North Korea-related tensions weighed on stocks across the world last week. The ECB struck a dovish tone, leading to gains for Europe’s stocks during the latter half of the week. A private index indicated that China’s services sector experienced significant expansion last month, driving the stocks higher. Meanwhile, positive developments related to reforms propelled Brazil’s stocks.
North Korea Weighs on Europe’s Stocks, Autos Lead Gainers
North Korea’s nuclear test pushed Europe’s stocks lower on Monday. Safe-haven stocks regained favor and the STOXX 600 lost 0.5%. All of the index’s sectors experienced losses, with only oil and auto stocks closing in the green. France’s CAC, Germany’s DAX and the FTSE 100 declined 0.4%, 0.3% and 0.4%, respectively. Tech stocks were the worst sufferers of the session, losing 0.9%.
The STOXX 600 closed 0.1% lower on Tuesday after Wall Street endured losses and geopolitical worries heightened. Auto stocks continued to lead gainers, ending the day 0.9% higher. The FTSE 100 and the CAC declined 0.5% and 0.3%, respectively, whereas the DAX ended 0.2% higher. Oil and gas stocks were the day’s second-highest gainers. These stocks were buoyed by significant gains in oil prices caused by the shutdown of major refineries in the wake of Hurricane Harvey.
Stocks across Europe ended mixed on Wednesday. Even as markets were lifted by gains on Wall Street, geopolitical concerns continued to weigh on investor sentiment. A leading North Korean diplomat warned that the United States was likely to receive “more gift packages.” The STOXX 600 inched up 0.1% even as the CAC and the DAX gained 0.3% and 0.8%, respectively. However, the FTSE 100 ended 0.3% lower. Auto stocks increased 1.7%, leading the gainers.
The STOXX 600 gained 0.3% on Thursday after the ECB left room for increasing its asset purchasing program, quashing expectations of a stimulus wind down. ECB President Mario Draghi said that if required, bond purchases would be stepped up. The CAC, FTSE 100 and DAX gained 0.3%, 0.6% and 0.7%, respectively. Auto stocks continued to gain, closing 0.4% higher. Tech stocks also gained significantly, closing the day 1.5% higher.
The advent of Hurricane Irma and a poor showing by U.S. stocks weighed on European stocks on Friday. The STOXX 600 ended 0.2% higher but suffered a weekly loss of 0.2%. The CAC and the DAX ended nearly flat but the FTSE 100 lost 0.3%. A fall in crude prices led to losses for oil and gas stocks. Basic resources stocks declined 1.8% after China released dismal export data. Retail stocks also suffered substantial losses.
Asia’s Stocks Suffer on North Korean Tensions
Markets across Asia closed in the red following North Korea’s nuclear test. Investors sought out safe haven assets, leading to a spike in the demand for gold and the yen. South Korea’s Kospi and Japan’s Nikkei 225 lost 1.2% and 0.9%, respectively. Australia’s S&P/ASX 200 declined 0.4% with most of its sectors experiencing losses. However, the Shanghai Composite and Shenzhen Composite indexes gained 0.4% and 0.6%, respectively.
Reports that North Korea was preparing to test an intercontinental ballistic missile kept Asia’s investors on the edge on Tuesday. The Nikkei 225 and the Kospi declined 0.6% and 0.1%, respectively. However, gains in gold stocks helped the S&P/ASX 200 end 0.1% higher. Meanwhile, China’s Caixin/Markit services PMI for August increased to 52.7, representing the fastest growth in three months. Consequently, the Shanghai Composite and the Shenzhen Composite increased 0.2% each.
Asia’s stocks declined once again on Wednesday, weighed down by North Korea related tensions and losses on Wall Street. The Nikkei 225 lost 0.1% while the Kospi declined 0.3%, closing in the red for the fifth straight session. The S&P/ASX 200 moved 0.3% lower and the Hang Seng finished in the red. However, the Shanghai Composite and the Shenzhen Composite gained 0.1% and 0.4%, respectively.
Stocks across Asia rebounded on Thursday following a strong showing on Wall Street which was buoyed by political events in the United States. President Trump’s decision to push through a debt ceiling deal was responsible for such optimism. The Nikkei 225 and the Kospi gained 0.2% and 1.1%, respectively. The S&P/ASX 200 ended the day nearly unchanged. However, the Shanghai Composite and the Shenzhen Composite ended 0.6% and 0.3%, lower.
However, Asia’s markets closed lower on Friday, weighed down by the dollar incurred heavy losses following hints of tapering from the ECB. The Nikkei 225 lost 0.6%, recovering from the lowest levels witnessed since May. The Kospi and the S&P/ASX 200 lost 0.1% and 0.3%, respectively. The Shanghai Composite ended unchanged while the Shenzhen Composite gained 0.2%.
North Korea Weighs on Latin America stocks, Brazil Reforms Cause Optimism
Latin America’s investors refrained from placing large bets on Monday following tensions surrounding North Korea. The testing of a powerful nuclear device sent out shockwaves throughout the international community. However, volumes were considerably low due to U.S. markets being closed for the Labor Day holiday. The Bovespa slipped 0.1% but lingered near seven-year highs.
