Some investors are doubtful that the promised US tax cut will take place.
United States
After sinking early in the trading session, the major indices pared declines as investors studied developments in a tax overhaul they have been anticipating since the election of President Donald Trump a year ago. A US Senate tax-cut bill is different from one already being considered in the House of Representatives. The Senate bill would delay the corporate tax rate cut until 2019 complicating the tax overhaul push by the administration. The Dow Jones industrials and S&P both were down 0.4 percent and the Nasdaq lost 0.6 percent.
Doubts about how the Senate plan might affect mortgage interest deductions hit homebuilders including Toll Brothers. Roku soared after the video streaming device maker's quarterly results and guidance beat expectations. Macy's jumped after the department store’s profit came in above expectations. Dish Network advanced after the satellite and internet TV provider added subscribers in the United States in the third quarter and reduced the rate at which it lost existing customers. Ebay and Microsoft retreated. Apple, Alphabet, Oracle and Facebook declined.
Kohl’s declined after the department store operator’s quarterly profit missed estimates. Walt Disney shares tumbled in after-hours trading after quarterly revenues dropped 3 percent thanks in part to a sharp decline in sales and income from its studio entertainment segment. Nvidia reported a 54.6 percent rise in quarterly profit, driven by strong demand for its graphics chips used in gaming devices, data centers, autonomous vehicles and also by cryptocurrency miners. Equifax reported a lower third-quarter profit as costs from the credit reporting bureau’s data breach that exposed deeply sensitive information on 145.5 million people began to mount.
The Senate Banking Committee will meet November 28 to consider the nomination of Federal Reserve Governor Jerome Powell to be the next central bank chairman. President Donald Trump announced last week that he intends to nominate Powell to take the helm of the Fed in early February when Chair Janet Yellen's term expires. Powell has been through the Senate confirmation process before, most recently in 2012 and 2014 when he was nominated to join the Fed board. His nomination is expected to receive bipartisan support, though some GOP lawmakers have indicated they have concerns about his support for Fed policies under Yellen.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up 80 US cents to US$1,284.80. Copper futures were down 0.3 percent to US$3.09. WTI spot crude was up 26 US cents to US$57.07. Dated Brent spot crude was up 36 US cents to US$63.85. The US dollar was down against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was down 0.4 percent. The yield on both the US Treasury 30 year bond was up 1 basis point to 2.80 percent while the 10 year note was unchanged at 2.33 percent.
European markets
Stocks tumbled in Europe incurring their steepest declines since late August. The FTSE was down 0.6 percent, the CAC lost 1.2 percent, the DAX retreated 1.5 percent and the SMI dropped 0.9 percent. Weak earnings results from Burberry and Vestas Wind Systems put investors in a negative mood. Uncertainty about the outlook for the US tax reform plan and rising tensions in the Middle East also weighed on investor sentiment.
According to the European Commission’s Autumn Forecast, the Eurozone will grow the fastest in a decade this year thanks to resilient private consumption, stronger global growth and falling unemployment. The euro area growth forecast for this year has been increased to 2.2 percent from 1.7 percent. The EU growth forecast was lifted to 2.3 percent from 1.9 percent. Eurozone growth surpassed expectations according to the commission. The economies of all Member States are expanding and their labor markets improving, but wages are rising only slowly, the agency added. However, challenges remain in the form of high debt levels and subdued wage increases, the EU top-official added.
Commerzbank declined after it swung to a profit in the third quarter, matching expectations. Adidas declined even though the firm posted another strong quarter of sales and profit growth. Siemens dropped after saying it would complete work for its health care unit IPO by the end of March 2018. Engie rose after Total SA agreed to buy its upstream LNG business for $1.49 billion. Burberry tumbled after it said it would close stores and stop its products being sold in 'unluxurious' areas. Novartis, Roche and Nestlé finished lower in Zurich.
Hikma Pharmaceuticals dropped after it cut revenue forecasts for its generic business for a third time, citing challenging market conditions in the United States. J Sainsbury declined after it reported a 9 percent decline in first-half profit. ArcelorMittal was down after EU anti-trust authorities opened a probe into the company's proposed purchase of struggling Italian steel producer Ilva. Vestas Wind Systems plunged in Copenhagen after it lowered its profit guidance for the year, citing some uncertainty linked to the US tax reform.
Germany's September merchandise trade surplus increased moderately as exports dropped by a monthly 0.4 percent, reversing a 2 percent increase in August. At the same time, imports slid 1.0 percent in contrast to a 0.8 percent increase in August. As a result, the trade surplus rose slightly to €21.8 billion from €21.3 billion a month ago.
Asia Pacific
Asian stocks were mixed Thursday as optimism over US tax reforms faded and tensions continued to flare in the Middle East. The yen was a little weaker and oil held steady after overnight losses while strong Chinese inflation data underscored the resilience of the economy.
The Shanghai Composite was up 0.4 percent ending at a fresh two-year high as encouraging inflation data pointed to a pickup in global demand. The Hang Seng added 0.8 percent. October consumer prices climbed at the fastest pace in nine months and producer prices exceeded expectations as measures taken to curb pollution raised commodity prices. The CPI was up 1.9 percent on the year, after increasing 1.6 percent in September. This was the highest rate since January when inflation was 2.5 percent. Producer price inflation held steady at 6.9 percent.
Japanese stocks ended lower as caution crept in ahead of Friday's option settlement. The Nikkei topped 23,000 earlier in the day for the first time since January 1992 before reversing direction to end down 0.2 percent. The broader Topix hit a 26-year high before closing 0.2 percent lower. During the trading session, the Nikkei plunged about 3.6 percent from the afternoon-session high to its low for the day. The sudden reversal from the highest levels since 1992 for the index quickly affected the yen.
Both the S&P/ASX and the All Ordinaries climbed 0.5 percent. BHP Billiton and Rio Tinto rose after iron ore futures surged. NAB tumbled after going ex-dividend while the other three banks rose. Building materials supplier James Hardie Industries soared after an acquisition announcement. Property group Goodman Group advanced after reiterating its full-year 2018 operating earnings outlook. Santos declined after the oil and gas producer forecast a significant fall in sales volume for the year ahead.
The Kospi slipped 0.1 percent as investors weighed potential delays to the US tax reform plan. The Sensex edged up 0.1 percent after suffering heavy losses in the previous two sessions.
Looking forward
France, Italy and the UK post September industrial production. The UK also releases September merchandise trade balance. The US releases preliminary November consumer sentiment and the October Treasury budget.
Global Stock Markets
Note — all releases are listed in local time.
