Daily global market update

On 25 May, 2017 - Stocks rallied despite the plunge in crude oil prices

Investors continued to respond favorably to Wednesday’s FOMC minutes.

United States

US shares advanced Thursday with both the S&P and Nasdaq hitting new highs. They were helped by gains in the consumer discretionary sector after strong earnings reports from Best Buy and other retailers. The Dow Jones industrials were up 0.3 percent, the S&P gained 0.4 percent and the Nasdaq was 0.7 percent higher. Traders also continued to respond positively to the minutes of the Federal Reserve's latest monetary policy meeting which included an outline of a plan to trim its $4.5 trillion balance sheet.

Best Buy jumped and hit a record high after its comparable sales unexpectedly rose last quarter. Tommy Hilfiger owner PVH jumped to a near six month high on strong results. Sears was up after posting its first quarterly profit in nearly two years. The reports follow mixed results from other retailers, some of which continue to be hurt by competition from Amazon.com. Netflix advanced. Energy shares fell with oil prices after the Organization of the Petroleum Exporting Countries (OPEC) agreed Thursday to extend output cuts.

OPEC members and non-member oil producing countries led by Russia decided to extend cuts in oil output by nine months to March 2018. A glut of crude has seen prices plunge and revenues drop sharply in the past three years. Oil prices dropped more than 5 percent — the market had been hoping oil producers could reach a last-minute deal to deepen the cuts or extend them further beyond March. OPEC's cuts have helped to push oil back above $50 a barrel this year. However, the latest cuts in production will give a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$4.40 to US$1,256.95. Copper futures were up 0.5 percent to US$2.60. WTI spot crude was down US$2.73 to US$48.63. Dated Brent spot crude was down US$2.79 to US$51.18. The US dollar was up against the yen, euro, pound and the Canadian and Australian dollars. The currency declined 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 were unchanged at 2.92 percent and 2.25 percent respectively.

Europe

The European markets fluctuated between small gains and losses in light trading. Markets in Stockholm and Switzerland were closed for the Ascension Day holiday. Energy stocks were in focus as OPEC met in Vienna. OPEC ministers announced an agreement to extend cuts in oil output by 9 months. Crude oil prices weakened in response to the announcement. The DAX and CAC lost 0.2 percent and 0.1 percent respectively while the FTSE was virtually unchanged (up 2.81 points).

Petrofac plunged amid worries over a fraud investigation. The company suspended its chief operating officer in response to a British investigation into alleged bribery, corruption and money laundering. Tanzania-focused miner Acacia Mining dropped after the country's mining minister was fired on Wednesday following an investigation into possible undeclared exports by miners to evade tax.

Media group Daily Mail and General Trust declined after it warned that revenue in its information business would be lower than previously forecast after posting a fall in first half profit. Anglo American, Rio Tinto and Glencore declined but came off lows as copper prices reversed course to hit three-week highs as worries about prolonged disruptions at the giant Grasberg copper mine in Indonesia triggered short-covering.

First quarter UK gross domestic product was revised downward to a quarterly 0.2 percent gain from the initial estimate of 0.3 percent. Spain’s first quarter gross domestic product was confirmed at 0.8 percent on the quarter.

Asia Pacific

Stock markets in Asia advanced Thursday after minutes from the May monetary policy meeting indicated another rate increase is likely in June, but is conditional on recent economic softness proving transitory. Crude oil rose in Asian markets before the OPEC meeting later in the global market day. OPEC is widely expected to extend output cuts.

The Shanghai Composite jumped 1.4 percent just a day after Moody's downgraded China’s credit rating. The Hang Seng added 0.8 percent — its credit rating also was downgraded by Moody's.

The Nikkei was up 0.4 percent and the Topix was up 0.2 percent. The major exporters closed higher. Toshiba, Panasonic, Canon and Sony advanced. However, Toyota and Honda retreated. Mitsubishi UFJ Financial edged up while Sumitomo Mitsui Financial slipped. Inpex and JXTG Holdings were lower after crude oil prices nudged lower overnight. SoftBank Group gained amid media reports that the company has purchased $4 worth of stock in Nvidia. Furukawa Electric and Konami Holdings also advanced. Furukawa, Tosoh and Tokai Carbon retreated.

The S&P/ASX was up 0.4 percent while the All Ordinaries added 0.3 percent. Banks were mixed with the ANZ Banking and Commonwealth Bank advancing while National Australia Bank was lower. Westpac advanced after it said it has completed the institutional book build to offload an A$645 million stake in BT Investment Management and raise capital to boost its balance sheet. BT Investment was down. Oil stocks including Oil Search and declined after crude oil prices slipped overnight. Woodside Petroleum however closed higher. Major miners also advanced.

The Kospi jumped 1.1 percent to close at a fresh record high after the Bank of Korea left interest rates unchanged for the 11th month. The Sensex added 1.5 percent.

Looking forward

Japan posts April consumer price index. The US releases April durable goods orders and second estimate of first quarter gross domestic products. First quarter corporate profits and final May consumer sentiment will also be released.

Global Stock Market Recap

Global Stock Market Recap

Bond markets

Bond markets

Currencies and commodities

Currencies and Commodities

The Longer-Term Perspective

The table below demonstrates that while we may experience some short-term weakness in markets, the longer-term performance remains encouraging.

equity market

*Note — all releases are listed in local time.

Anne D Picker
Chief Economist
Econoday

Important Information

Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. 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. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.

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