1,272.00. Copper futures were up 0.16 percent to US$3.11. WTI spot crude was up 24 US cents to US$54.14. Dated Brent spot crude was up 42 US cents to US$60.86. The US dollar was down against most of its major counterparts including the yen, euro, pound, Swiss franc and the Australian dollar. The currency was unchanged against the Canadian dollar. The Dollar Index was down 0.3 percent. The yields on both the US Treasury 30 year bond and 10 year note were down 4 basis points to 2.88 and 2.37 percent respectively.
European markets
Stocks in Europe were mixed Monday. The FTSE was down 0.2 percent, the SMI edged 0.1 percent lower and the CAC lost 0.50 point. The DAX managed to edged 0.1 percent higher. The IBEX jumped 2.4 percent after the Spanish government took control of the Catalonia region following its recent push for independence. However, traders remained cautious prior to meetings of the Bank of Japan, Federal Reserve and the Bank of England.
HSBC Holdings dropped despite reporting significantly higher third-quarter profit, benefiting from higher growth in its three main global businesses. EasyJet rose after it agreed to acquire part of Air Berlin’s operations at Berlin Tegel Airport for a consideration of €40 million. Both Persimmon and Berkeley Group Holdings were down after broker downgrades along with Taylor Wimpey.
Novartis advanced in Zurich after it offered to buy France’s Advanced Accelerator Applications in a $3.9 billion cash deal. LafargeHolcim declined following its disappointing report at the end of last week. UBS declined on a broker downgrade. Credit Suisse slid. The company is due to report quarterly results on Thursday. European iPhone suppliers STMicro, Dialog Semi and AMS advanced. Rexel and Kingfisher both increased on brokers’ upgrades.
The October economic sentiment index improved to 114.0 from 113.1 in September. This is the highest since January 2001 when the reading was 144.4. Germany’s September retail sales increased 4.1 percent on the year. Germany’s September unemployment rate remained unchanged at adjusted 3.6 percent.
Asia Pacific
Asian stocks began the week on a mixed note Monday even after US shares rallied Friday and after the release of upbeat corporate earnings results as well as solid US GDP data.
The Shanghai Composite was down 0.8 percent — its worst single-day loss in 11 weeks as a sell-off in bond markets continued and China’s securities regulator approved nine IPOs, raising fresh concerns about liquidity. The Hang Seng retreated 0.4 percent.
The Nikkei added 3.22 points while the Topix slipped 0.21 point prior to the Bank of Japan’s interest rate decision Tuesday. The BoJ is expected to keep its policy unchanged. The US Federal Reserve ends its two-day policy meeting on Wednesday while the Bank of England announces its decision on Thursday. Kobe Steel jumped on a Nikkei report that the troubled steelmaker has decided to withdraw its forecast for current financial year. Apple suppliers including TDK, Foster Electric and Taiyo Yuden rallied.
September retail sales rebounded 0.8 percent on the month after tumbling 1.6 percent in August. On the year, retail sales were up 2.2 percent after increasing 1.7 percent in August.
The S&P/ASX added 0.3 percent while the All Ordinaries were 0.2 percent higher. Woodside Petroleum, Origin Energy, Beach Energy and Santos climbed after oil prices rose more than 2 percent on Friday amid expectations that an OPEC-led production cut due to expire next March would be extended. NAB advanced after it reached a settlement with ASIC over alleged manipulation of the bank bill swap rate. Rivals ANZ and Westpac also gained. BHP Billiton and Rio Tinto closed on a flat note while gold miners closed broadly higher.
The Kospi added 0.2 percent thanks to strong gains in the technology sector after Amazon, Microsoft, Intel and Alphabet all reported quarterly earnings that beat estimates. The Sensex was 0.3 percent higher.
Looking forward
The Bank of Japan announces its monetary policy decision. Japan posts September data for household spending, unemployment rate and industrial production. China reports October CFLP manufacturing PMI. France releases flash third quarter gross domestic product, September consumer spending and producer price index and October preliminary consumer price index. The Eurozone posts flash third quarter gross domestic product and flash October harmonized index of consumer prices. Canada releases September industrial product price index and August monthly gross domestic product. In the US, third quarter employment cost index, October Chicago PMI, August Case-Shiller house price index and October consumer confidence.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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