The Bovespa, Brazil’s benchmark index, gained 0.4% on Tuesday after a leading prosecutor warned that a plea deal which had allowed corruption charges to be levied against President Michel Temer could be partially abolished.
Investors took the view that such a development would allow the government to further its market focused reforms agenda. The Bovespa also moved above the 73,000 mark for a short while, the first such occurrence since 2008. The index’s gains were propelled by gains mopped up by Petrobras (PBR - Free Report) and Vale (VALE - Free Report) .
On Wednesday, Brazil’s stocks surged after the country’s central bank reduced key rates to their lowest level in four years. Markets gained earlier in the session after lawmakers approved two crucial fiscal Bills, boosting investor sentiment over President Temer’s capability to push through his reforms agenda.
Brazil’s markets were closed on Thursday for the Independence Day holiday. Meanwhile, Mexico was struck by a devastating earthquake which caused the deaths of 32 people. Investors remained wary on Friday following reports that North Korea was likely to test another missile on Saturday, which marks its annual Foundation Day. Ultimately, the Bovespa closed 0.5% lower.
Stocks in the News
Honda Motor Co., Ltd. (HMC - Free Report) announced that it has agreed to a $605-million legal settlement over faulty Takata air bag inflators, which caused numerous deaths and injuries, according to a Wall Street Journal report. The loss settlement covers up to 16.5 million Honda and Acura vehicles.
Per the news, the Japanese automaker will have to pay $484 million after receiving $121 million credit, taking into consideration the company’s recall efforts, which included offering rental vehicles to customers who had to wait for repairs.
Of the $484 million, Honda will spend around $200 million over four years looking out for the vehicle owners with unrepaired cars and encouraging them to replace the inflators. The remaining amount will be utilized for paying attorney fees and reimbursing owners who had to suffer due to lost wages and had to incur expenses due to hiring rental cars. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Statoil ASA (STO - Free Report) has increased its presence in South Africa by announcing the acquisition of two offshore frontier blocks. Statoil acquired a 35% interest in Exploration Right 12/3/252 Transkei-Algoa from ExxonMobil Corporation (XOM - Free Report) , the operator of the license. Lying in water depth of about 3,000 meters, the license spans about 45,000 square kilometers. Upon completion of this transaction, ExxonMobil and its other partner, Impact Africa, hold an interest of 40% and 25%, respectively.
In another transaction, Zacks Rank #3 (Hold) Statoil has purchased 90% interest from OK Energy Ltd along with its operatorship of the Exploration Right 12/3/257 East Algoa. OK Energy retains the remaining 10% interest. The license spans about 9,300 square kilometers. (Read: Statoil Acquires Interest in 2 Exploration Rights)
Novartis AG (NVS - Free Report) announced that its Chief Executive Officer (CEO), Joseph Jimenez will step down from his position in 2018. Vasant Narasimhan, M.D., Global Head of Drug Development and Chief Medical Officer, will replace him effective Feb 1, 2018. Narasimhan is a member of the Executive Committee and joined Zacks Rank #3 Novartis in 2005.
Narasimhan led the Consumer Health Division and was the Division Head of Novartis Pharmaceuticals. (Read: Narasimhan to Replace Jimenez as Novartis CEO in 2018)
AstraZeneca Plc (AZN - Free Report) announced positive top-line results from the phase III AMPLIFY study for Duaklir (aclidinium bromide/formoterol 400µg/12µg twice daily). The candidate is being evaluated for the treatment of chronic obstructive pulmonary disease (COPD). AstraZeneca has a Zacks Rank #3.
The study met its primary endpoint and showed a statistically-significant improvement in lung function in patients with moderate to very severe stable COPD compared to each individual component (either aclidinium bromide or formoterol). (Read: AstraZeneca's COPD Candidate Duaklir Reports Positive Data)
Nokia Corporation’s (NOK - Free Report) wholly owned subsidiary, Nokia Solutions and Networks, has won approximately TWD 1.75 billion contract from Chunghwa Telecom Co. Ltd. (CHT - Free Report) , a Taiwanese telecommunication service provider for 3G network quality maintenance.
Moreover, Zacks Rank #3 Nokia in collaboration with Chunghwa Telecom plans to bring G.Fast — ultra-broadband access technology — in Taiwan. This is because a surge in 4K TV and HD video services in Taiwan is exerting severe pressure on the service providers’ capacity to deliver ultra-broadband access to customers. (Read: Nokia Secures 3G Network Contract from Chunghwa Telecom)
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
North Korea’s shadow has been writ large over the markets last week. Tensions emanating from saber rattling and the specter of a likely conflict have continued to weigh on stocks. Meanwhile, region specific positive developments have helped drive stocks higher. With the North Korean issues far from resolved, investors could be in for a bumpy ride next week. Only positive economic data is likely to provide respite from such a trend.
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