Global markets enjoyed a week of strong gains, boosted primarily by dovish comments from the Fed Chair. U.S. bank earnings failed to impress their U.S. counterparts even as investors rediscovered their confidence in tech stocks. Asian markets also gained from Janet Yellen’s dovish stance. The successful passage of crucial labor reforms led to gains for Brazil’s stocks on multiple occasions during the week.
Yellen’s Dovish Comments Buoy European Markets
Encouraging export data from Germany helped stocks in Europe close with gains on Monday. The country’s trade surplus expanded beyond expectations in May with exports gaining 1.4% and imports coming in 1.2% higher. The STOXX 600 index increased 0.4%. Investors’ new found confidence in tech stocks ensured that the sector was amongst the best performers of the day.
The STOXX 600 lost 0.7% on Tuesday after dismal industry survey readings led to losses for all industrial sectors. A survey from the Confederation of British Industry and PwC indicated that Britain’s business sentiment had undergone a downturn. This led to a 0.6% decline for the FTSE even as the French CAC 40 and German DAX lost 0.5% and 0.1%, respectively.
Dovish comments from Yellen helped European markets finish in the green on Wednesday. The STOXX 600 gained a substantial 1.5% with all industrial sectors closing higher. The CAC 40, DAX and FTSE 100 logged gains of 1.6%, 1.5% and 1.2%, respectively. Oil and gas stocks ended 1.5% following an increase in crude prices.
The Fed Chair’s statements continued to dominate market sentiment in Europe on Thursday. Yellen indicated that any acute economic crisis calling for a substantial rate cut would put the trimming of the Fed’s balance sheet on hold. (Read More) The STOXX 600 gained 0.3% with all sectors ending in the green.
Even though the STOXX 600 closed Friday marginally higher, stocks ended the session mixed. Investors keenly examined the fallout of U.S. bank earnings and a meeting between the U.S. and French presidents. Interestingly enough, earnings beats from major U.S. banks led to losses for European banking stocks. The DAX and CAC each increased by a percent while the FTSE ended the day flat.
Asian Stocks Also Gain from Fed’s Stance
Asian markets ended the day higher on Monday, riding on a bullish U.S. employment report and encouraging Chinese inflation data. The Nikkei 225 gained 0.8% while South Korea’s Kospi inched up by 0.1% Hong Kong’s Hang Seng index ended the day in the green but the Shanghai Composite lost 0.2%.
The yen declined to a four month low versus the dollar on Tuesday, boosting the majority of Asia’s indexes. The Nikkei 225 gained 0.6% even as the Bank of Japan continues to adopt a soft monetary stance while the Fed turns increasingly hawkish. Meanwhile, the Kospi increased 0.6%. The Hang Seng added 1.5% even as the Shanghai Composite lost 0.3%.
Asian markets ended in the red on Wednesday as investors remained focused on the outcome of the Fed Chair’s testimony before Congress. The Nikkei increased 0.5% while the Kospi slipped 0.2%. Even though the Hang Seng increased 0.7%, the Shanghai Composite lost 0.2%.
Investors were buoyed by dovish comments from Fed Chair Janet Yellen with Asian markets logging substantial gains on Thursday. The Nikkei ended in the green even as the Kospi increased 0.7%. Hong Kong’s Hang Seng advanced by more than 1% to end close to a two-year high while the Shanghai Composite added 0.7. India’s markets were not immune from this trend with the BSE Sensex hitting the 32,000 mark early in the trading day.
Yellen’s comments on the second day of her testimony continued to occupy investor mind space on Friday. Most Asian markets closed in the green with the Nikkei 225 adding 0.1% and the Kospi increasing 0.2%. Both the Hang Seng and the Shanghai Composite increased, by 0.2% and 0.1%, respectively.
Labor Reforms Boost Brazil’s Stocks
An increase in iron ore prices lifted mining behemoth Vale SA (VALE - Free Report) on Monday, leading to a 0.8% gain for Brazil’s benchmark Bovespa index. Gains for the Bovespa continued on Tuesday, with the index increasing 0.4%. Gains from Vale SA and Petrobras (PBR - Free Report) helped the Bovespa log a 0.4% increase on Tuesday. Stocks also gained support from expectations that President Temer’s labor reforms would receive legislative approval.
