Foreign markets remained focused on the outcome of the annual economic symposium at Jackson Hole last week. Meanwhile, events at the White House weighed on investors. Military drills held jointly by the U.S. and South Korea weighed on Asia’s investors for a while until they chose to ignore the issue. Sales of state-owned assets boosted stocks appreciably in Brazil while Chile’s stocks closed at a record level after the Fed Chair refrained from commenting on U.S. monetary policy in her speech at Jackson Hole.
European Investors Focus on Jackson Hole
Geopolitical concerns weighed down Europe’s markets on Monday with only mining stocks helping to curb the day’s losses. The STOXX 600 lost 0.4% with nearly all sectors and major exchanges in the red. Europe’s bourses were affected by the reverses suffered by their Asian counterparts following joint U.S. and South Korean military drills. Banks were the worst sufferers with Europe’s banking index declining in excess of 0.9%.
The STOXX 600 rebounded on Tuesday, gaining 0.8%, as investors keenly awaited the outcome of the annual Jackson Hole conference. Stocks of basic resources companies were the largest gainers, moving up in excess of 1.7% on a rise in metal prices and encouraging earnings results. Meanwhile, Germany’s economic sentiment index declined more than expected, falling from 17.5 in July to 10 in August.
Stocks across Europe closed lower on Wednesday after media stocks suffered losses and overall sentiment took a hit. The STOXX 600 declined by 0.5% with most sectors closing in the red. Media stocks were the most grievously affected, losing in excess of 2.7% following disappointing earnings news. The largest advertising group on a global basis, WPP plc , lost 11% after reducing its full-year outlook for net sales.
The STOXX 600 gained 0.3% on Thursday as investors continued to wait for clues on global monetary policy from the Jackson Hole meet. Materials and construction stocks notched up the largest gains for the day. In the U.K., private consumption growth declined more than expected during the second quarter. Meanwhile, business sentiment in France touched its highest level in 10 years during the month of August.
Europe’s stocks broadly declined on Friday even as Janet Yellen delivered the first of a number of speeches from central bankers at the Jackson Hole economic symposium. The STOXX 600 closed the day with losses but still managed to increase 0.2% over last week. However, France’s CAC, the FTSE and Germany’s DAX remained virtually unchanged over this period. Basic resources were among the few gainers for the day, boosted by a spike in prices of copper.
U.S. Political Events, Jackson Hole, Military Drill Guide Asian Stocks
Markets across Asia closed mixed on Monday as investors remained focused on events at the White House and military drills held jointly by the U.S. and South Korea. The Nikkei 225 lost 0.4% after oil stocks notched up gains. The Kospi lost 0.1%, weighed down by concerns triggered by the joint drill. Australia’s S&P/ASX 200 slipped 0.4% with telecom and healthcare stocks leading the losers. However, the Shanghai Composite and Shenzhen Composite indexes gained 0.6% and 0.7%, respectively.
Investors switched their attention to the Jackson Hole meet on Tuesday as Asian stocks closed with gains. The Nikkei 225 declined for the fifth consecutive session, losing 0.1% to set its longest streak of losses since April 2016. The Kospi rebounded, gaining 0.4% even as investors ignored concerns surrounding the joint military drill. The S&P/ASX 200 and the Shanghai Composite gained 0.4% and 0.1%, respectively. However, the Shenzhen Composite lost 0.4% to close the day in the red.
Markets across Asia closed mixed despite an overnight rally on U.S. bourses. Meanwhile, the dollar slipped, weighed down by President Trump’s comments. The Nikkei gained 0.3%, snapping its five-day long stretch of losses. The Kospi increased 0.1% while the S&P/ASX 200 lost out on early gains to close the day 0.2% lower. The Shanghai Composite and Shenzhen Composite indexes declined by 0.1% and 0.3%, respectively.
Investors ignored President Trump’s threat of a government shutdown and Asia’s stocks closed with gains on Thursday. The Nikkei 225 lost 0.4% while the Kospi gained 0.4%. Materials and tech stocks helped the S&P/ASX 200 advance 0.2%. The Shanghai Composite and Shenzhen Composite indexes both closed in the red with the former closing 0.5% lower.
Markets across Asia closed in the green on Friday with investors ignoring losses on the U.S. markets caused by domestic political concerns. Investors continued to focus on the outcome of the annual Jackson Hole economic symposium. The Nikkei 225 and the Kospi gained 0.5% and 0.1%, respectively. The S&P/ASX 200 slipped marginally to close the day in the red amidst a spate of earnings reports. The Shanghai Composite and Shenzhen Composite closed in the green with the former closing 1.8% higher.
Bovespa Gains from State Asset Sales Announcements
Latin America stocks endured considerable volatility on Monday even as investors remained focused on the annual Jackson Hole meeting scheduled later in the week. A spike in iron ore prices boosted Vale S.A. (VALE - Free Report) , which in turn lifted Brazil’s Bovespa by 0.3% to its highest level in six months.
Brazil’s stocks continued to notch up gains on Tuesday, rising to their highest level in six months. The Bovespa gained 2.3% to break above the 70,000 level for the first time in more than six years. The day’s gains were a result of the government’s decision to private a key power utility, a development which boosted the demand for government run companies.
The Bovespa increased 0.6% to close at another record level on Wednesday. Brazil’s benchmark was once again lifted by the government decisions to privatize government enterprises. These sales are part of President Michel Temer’s attempts to reduce the role of the state in the economy in an effort to control the budget deficit.
