Global markets were weighed down by comments from the ECB and Bank of Japan even as bullish GDP data emerged from China this week. The Trump administration’s failure to push through a new healthcare law weighed on stocks in Asia and Europe on Tuesday.
Gains for the euro also led to all-around losses, except for stocks listed on the FTSE 100. Meanwhile, stocks in Brazil were afflicted by profit booking ahead of second quarter earnings season.
ECB Call Boosts Euro, Weighs Down European Markets
Investors in Europe digested strong China GDP data and closely watched Brexit talks being helped in Brussels even as the region’s markets closed mixed. Stocks of basic materials gained more than 1%, emerging as the biggest beneficiaries of the day because of their significantly high exposure to China. The STOXX 600 index vacillated between gains and losses through the trading day to end 0.01% higher.
The STOXX 600 lost 1.1% on Tuesday following the failure of Republicans’ efforts to repeal and replace the Affordable Care Act. All of Europe’s sectors closed in the red as investors lost confidence in President Trump’s ability to push through his reform agenda. Among the worst performers for the day were banks, at one time the premier beneficiaries of Trump’s policy proposals.
Stocks in Europe moved higher on Wednesday even as investors digested a clutch of continent-wide corporate developments. The STOXX 6000 gained 0.8% with all industrial sectors ending in the green. Tech stocks were the best performers for the day, gaining more than 2%.
The STOXX 600 lost 0.4% on Thursday even as major markets across the region closed mixed. This was likely a reaction to the ECB’s decision to leave interest rates unchanged. ECB President Mario Draghi said policymakers were likely to start discussions regarding gradual unwinding of the bank’s monetary stimulus program. His comments led to the gains for the euro. The FTSE 100 increased as the pound sterling turned cheaper but Germany’s DAX and France’s CAC suffered as a result.
Markets across Europe closed significantly lower on Friday after the euro gained and earnings numbers failed to stoke investor enthusiasm. The STOXX 600 lost more than 1% with the majority of sectors closing with in the red. The DAX declined by 1.7%, marking its worst performance for the year while the CAC lost around 1.8%.
China’s GDP, BoJ, ECB Actions Guide Asian Stocks
Markets across Asia closed mixed on Monday following the release of better than expected second quarter GDP data. Chinese stocks managed to recoup early losses following the release of GDP numbers, but still closed in the red. The Shanghai Composite lost 1.4% while the Australian S&P/ASX 200 moved 0.2% lower. However, South Korea’s Kospi increased by 0.4% and the Hang Seng also finished in the green. Markets in Japan were closed for the Marine Day holiday.
The failure of the Trump administration to push through a new healthcare law led to losses for stocks across Asia on Tuesday. The Nikkei 225 and the S&P/ASX 200 lost 0.6% and 1.2%, respectively. The Hang Seng lost out on early gains to close 0.1% lower. However, both the Shanghai Composite and Shenzhen Composite ended the day with gains, closing 0.3% and 0.6% higher, respectively.
The dollar continued to languish at appreciably low levels on Wednesday even as markets in Asia closed with gains. The Nikkei and the Kospi both increased by 0.1% while Australia’s S&P/ASX 200 gained 0.8%. The Shanghai Composite gained 1.4% while the CSI 300 gained 1.7% to close at its highest level since Dec 2015.
Markets in Asia closed in the green on Thursday after the Bank of Japan chose to keep interest rates unchanged. Investors also awaited comments from the ECB regarding monetary policy. The Nikkei gained 0.6% while the Kospi and the S&P/ASX 200 each increased by 0.5%. The Shanghai Composite and the Hang Seng increased by 0.4% and 0.3%, respectively.
The euro hovered near a two-year high on Thursday even as the Australian dollar moved lower, leading to losses for Asia’s stocks. The Nikkei and Kospi lost 0.2% and 0.3%, respectively while the S&P/ASX 200 declined by 0.7%. The Shanghai Composite moved 0.2% lower while the Hang Seng suffered losses after nine successive days of gains.
Decline in Crude Price, Profit Booking Hit Brazil’s Stocks
Markets in Latin America swung between gains and losses on Monday as investors refrained from placing big bets after notching up considerable gains in the earlier week. Brazil’s Bovespa index lost 0.5% as investors booked profits after a five day run of gains. Stocks across Latin America declined on Tuesday following concerns that a slowdown in growth could lead to a decline of U.S. imports from the region. The Bovespa lost 0.2% even as export oriented companies helped to curb losses.
