On 07 February, 2018 - Most stock indices advanced Wednesday as shares began to stabilize after the recent selloff

Anne D Picker
Anne D Picker
Econoday8 February 2018

Oil prices sent energy stocks down.

US markets

After gyrating across the unchanged mark, the three US indices ended lower on the day. The Dow Jones industrials were down 0.1 percent, the S&P retreated 0.5 percent and the Nasdaq lost 0.9 percent in choppy trading. A yield surge according to some could accelerate the Federal Reserve’s tightening schedule.

Energy shares were pulled down by falling oil prices after US weekly inventory data indicated larger inventories. Tesla stocks increased in after hour trading after the company’s loss is smaller than anticipated. Snap surged on better-than-expected earnings. Walt Disney was flat despite strong quarterly profits. Wynn advanced after Steve Wynn resigned. Chipotle tumbled even though it met profit estimates. Tronc advanced after announcing its sale of the Los Angeles Times and the San Diego Union-Tribune for $500 million to businessman Patrick Soon-Shiong.

The US Senate reached a two-year budget deal to raise federal spending by almost $300 billion, in an attempt to end squabbling over fiscal issues that has plagued Washington for years. The agreement would lift caps on defense funding and some domestic government spending. Along with President Donald Trump’s tax cuts approved by Congress in December, the new round of spending would further add to the growing federal deficit. The plan will need to be passed in the House of Representatives and the Senate before going to the president to sign.

Federal Reserve speakers sent out mixed signals. An increase in consumer prices could warrant as many as four rate increases by year's end, according to Chicago Federal Reserve President Charles Evans. Still, Evans said the Fed should not raise rates in the first half of the year. NY Fed President William Dudley said the recent downturn in the stock market does not change the outlook for interest rates or the broader economy. "This wasn't that big a bump in the equity market," Dudley said in New York Wednesday. "The stock market had a remarkable rise over a very long time with extremely low volatility.”

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$6.75 to US$1,324.65. Copper futures were down 2.9 percent to US$3.10. WTI spot crude was down US$1.66 to US$61.73. Dated Brent spot crude was down US$1.40 to US$65.46. The US dollar was up against the euro, pound, Swiss franc and the Canadian and Australian dollars. It was virtually unchanged against the yen. The Dollar Index was up 0.7 percent. The yields on both the US Treasury 30 year bond and 10 year note were both up 5 basis points to 3.12 percent and 2.85 percent respectively.

European markets

European stock indices rebounded from Tuesday’s deep losses. Reports from Germany indicated that a deal may have been reached to form a coalition government. The FTSE was up 1.9 percent only partially erasing Tuesday’s loss. The CAC added 1.8 percent while both the DAX and SMI were 1.6 percent higher.

The European Commission raised its growth projections for the euro area citing stronger cyclical momentum in Europe and better than expected pick-up in global economic activity and trade. In the Winter Economic Forecast, the commission said the Eurozone will grow 2.3 percent in 2018, up from the previous projection of 2.1 percent. The forecast for 2019 was upgraded to 2 percent from 1.9 percent. Risks to this growth forecast remain broadly balanced according to the EC. Downside risks were related to uncertain outcome of the Brexit negotiations and a shift towards more inward looking and protectionist policies. Inflation is forecast to remain at 1.5 percent in 2018 and to increase to 1.6 percent in 2019.

Hannover Re rallied after saying it was optimistic for 2018. Sanofi declined after the pharmaceutical firm reported a significant decline in fourth-quarter net profit amid weak net sales and a tax-related charge. Tullow Oil climbed after posting its first annual profit in three years. Severn Trent advanced after reaffirming its full-year guidance. Redrow advanced after it posted record profits and revenues for the first half of its financial year. Vestas Wind Systems jumped in Copenhagen after the wind turbine maker said it would initiate a new share buy-back program of DKK 1.5 billion shortly. Carlsberg tumbled after its 2017 sales came in below expectations.

December German industrial production declined a monthly 0.6 percent after jumping a revised 3.1 percent in November. December French foreign trade gap narrowed to €3.5 billion in December from €5.6 billion in November. The January UK Halifax price index fell unexpectedly a monthly 0.6 percent.

Asia Pacific Markets

Stocks in this region were mixed Wednesday — investors monitored oil price movements and kept a wary eye on bond markets after the brutal selloff in global share markets.

The Shanghai Composite reversed earlier gains to end sharply lower as investors booked some profits in recent outperformers. The Shanghai Composite retreated 1.8 percent while the Hang Seng was 0.9 percent lower.

The Nikkei and Topix advanced 0.2 percent and 0.4 percent respectively. Panasonic and Sony advanced thanks to a weaker yen. Drug makers Eisai and Astellas Pharma rallied. Toyota Motor advanced after the automaker forecast a record profit this fiscal year.

Australian shares snapped two days of losses to end higher after the Dow and the S&P rebounded from their biggest one-day drops in more than six years. The S&P/ASX was up 0.7 percent while the All Ordinaries rebounded 0.9 percent. Commonwealth Bank of Australia was down after reporting a 1.9 percent fall in first-half cash profit. The other three banks ended with modest losses. Santos, Origin Energy, Oil Search and Woodside Petroleum rose with oil prices. Miners BHP Billiton, Rio Tinto and Fortescue Metals Group rallied but gold miners Newcrest, Regis Resources and Northern Star all ended lower.

The Kospi tumbled 2.3 percent even though an economic policymaker said the government is prepared to take action to stem market instability recently caused by falling bond prices. The Sensex was down 0.3 percent after the Reserve Bank of India (RBI) warned of higher government spending feeding into inflation after keeping its policy interest rate unchanged at 6.0 percent for a third straight meeting as widely expected.

The MPC left interest rates unchanged as expected and kept its neutral policy stance today after its two-day monetary policy review. The rate setting committee, however, raised its inflation forecasts, saying it expects retail inflation to average 5.10% in January-March against an average of 4.6% in October-December. It said there was a need for vigilance over the coming months in relation to inflation.

Looking forward

China will report January merchandise trade balance. Germany will release December merchandise trade balance. The Bank of England will announce its monetary policy decision and publish its Quarterly Inflation Report. Canada will post January housing starts. The US will release weekly jobless claims, money supply and fed balance sheet.

Global Stock Markets

 

Index

07 Feb 2018

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

24893.35

-19.42

-0.1

 

NASDAQ

7051.98

-63.90

-0.9

 

S&P 500

2681.66

-13.48

-0.5

Canada

S&P/TSX Comp

15330.58

-33.35

-0.2

Europe

 

 

 

 

UK

FTSE 100

7279.42

138.02

1.9

France

CAC

5255.90

94.09

1.8

Germany

XETRA DAX

12590.43

197.77

1.6

Italy

MIB

22986.18

639.17

2.9

Spain

Ibex 35

9976.90

166.90

1.7

Sweden

OMX Stockholm 30

1551.15

39.55

2.6

Switzerland

SMI

8975.01

138.30

1.6

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

5981.54

51.32

0.9

Japan

Nikkei 225

21645.37

35.13

0.2

 

Topix

1749.91

6.50

0.4

Hong Kong

Hang Seng

30323.20

-272.22

-0.9

S. Korea

Kospi

2396.56

-56.75

-2.3

Singapore

STI

3383.77

-22.61

-0.7

China

Shanghai Comp

3309.26

-61.39

-1.8

Taiwan

TAIEX

10551.54

147.54

1.4

India

Sensex 30

34082.71

-113.23

-0.3

Data Source — Haver Analytics

 

 

 

Note: All releases are listed in local time.

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