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On 15 June, 2017 - Most global stock indices declined

Anne D Picker, Econoday

Investors reacted to yesterday’s Fed announcement along with today’s BoE and SNB statements.

United States

US shares retreated Thursday as technology companies, retailers and smaller firms took some of the largest losses. Materials companies were down along with precious metal prices. Losses eased as the day progressed. The Dow Jones industrials slipped 0.1 percent, the S&P lost 0.2 percent and Nasdaq dropped 0.5 percent.

Technology stocks continued to tumble. Apple, Facebook, Amazon and Alphabet retreated. Nike declined after the company said it will eliminate 1,400 jobs or about 2 percent of its staff positions as well as reduce the number of sneaker styles it sells by about a quarter. Kroger tumbled after it cut its annual profit outlook as the company faces growing competition from discount chain Aldi and from Lidl, a German chain opening its first locations in the United States. Supervalu also declined. Mattel dropped after it said it wants to restructure its business to help bring new products to market faster. It will also reduce its dividend payments, although it didn't say how much.

Several important economic indicators were released in the day. Among them were the June Philadelphia Fed business outlook survey and the Empire State manufacturing survey. The Philadelphia Fed’s general business conditions index did slow from May's 38.8 but not by much, to a still very hot 27.6 in June. Empire State rebounded from a respite in May to 19.8 from minus 1.0. The exuberant readings in the surveys did not carry through to May industrial production — it was unchanged on the month while manufacturing was down 0.4 percent. Weekly unemployment claims continued to decline and import/export prices gave no sign of inflation.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$20.95 to US$1,254.55. Copper futures were down 0.23 percent to US$2.57. WTI spot crude was down 32 US cents to US$44.41. Dated Brent spot crude was down 11 US cents to US$46.89. The US dollar was up against the yen, euro, Swiss franc and the Canadian and Australian dollars. The currency declined against the pound. The Dollar Index was up 0.55 percent. The yield on US Treasury 30 year bond was up 2 basis points to 2.79 percent while the yield on the 10 year note was up 3 basis points to 2.16 percent.

Europe

Stocks retreated Thursday adding to the losses incurred on Wednesday. It was European investors' first opportunity to react to yesterday's announcement from the Federal Reserve that it was increasing its fed funds rate by 25 basis points to a range of 1.00 percent to 1.25 percent as universally expected. The FTSE declined 0.7 percent, the CAC was down 0.5 percent, the DAX dropped 0.9 percent but the SMI was virtually unchanged (up 3.61 points).

Both the Swiss National Bank and Bank of England decided to leave their respective policy rates unchanged. The BoE monetary policy committee voted 5 to 3 to hold its Bank Rate at 0.25 percent. The split among committee members widened — more members sought an interest rate increase citing the rise in inflation. However, all eight members voted to maintain quantitative easing at £435 billion.

The Swiss National Bank kept its target range for 3-month CHF Libor at minus 1.25 percent to minus 0.25 percent and the key deposit rate at minus 0.75 percent. The SNB also signaled its determination to prevent any renewed appreciation by the Swiss franc which it still sees as significantly overvalued. The SNB forecast 0.3 percent inflation for this year, the same as predicted in March. For 2018, the bank lowered its outlook to 0.3 percent from 0.4 percent.

Deutsche Bank dropped on a Bloomberg report the lender is creating a new combined debt, equity and leveraged capital markets business within the investment bank. Publicis Groupe slipped after restructuring its management bodies. DFS plunged after the furniture retailer warned full-year profits will be weaker than market expectations. Hennes & Mauritz sank in Stockholm after the company posted muted sales growth in local currencies in May amid tough trading conditions. Petrofac advanced after a broker upgrade. Proximus retreated after a broker downgrade.

UK May retail sales volume declined a monthly 1.2 percent reversing a 2.5 percent rise in April.

Asia Pacific

Most Asian indices declined Thursday thanks to a sharp overnight drop in crude oil prices, the Federal Reserve's relatively hawkish tone and a widening probe into Russia's role in the US election. The Federal Reserve raised its key interest rate by 25 basis points, as widely expected, despite the recent weakness of core inflation.

The Shanghai Composite edged up 0.1 percent after the International Monetary Fund on Wednesday raised China's growth projections but called for deep reforms to transition its economy to more sustainable growth. The Hang Seng dropped 1.2 percent with property developers coming under selling pressure after the Hong Kong Monetary Authority raised interest rates. The People’s Bank of China left interest rates for open market operations unchanged, shrugging off an overnight increase in the US Federal Reserve's key policy rate. Though China didn't follow the Fed in raising rates, as it did with short-term rates in March, analysts said borrowing costs in the country's interbank market have already risen sharply this year, as money supply in May grew at the slowest annual rate in over 20 years.

The Nikkei was down 0.3 percent and the Topix was 0.2 percent lower in choppy trading as the yen's strength pressured exporters and an overnight drop in US Treasury yields dragged down financial stocks. The US dollar dropped to an eight-week low against the yen after a Washington Post report said the special counsel overseeing the federal investigation into Russian interference in the 2016 election is looking into whether US President Donald Trump tried to obstruct justice. Toyota Motor, Panasonic, Mitsubishi UFJ Financial Group and T&D dropped. Nintendo shares climbed after the gaming firm announced its next major Mario game will go on sale on October 27.

Both the S&P/ASX and All Ordinaries tumbled 1.1 percent as a fall in iron ore and oil prices pulled down basic material and energy stocks. Banks also came under selling pressure after the Federal Reserve signaled one additional rate increase this year and said it would start "gradual" shrinking of its $4.5 trillion balance sheet provided that the economy evolves broadly as anticipated. Banks ANZ, NAB and Westpac declined as did mining stocks BHP Billiton, Rio Tinto and Fortescue Metals Group. Santos tumbled along with Origin Energy and Oil Search.

The Kospi declined 0.5 percent as institutional and foreign investors dumped auto, steel and chemical stocks. But tech shares including SK Hynix and LG Display rallied. The Sensex was 0.3 percent lower.

Looking forward

Eurozone final May harmonized index of consumer prices will be released. In the US, May housing starts and June preliminary consumer sentiment will be posted.

Global Stock Markets

Global Stock Markets

*Note — all releases are listed in local time.

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