The index lost 0.2% once again on Wednesday. Stocks in Brazil swung between gains and losses on Thursday ahead of the beginning of the second quarter earnings season with the Bovespa eventually ending 0.2% lower. A decline in prices of crude and higher fuel taxes led to losses for state owned Petrobras (PBR), ultimately leading to 0.3% loss for the Bovespa.
Stocks in the News
ABB Ltd. (ABB - Free Report) reported operational earnings per share of 30 cents, down 14.3% year over year, but beating the Zacks Consensus Estimate of 29 cents by 3.4%. Quarterly revenues were up 1% year over year and came in at $8,454 million. ABB has a Zacks Rank #3 (Hold).
Individually, revenues witnessed growth in two of the four segments of the company. However, revenues lagged the Zacks Consensus Estimate of $8,593 million. (Read: ABB's Q2 Earnings Beat Estimates but Fall Y/Y, Shares Down)
SAP SE (SAP - Free Report) reported second-quarter 2017 IFRS earnings per share of €0.56 (62 cents), which reflects a decline of 17.7% on a year-over-year basis. An increase in the share-based compensation expenses and restructuring related expenses proved to be a drag on the bottom line. SAP has a Zacks Rank #4 (Sell).
Total IFRS revenues for the first quarter were €5,782 million ($6,358.1 million), up 10% year over year. However, the figure fell short of the Zacks Consensus Estimate of $6,175 million. (Read: SAP SE Q2 Earnings Fall Y/Y, Revenues Miss, View Up)
Centrica plc (CPYYY - Free Report) , a utility company based in UK, recently announced a joint venture ("JV") with German energy company, Bayerngas Norge, which is operated primarily by its major shareholder Stadtwerke Muenchen GmbH, to create a new sustainable exploration and production (“E&P”) company.
Centrica will hold 69% of the newly formed company while the remaining 31% will be owned by Bayerngas Norge’s shareholders. The transaction – having an effective date of Jan 1, 2017 – is expected to be completed by the fourth quarter of 2017. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ericsson (ERIC - Free Report) reported second-quarter 2017 results, non-IFRS earnings of SEK 0.17 (2 cents) per share (excluding amortizations, write-downs of acquired intangible assets and restructuring charges). This is down from earnings of SEK 0.83 recorded in the comparable quarter last year. Ericsson has a Zacks Rank #3.
Net sales for the quarter fell 8% year over year to SEK 49.9 billion ($5.7 billion). The top line also missed the Zacks Consensus Estimate of $5.8 billion. (Read: Ericsson Q2 Earnings Miss, Outlook Grim, Shares Down)
Novartis AG (NVS - Free Report) reported second-quarter 2017 core earnings of $1.22 per share, beating the Zacks Consensus Estimate of $1.16 but the recorded figure was a penny lower than the year-ago figure of $1.23. Novartis has a Rank #3.
Revenues declined 2% to $12.2 billion as volume growth was offset by the negative impact of generic competition and pricing but beat the Zacks Consensus Estimate of $12.1 billion. (Read: Novartis Tops Q2 Earnings, Sandoz Faces Pricing Pressure)
America Movil S.A.B. (AMX - Free Report) reported net income of $771 million in second quarter 2017, up a whopping 81.8% year over year. However, quarterly earnings per ADR (American Depository Receipt) of 23 cents were well below the Zacks Consensus Estimate of 32 cents. Total revenue of approximately $13,432 million highlighted an improvement of 4% on a year-over-year basis. America Movil has a Zacks Rank #5 (Strong Sell). (Read: America Movil Q2 Earnings Miss, Revenues Rise Y/Y)
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
News from key central banks largely dominated this week’s proceedings. Both the ECB and Japan refrained from extending stimulus with Europe’s central bank hinting at winding down its monetary stimulus at the end of the year. This has set the tone for a tougher rate regime, boosting the euro in the process.
Meanwhile, the Trump’s administration’s failure to pass a new healthcare law has shaken investors’ faith in larger reform agenda. In this context, economic fundamentals such as China’s GDP data are likely to guide markets to a greater extent. Second quarter earnings are also likely to take center stage in the week ahead.
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