On 28 April, 2016 – Bank of Japan upsets markets

Indices partially recover some of their early losses.
United States
US stocks joined those in Asia and declined after the Bank of Japan disappointed investors and left its monetary policy unchanged. A rout in technology stocks added downward pressure. The Dow Jones industrials and Nasdaq both lost 1.2 percent while the S&P was 0.9 percent lower.
Apple retreated after the billionaire investor Carl Icahn said he had sold his stake in the company. A day earlier Apple reported its first revenue decline in over a decade as iPhone sales declined. Energy stocks were down despite another gain in the price of oil. Abbott Laboratories said it would buy St. Jude Medical for $19.3 billion, combining Abbott’s heart devices, heart valve products and infant formula business with St. Jude’s heart failure and heart rhythm device products. The deal valued St. Jude stock at $46.75 per share. St Jude Medical advanced while Abbott retreated. Sanofi went public with an offer to buy the cancer drug maker Medivation for $9.3 billion or $52.50 per share. Shares of Medivation, the maker of the prostate cancer medication Xtandi, advanced while Sanofi shares traded in the United States were lower.
Comcast’s NBCUniversal unit will buy DreamWorks Animation for $3.55 billion. The deal values DreamWorks at $41 per share. Both DreamWorks and Comcast gained. Hanesbrands said it would buy Pacific Brands. The company said its offer values Pacific Brands at $800 million. Facebook jumped after its first quarter profit nearly tripled and its revenue was better than expected. Shares of PayPal gained after its net income and revenue surpassed estimates. GNC Holdings plunged after the company reported weak first quarter results, including lower vitamin sales. The company also said it would sell 84 stores to a franchise operator.
Amazon reported first quarter net income of $513 million or $1.07 per share, up from a loss of $57 million or 12 cents per share in the same period a year ago. It was the most profitable quarter in the company’s history. Revenue at the company rose to $29.13 billion from $22.72 billion a year ago.
First estimate first quarter gross domestic product was up at an annualized pace of 0.5 percent — the weakest result in two years.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$8.60 to US$1,256.00. Copper futures were up 0.1 percent to US$2.23. WTI spot crude was up 33 US cents to US$45.66. Dated Brent spot crude was up 59 US cents to US$47.77. The US dollar was down against all of its major counterparts including the euro, yen, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was down 0.8 percent. The yields on US Treasury 30 year bond and 10 year note were down 3 basis points to 2.68 percent and 1.83 percent respectively.
Europe
Stocks were mixed Thursday. They retreated in early trading after the Bank of Japan refrained from expanding its monetary stimulus defying market expectations for some action and at the same time, kept its negative interest rate unchanged. Some tepid earnings reports and mixed regional data also dampened investor sentiment. However, the markets pared their losses in the afternoon. The markets here began to recover around the same time that markets in the United States reversed their early losses. The FTSE was virtually unchanged along with the CAC and SMI. However, the DAX managed to edge up 0.2 percent.
The Bank of Japan shocked markets by keeping its monetary policy steady despite multiple headwinds plaguing the economy. The central bank maintained its negative 0.1 percent deposit rate and the size of its asset purchase program, while adopting a ¥300 billion new lending program to aid regional banks operating in areas hit by this month’s earthquake in southern Japan.
Deutsche Börse dropped after reporting a 7.6 percent decline in first-quarter net profit, reflecting higher costs for integrating recent acquisitions. Embedded computer technology firm Kontron retreated after its first quarter loss before interest and tax widened from last year. Telefonica Deutschland Holding declined after its first quarter net loss widened. Deutsche Bank climbed after the lender posted a smaller than expected 58 percent drop in first-quarter net profit, pressured by difficult market conditions and its decision to exit some businesses. In Paris, building materials firm Saint-Gobain was down after reporting a drop in first quarter sales. Airbus Group was down after its first quarter net profit fell 50 percent from a year earlier due to delayed jet deliveries.
Sanofi declined after it offered to acquire Medivation for $52.50 per share in cash. In London, travel and tourism group TUI edged up as it reached an agreement to sell its Hotelbeds business to GNVA Acquisitions for €1.19 billion in cash. Lloyds Banking Group dropped after reporting a decline in first quarter profits on expected costs linked to the redemption of bonds. Anglo American advanced after the mining giant reached an agreement with China Molybdenum to sell its niobium and phosphates businesses for a total cash consideration of $1.5 billion. Weir Group jumped after it said it expects first half profits to be slightly ahead of market expectations.
Eurozone economic confidence improved in April after falling for three consecutive months to reach a one-year low level. The economic sentiment index climbed to 103.9 from 103.0 in March.
Asia Pacific
Asian stocks reversed early gains to end mostly lower on Thursday, as an overnight rally in oil prices and the Federal Reserve’s decision to keep rates unchanged were overshadowed by the Bank of Japan’s decision to maintain its negative 0.1 percent deposit rate and the size of its asset purchase program, while adopting a ¥300 billion new lending program to aid regional banks operating in areas hit by this month’s earthquake in southern Japan.
The Nikkei reversed early gains to end sharply lower after the yen soared as much as 2.6 percent against the US dollar in the wake of BoJ announcement. Sluggish inflation and spending data also weighed on markets. The Nikkei average tumbled 3.6 percent. A slew of data released prior to the BoJ announcement, painted a mixed picture of the economy in March with industrial output rebounding, housing starts growth accelerating and the jobless rate falling for the first time in two months, while retail sales dropped at a slower than expected phase and household spending declined at the fastest pace in a year. The consumer price index dropped by the most in three years, with core inflation excluding volatile food prices declining 0.3 percent from a year ago. Nintendo was down after reporting lower revenue and profit for the fiscal year ended March. Fanuc and Nomura retreated each after posting disappointing financial results. Sharp tumbled on a Nikkei report it is considering eliminating about 1,000 more jobs ahead of its takeover by Taiwan’s Hon Hai Precision Industry. Automakers Honda Motor, Mazda, Nissan, Toyota were down. However, Apple-supplier Alps Electric jumped and Mitsubishi Motors rallied 6.7 percent.
Both the S&P/ASX and All Ordinaries were up 0.7 percent. Miners BHP Billiton, Rio Tinto and Fortescue Metals Group rallied after the World Bank lifted its iron ore forecasts for the five years through 2020. Energy stocks such as Oil Search, Origin Energy, Santos and Woodside Petroleum advanced after U.S. crude oil futures climbed almost 3 percent overnight to hit fresh 2016 highs. Banks ended mixed ahead of their earnings results due next week.
The Shanghai Composite declined 0.3 percent, dragged down by resource stocks, as commodity prices fell in response to a government crackdown on speculation in commodity markets. The Hang Seng however, added 0.1 percent. The Kospi was down 0.7 percent on the Bank of Japan’s decision. The Sensex tumbled 1.8 percent thanks to the BoJ.
Global Stock Markets

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Looking forward*
Australia posts first quarter producer price index. France and the Eurozone post first quarter flash gross domestic product. The Eurozone also releases April flash harmonized index of consumer prices and March unemployment. Canada posts monthly GDP for February. In the US, March personal income and spending, April Chicago PMI and consumer sentiment will be reported.
*Note — all releases are listed in local time.

Source: Fidelity

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