Another round of asset sales announcements from the government led to further gains for Brazil’s stocks on Thursday. The Bovespa gained around 1% to touch yet another new six year high. The index ultimately lost 0.2% on Friday despite the Fed Chair’s decision to refrain from speaking on monetary policy during her Jackson Hole speech. However, stocks in Chile closed at a record level.
Stocks in the News
WPP reported strong results for first-half 2017. Earnings per share (EPS) improved 146.6% year over year to 46.6 pence ($58.67) on the back of revenue growth across all geographic regions and strong performance in all operating segments. WPP has a Zacks Rank #3 (Hold).
Reported revenues for the period increased 13.3% to £7,404 million (down 0.4% to $9.328 billion) year over year, with constant currency growth of 1.9%. For 2017, the advertising giant expects EPS growth to be in the range of 10% to 15% through revenue growth, margin expansion, acquisitions and share buybacks. Growth in net sales margin of 0.3 margin points or more is expected. (Read: WPP Reports Strong 1H17 Earnings, Revenues Rise)
BHP Billiton Limited (BHP - Free Report) reported robust financial results for fiscal 2017 (ended Jun 30, 2017). For fiscal 2017, earnings per American Depositary Share (ADS) came in at roughly $1.27 per share, remarkably up from 23 cents recorded in the year-ago period. Revenues for fiscal 2017 totaled $38.3 billion, up from $30.9 billion recorded in the prior-year period. (Read: BHP Billiton's Fiscal '17 Earnings and Revenues Up Y/Y)
In a separate development, Zacks Rank #3 BHP Biliton recently sanctioned $2.5 billion capital expenditure project for extending the life of its Spence open-cut copper mine by more than fifty years. The investment is for the company’s Spence Growth Option (SGO) project and is in sync with its strategy to sound copper production moving ahead. (Read: BHP Billiton Sanctions $2.5B for SGO Copper Plan)
China Life Insurance Co. Ltd’s (LFC - Free Report) first-half 2017 earnings per share of 6.45 cents (RMB 0.43) grew 7% year over year. The company’s net profit attributable to equity holders of the company was $1.8 billion (RMB 12.2 billion) at the end of first six months of 2017, reflecting 17.8% year-over-year growth. The upside was primarily driven by higher revenues. China Life has a Zacks Rank #3.
During the first half of 2017, the company’s total revenues reached $59.4 billion (RMB 396.2 billion), up 17.3% year over year on the back of rapid growth in premiums. The company's gross written premiums were $51.9 billion (RMB 346 billion), an increase of 18.3% year over year. (Read: China Life's 1H17 Earnings & Revenues Increase Y/Y)
TOTAL S.A. (TOT - Free Report) announced that it has entered into a definite agreement to acquire Maersk Oil & Gas A/S (Maersk Oil) in a share and debt deal. This acquisition is expected to close in the first quarter of 2018.
The deal will bring in high quality low margin production assets and help TOTAL raise its total hydrocarbon production level to 3,000 thousand barrels of oil equivalent (kboe) per day in 2019 from 2,500 kboe per day at the end of second quarter of 2017.
TOTAL will fully acquire Maersk Oil through payment of its shares and assumption of debt. The company will issue shares worth $4.95 billion and assume Maersk Oil’s debt of $2.5 billion. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Infosys Limited (INFY - Free Report) announced a $2 billion share repurchase program a day after the sudden resignation of CEO and MD Vishal Sikka. This move reflects an initiative to improve stakeholder returns for the Indian software exporter, after heightened tensions between the board and the founders led by ex-Chairman N R Narayana Murthy resulted in Sikka’s quitting.
Asia’s second-largest software services developer plans to repurchase as many as 113 million shares at Rs 1,150 apiece, per an exchange filing. Investors actually lost $3.5 billion as Zacks Rank #3 Infosys’s market value plunged on Aug 18 in the wake of Sikka’s step-down. The repurchase price represents a 25% premium to the closing price on that day. Despite this generous offer, the shareholders’ response was lukewarm at best. (Read: Infosys Notifies $2B Buyback Program, Shares Stretch Losses)
Novartis AG (NVS - Free Report) announced that the European Commission (EC) has approved breast cancer drug Kisqali (ribociclib).The EC approved the drug in combination with an aromatase inhibitor for treatment of postmenopausal women with hormone receptor positive, human epidermal growth factor receptor-2 negative (HR+/HER2-) locally advanced or metastatic breast cancer as initial endocrine-based therapy. Novartis has a Zacks Rank #3. (Read: Novartis Receives EC Approval for Breast Cancer Drug)
Roche Holding AG (RHHBY - Free Report) announced that the FDA has accepted the company’s Biologics License Application (BLA) and granted Priority Review for hemophilia A candidate, emicizumab. The FDA has granted emicizumab prophylaxis (preventative) priority review as a once-weekly subcutaneous treatment for adults, adolescents and children with hemophilia A with factor VIII inhibitors. Roche has a Zacks Rank #3. (Read: Roche Hemophilia A Drug Granted Priority Review)
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
With central bankers refraining from providing major clues on monetary policy at the Jackson Hole meeting, investors will possibly shift their focus elsewhere. The specter of war seems to be lifting from North Korea, adding to investors’ relief. Economic data released in Europe has also been largely encouraging. Given this backdrop, only events surrounding the Trump administration could impede gains for stocks across the world in the week ahead.
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