The Bovespa increased 0.6% on Wednesday after the Senate voted to pass Temer’s labor reforms by a larger than expected margin. Petrobras was the leading gainer for the day. The Bovespa continued to move higher on Thursday, gaining 0.5%. However, investors remained watchful ahead of a vote on corruption allegations against President Temer. Despite such concerns, Brazil’s benchmark index increased on Friday, marking the fifth successive day of gains.
Stocks in the News
Sanofi (SNY - Free Report) announced plans to buy a Meriden, CT-based private vaccine biotech, Protein Sciences, for an upfront payment of $650 million. Protein Sciences’ influenza vaccine Flublok received FDA approval in October last year.
According to Zacks Rank #3 (Hold) rated Sanofi, Flublok is the only recombinant protein-based influenza vaccine approved by the FDA. The acquisition is expected to close in the third quarter of 2017. Apart from the upfront payment, Sanofi will also be entitled to pay up to $100 million to Protein Sciences, if certain milestones are achieved. (Read: Sanofi to Buy Vaccine Biotech Protein Sciences for $650M)
Infosys Limited (INFY - Free Report) reported earnings per ADS of 24 cents for the quarter, which topped the Zacks Consensus Estimate by a penny and was up 5.8% on a year-over-year basis. Revenues increased 6% year over year to $2,651 million and topped the Zacks Consensus Estimate of $2,629 million.
Zacks Rank #3-rated Infosys’ operating profit rose 6.0% year over year to $638 million. Strong focus on operational improvement helped maintain the company’s operating profits, despite strong headwinds. (Read: Infosys Beats on Q1 Earnings & Revenues, Raises View)
Toyota Motor Corp. Ltd. (TM - Free Report) has announced the launch of a newly improved Camry in Japan. This new model will be sold through nationwide dealers, including Toyopet, Toyota Corolla and Netz dealers.
The new Camry design is based on core elements of Toyota New Global Architecture (“TNGA”) with an all-new platform, units, electronics and other core components. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Honda Motor Co., Ltd. (HMC - Free Report) has decided to recall 1.2 million Accord midsize cars, according to a Bloomberg report. A problem in the battery sensor, which can lead to an electric short and even a fire, has prompted the Japanese automaker to take such a decision.
Four cases of engine compartment fires due to the battery sensor-related problem have been reported to Zacks Rank #3-rated Honda. All the cases have been reported from states where salt is used to clear roads during winter. (Read: Honda Recalls 1.2M Accord Due to Battery Sensors Issues)
Taiwan Semiconductor Manufacturing Co. (TSM - Free Report) reported second-quarter 2017 earnings of 42 cents per ADR, which missed the Zacks Consensus Estimate by 14 cents. Further, it decreased 8.7% on a year-over-year basis and 24.3% sequentially. The stock has a Zacks Rank #4 (Sell).
Moreover, revenues decreased 3.8% year over year and 8.7% sequentially to $7.06 billion. The figure was better the Zacks Consensus Estimate of $7.03 billion.
Management’s third-quarter guidance was unimpressive due to continued inventory adjustments at most of the smartphone manufacturers as well as unfavorable currency movement. However, management reiterated top-line growth guidance for 2017. (Read: Taiwan Semi Misses on Q2 Earnings, Guidance Dull)
Roche Holdings AG (RHHBY - Free Report) announced positive data from the phase III study, HAVEN 1, on hemophilia A candidate emicizumab. The stock has a Zacks Rank #3.
The study evaluated once-weekly subcutaneous emicizumab prophylaxis (preventative) in adults and adolescents with hemophilia A with inhibitors. The primary endpoint showed a clinically meaningful and statistically significant reduction in treated bleeds. (Read: Roche Announces Positive Data on Hemophilia A Drug)
Performance of Leading Foreign Stocks
The table given below shows the price movements of 10 of the largest stocks listed on indexes worldwide, over the last five days and during the last six months.
Last 5 Day’s Performance
Next Week’s Outlook
Over the next few days, the Eurozone will receive data on inflation and construction. However, of far greater significance is the ECB meeting scheduled for Thursday where the central bank will take another call on monetary policy.
China will also receive crucial manufacturing services data next week. While all of these reports will have an impact on markets’ direction, the nature of U.S. earnings results is also likely to determine whether global stocks can continue to post gains next week.
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