Investors across the globe focused on earning numbers and the outcome of the Fed’s policy meeting this week. Regulatory pressures on tobacco and auto stocks weighed on Europe’s stocks. Meanwhile, key earnings results guided markets across Asia. Brazil’s markets gained direction from shifts in institutional policy. Also, the peso rose versus the dollar following the Fed’s call to leave rates unchanged, leading to gains for stocks in Mexico.
Earnings Reports Guide European Markets
A slump in auto stocks led to losses for the broader markets across Europe on Monday. Auto stocks suffered following reports that the EU was conducting an investigation into allegations of technological collusion between carmakers from Germany. The STOXX 600 lost 0.2% with most sectors closing in the red.
The STOXX 600 gained 0.4% on Tuesday even as investors remained focused on earnings numbers and the Fed’s two-day policy meeting. Gains made by banks and commodity stocks delivered a much needed boost to the bourses.
Earnings and the Fed’s policy meeting continued to guide investor sentiment in Europe on Wednesday. The STOXX 600 continued to notch up gains, closing 0.5% higher with all sectors except healthcare finishing in the green. Oil and gas stocks gained momentum from earnings news to end among the day’s leading performers.
The STOXX 600 closed in the red on Thursday after the Fed refrained from raising interest rates. Meanwhile, investors continued to be guided by the nature of earnings results. Stocks from the food and beverages sector emerged as the day’s top performers, gaining 1.3%. Diageo (DEO - Free Report) posted impressive earnings numbers riding on steps taken to boost productivity.
Disappointing earnings from Amazon (AMZN - Free Report) and losses incurred by tobacco stocks led to markets across the region closing lower on Friday. Tobacco stocks declined after the FDA said it would unveil plans intended to lower nicotine levels in cigarettes. The STOXX 600 closed more than 1% lower. Over the week, the pan European index declined by nearly 3% while the FTSE 100 and the DAX lost 1% and 0.7%, respectively.
Asian Stocks Move on Earnings, Fed Rate Call
Markets across Asia closed mixed on Monday as investors focused on the slump in the dollar and the Fed’s two-day policy meeting. Australia’s ASX 200 lost 0.6% even as the country’s major banks suffered losses. The Nikkei 225 managed to recoup some of its losses to close 0.6% lower even as South Korea’s Kospi ended the nearly almost unchanged. In contrast, the Shanghai Composite and the Shenzhen Composite closed 0.4% and 0.5% higher, respectively.
Most of Asia’s benchmark indexes suffered declines on Tuesday as investors focused on the Fed’s two-day policy meeting. The Nikkei 225 lost 0.1% after negating early gains while South Korea’s Kospi declined 0.5%. The Shanghai Composite and the Hang Seng lost 0.2% and 0.1%, respectively. However, the S&P/ASX 200 gained 0.7% after stocks across all sectors notched up gains in Australia.
Markets closed mixed again on Wednesday even as oil prices moved higher and the dollar remained on the edge ahead of the outcome of the Fed’s policy meeting. The Nikkei 225 gained 0.5%, buoyed by gains from Japan’s automakers. The Kospi lost out on early gains to end the session 0.2% lower. In contrast the S&P/ASX 200 increased 0.9%, powered by strong gains from materials and energy stocks. While the Shanghai Composite ended the day 0.1% higher, the Shenzhen Composite lost 0.3%.
Stocks across Asia moved higher on Thursday following the release of a number of key earnings results. Additionally, the Fed refrained from raising interest rates, a move which lifted consumer sentiment. The Nikkei 225 gained 0.2% while the Kospi moved 0.4% higher. The S&P/ASX 200 and the Hang Seng increased 0.1% and 0.8%, respectively. While the Shanghai Composite inched up by 0.1%, the tech-heavy ChiNext increased by 3.5%.
Investors continued to digest earnings on Friday even as indexes across Asia closed lower. The Nikkei 225 lost 0.6% while the Kospi suffered a 1.7% slide. The S&P/ASX 200 declined by 1.4% even as Australian sub-indexes suffered loses. While the Hang Seng declined by 0.6%, the Shanghai Composite bucked the trend to end 0.1% higher.
Earnings, Economic Concerns Guide Latin American Stocks
Brazil’s benchmark index, the Bovespa ended 0.4% lower on Monday. Stocks in Mexico ended at a record level on Tuesday, following expectations of strong earnings results. Meanwhile, the Bovespa gained 0.9% to close at its highest level in a month. A surge in commodity prices boosted stocks of Vale S.A. (VALE - Free Report) and Petrobras (PBR - Free Report) leading to gains for the broader markets.
On Wednesday, the Bovespa closed 1% lower following concerns that the government would reduce its fiscal goals for the year since the pace of the economic recovery has remained under par. Meanwhile Mexico’s benchmark S&P/BMV IPC stock exchange lost 0.2%. This was its first decline in five sessions, triggered by the Peso’s increase versus the dollar following the Fed’s decision to leave rates unchanged.
