On 07 November, 2017 – With little economic data for guidance, shares in Europe and the US retreated
Several earnings reports disappointed.
United States
Shares were mixed Tuesday as the Dow Jones industrials managed to inch back above the unchanged line late in the day. The Dow crept up 8.81 points while the S&P inched down 0.49 point. The Nasdaq lost 0.3 percent. The weakness was partly due to profit taking, as traders cashed in on some of the recent strength in the markets. Trading activity was relatively light with a lack of major US economic data keeping some traders on the sidelines. Investors also fretted that a Republican plan to cut corporate taxes could be watered down.
Banking stocks including M&T Bank, SunTrust Banks and Zions Bancorp retreated. Also lower on the day were JPMorgan Chase, Wells Fargo and Goldman Sachs. Banks are especially sensitive to changes in the yield curve, a key measure of which just hit a 10-year low. Priceline declined after a disappointing profit forecast. TripAdvisor also declined after it missed revised sales estimates.
Valeant Pharmaceuticals surged after the company’s profit beat expectations. Mallinckrodt sank to an all-time low after the drug maker reported dismal quarterly revenue and warned of slower sales for Acthar, its biggest source of revenue. Broadcom declined as investors continued to assess the chip maker’s bid for Qualcomm. Shares of Qualcomm gained.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$4.70 to US$1,275.60. Copper futures were down 2.1 percent to US$3.09. WTI spot crude was down 11 US cents to US$59.24. Dated Brent spot crude was down 51 US cents to US$63.76. The US dollar was up against the yen, euro, Swiss franc and the Canadian and Australian dollars. The currency was virtually unchanged against the pound. The Dollar Index was up 0.2 percent. The yield on the US Treasury 30 year bond was down 2 basis points to 2.77 percent and 10 year note was down 1 basis point to 2.31 percent.
European markets
European markets got off to a positive start. However, those early gains quickly evaporated and the markets ended the day in negative territory. The FTSE, DAX and SMI each lost 0.7 percent while the CAC was 0.5 percent lower thanks in part to profit taking.
European Central Bank President Mario Draghi said that most of the financial stability issues that were linked to low interest rates did not materialize. There is hardly any evidence that negative rates are hurting Eurozone banks’ profitability. “At euro area level, we currently see no signs of credit-fueled housing bubbles, which are at the root of most serious financial crises,” Draghi said in a speech at the second ECB Forum on Banking Supervision in Frankfurt.
BMW dropped after posting lower third quarter profit due to higher expenses for research and development. Biotechnology firm MorphoSys gained after its third quarter net loss widened from last year. Apple supplier Dialog Semiconductor sank even though the company raised its full-year forecast. Crédit Agricole rose after it agreed to buy Italy’s wealth-management specialist Banca Leonardo for an undisclosed amount. Riber jumped after winning a multi-million euros order in Asia.
Associated British Foods declined even though the company reported a surge in full-year profit. Imperial Brands climbed after the tobacco group reported an increase in annual revenues thanks to favorable currency movements. Staffing firm Adecco Group was down in Zurich on disappointing third-quarter earnings. Richemont and Swatch also were lower. Zurich Insurance and Swiss Life retreated. Swiss Life is due to report results on Wednesday, while Zurich Insurance will report on Thursday. Energy stocks including BP and Tullow Oil advanced.
Asia Pacific
Asian stocks were mostly higher Tuesday after the major US indices hit fresh record closing highs, boosted by rallying oil prices and corporate deal making news. Higher commodity prices, including the overnight surge in crude oil prices after a purge of royal family’s political rivals in Saudi Arabia helped investors shrug off US President Donald Trump’s rhetoric on North Korea and uncertainties related to proposed US tax reform.
Chinese shares hit a two-year high, with banking and energy surging on optimism about global growth. The Shanghai Composite added 0.7 percent and the Hang Seng was 1.4 percent higher.
The Nikkei jumped 1.7 percent to the best close since January 1992. The Topix climbed 1.2 percent. A weaker yen and optimism about corporate earnings buoyed investor sentiment. Inpex jumped and Japan Petroleum Exploration climbed amid the rally in oil and other commodities. Mitsubishi Estate rallied after the realty firm raised its net profit outlook.
Both the S&P/ASX and All Ordinaries added 1.0 percent thanks to mining and energy stocks that led the surge after Brent crude and iron ore prices rallied overnight. Oil majors Oil Search, Woodside Petroleum, Santos and Beach Energy climbed along with miners Rio Tinto, BHP Billiton and Fortescue Metals Group. Gold miners Northern Star, Newcrest and Evolution Mining also advanced. Investors largely shrugged off disappointing consumer confidence and construction data along with the Reserve Bank of Australia’s widely expected decision to keep its cash rate at a record low of 1.5 percent.
The Kospi retreated 0.2 percent while the Sensex tumbled 1.1 percent.
Looking forward
September French merchandise trade balance will be posted. Canada releases September housing starts. In the US, the weekly petroleum status will be reported.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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