The Bovespa gained 0.7% on Thursday, lifted by stellar earnings numbers from the likes of Vale and Banco Bradesco S.A. BBDO. Meanwhile, the country’s central bank indicated that it would continue to cut rates in order to boost inflation. The Bovespa gained 0.2% on Friday, ending the week on an optimistic note.
Stocks in the News
Royal Dutch Shell plc RDS.A reported earnings per ADS (on a current cost of supplies basis, excluding items) of 88 cents, breezing past the Zacks Consensus Estimate of 75 cents and the year-ago adjusted profit of 26 cents. Revenues of $72,702 million were 21% above the second-quarter 2016 sales of $60,271 million. Shell has a Zacks Rank #5 (Strong Sell). (Read: Shell's Q2 Earnings Soar as Cost Cuts Pay Off)
AstraZeneca PLC (AZN - Free Report) reported second-quarter 2017 core earnings of 87 cents per American Depositary Share, which comfortably beat the Zacks Consensus Estimate of 41 cents. Core earnings also increased 6% year over year at constant currency rates (CER). Total revenue declined 8% at CER to $5.05 billion in the reported quarter. Revenues were in line with the Zacks Consensus Estimate. AstraZeneca has a Zacks Rank #4 (Sell). (Read: AstraZeneca Beats on Q2 Earnings, Falls on Failed Study)
Roche Holding AG (RHHBY - Free Report) reported sales of CHF26.3 billion in the first half of 2017, up 5% from the year-ago period. Core earnings came in at CHF8.23 per share, up 6% from the first half of 2016. Sales at the Pharmaceuticals division increased 5% while Diagnostics division sales climbed 5%
Zacks Rank #3 (Hold) rated Roche now expect sales to grow in mid-single digits (prior guidance: low-to-mid single digits). The company expects core earnings to grow in tandem with sales. (Read: Roche's Sales Grow Y/Y in 1H17 on New Drug Launches)
Deutsche Bank AG (DB - Free Report) reported net income of €466 million ($512.4 million) in second-quarter 2017, significantly up on a year-over-year basis. Income before income taxes more than doubled to €822 million ($903.9 million) on a year-over-year basis. The bank reported net revenue of €6.6 billion ($7.3 billion) in the second quarter, down 10.8% year over year. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GlaxoSmithKline plc (GSK - Free Report) reported core earnings of 70 cents per American depositary share in the second quarter of 2017, which beat the Zacks Consensus Estimate of 68 cents by almost 3%. Earnings were, however, down 2% year over year at constant exchange rates (CER). GlaxoSmithKline has a Zacks Rank #3.
Quarterly revenues were up 3% at CER to $9.42 billion (£7.3 billion) on the back of strong performances by all the business segments. However, revenue marginally missed the Zacks Consensus Estimate of $9.52 billion. (Read: GlaxoSmithKline Beats on Q2 Earnings, Lowers Guidance)
Anheuser-Busch InBev SA/NV (BUD - Free Report) posted second-quarter 2017 normalized earnings per share of 95 cents decreased 10.4% from $1.06 earned in the year-ago quarter and also lagged the Zacks Consensus Estimate of $1.14. Revenues for the quarter advanced 31.2% to $14,182 million but missed the Zacks Consensus Estimate of $14,434 million. Anheuser-Busch has a Zacks Rank #3. (Read: AB InBev Earnings and Revenues Miss Estimates in Q2)
Barclays PLC’s (BCS - Free Report) second-quarter 2017 net loss attributable to ordinary equity holders was £1.40 billion ($1.79 billion), mainly reflecting losses incurred from the disposal of the Africa unit. Net operating income was £4.5 billion ($5.75 billion), down 17.4% year over year. Barclays has a Zacks Rank #5. (Read: Barclays Reports Loss in Q2 on Africa Unit Disposal)
Koninklijke Philips N.V. (PHG - Free Report) reported second-quarter net income from continuing operations of €161 million ($177 million), up 36.4% from the prior-year quarter’s figure of €118 million. Total revenue in the quarter came in at €4,294 million ($4721.8 million), up 3.9% from the year-ago tally. Philips has a Zacks Rank #3. (Read: Philips Q2 Earnings Increase Y/Y, Order Intake Strong)
TOTAL S.A. (TOT - Free Report) reported second-quarter 2017 operating earnings of 97 cents per share (€0.88 per share), lagging the Zacks Consensus Estimate of 98 cents by a penny. Total revenue in the reported quarter came in at $39.91 billion, up 7.3% from $37.21 billion in the year-ago quarter. TOTAL S.A. has a Zacks Rank #3. (Read: TOTAL Lags Q2 Earnings Estimates, Keeps 2017 View)
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
The Fed’s decision to leave interest rates unchanged led to diametrically opposite results in Europe and Asia. While stocks in Europe closed in the red after the U.S. central banks’ rate call, Asian markets gained from the same development. With the Fed’s path on rates more or less clear, the focus will remain squarely on earnings results this week. Though earnings have been promising this week, stray results from behemoths like Amazon could spoil markets’ party.
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