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Asian Markets at Close Report

European Markets at Close Report

Feb 21, 2017

Asian, European & U.S. Stocks Market Close Reports on February 21, 2017



marketwatch.com

ASIA
 
Willa Plank
Asian stocks ended mostly higher Tuesday, with Japanese equities rising as the yen pulled back against the U.S. dollar while banking stocks bolstered gains in Chinese trade.
Japan’s Nikkei Stock Average NIK, +0.68%  added 0.7%, as a stronger dollar and the prospects of higher U.S. rates lifted shares of financials and auto companies.
Shares of Sumitomo Mitsui 8316, +0.40%  gained 0.4% and Resona Holdings 8308, +1.54%  rose 1.5% following media reports that the banking groups were in talks to merge operations of three regional banks based in western Japan’s Kansai region.
In China, stock gains continued, with financials and cyclicals boosting the market after the Shanghai Composite Index posted its best day since November on Monday. The Shanghai Composite Index SHCOMP, +0.41%  added 0.4%.
The strong rally in Chinese blue chips, in particular banking stocks, has raised speculation that local pension funds are buying—a signal that Beijing believes the market has bottomed out, according to Simon Wang, an analyst at Guoyuan Securities.
“I’ve heard anecdotes that off-market fund-matching is turning more active again,” said Wang, arguing that the latest bull run differs from the one in 2015, which was purely driven by funds. This is due to stronger fundamental support as China’s economy stabilizes, he said.
Among major gainers in Asia, shares of South Korean messaging app maker Kakao 035720, +4.25%  jumped 4.3% after the financial arm of internet giant Alibaba Group BABA, +1.59%  said Tuesday it would invest $200 million in the payments unit of Kakao.
Korea’s Kospi SEU, +0.89%  was the region’s biggest gainer with a 0.9% advance. That allowed the index to close at its highest level since July 2015.
But Australia’s S&P/ASX 200 XJO, -0.07%  shed 0.1%. Hong Kong’s Hang Seng Index HSI, -0.76%  fell 0.8%, as downbeat reports from global banks weighed on the index after it hit an 18-month closing high on Monday. Singapore’s Straits Times Index STI, -0.08%  slipped 0.1%.
“The political landscape is quite dominant at the moment,” said Alex Furber, sales trader at CMC Markets.
Investors were selling French government debt, worried that the country would elect Marine Le Pen--the leader of the far-right National Front — as its president. Le Pen, who has promised to take the country out of the eurozone, has a comfortable lead in April’s first round of elections, according to a poll published Monday.
Meanwhile, markets were also in a wait-and-see mode in anticipation of U.S. President Donald Trump’s address of a joint session of Congress on Tuesday next week, notes Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets.
Investors have been eagerly awaiting details of his tax plan.
— Yifan Xie and Kosaku Narioka contributed to this article. 
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EUROPE
 
Carla Mozee
European stocks closed at their highest in more than a year Tuesday, finding support from upbeat eurozone data, but HSBC PLC shares suffered the most since 2009 in the wake of financial results from the London-based lender.
The Stoxx Europe 600 SXXP, +0.64%  ended up 0.6% at 373.40, the best close since Dec. 2, 2015, and the 10th rise in 11 sessions. But the bulk of the advances were derived from oil, gas SXER, +1.64%  and technology stocks. The pan-European index on Monday rose 0.2%.
European equities climbed Tuesday after a better-than-expected preliminary reading on manufacturing activity in the eurozone. IHS Markit’s February PMI gauge of eurozone manufacturing activity came in at 56.0, outstripping a 54.3 estimate from FactSet.
“European stock markets have enjoyed a positive day buoyed by an improving macroeconomic outlook,” said Michael Hewson, chief market analyst at CMC Markets UK, in a note.
“This improvement in business activity in Germany and France came in at its highest levels since April 2011, though more concerning is the rise in prices, which is likely to ramp up pressure on ECB President Mario Draghi to start looking at measures to start tapering the ECB’s bond buying program early,” said Hewson.
Germany’s DAX 30 DAX, +1.18%  surged 1.2% to 11,967.49, with the export-oriented market aided by a pullback in the euro against the U.S. dollar, below $1.06. The DAX notched its highest close since April 27, 2015.
Meanwhile, France’s CAC 40 PX1, +0.49%   closed up 0.5% at 4,888.76, snapping a three-day losing streak.
But the yield on the 10-year French bond TMBMKFR-10Y, +2.80%  rose 3 basis points to 1.08% as prices continued to fall. The spread between French and German 10-year bond yields has hit its highest since March 2013, according to FactSet data. Investors are demanding a higher premium for French holding debt, with an eye to the first round of voting in the French presidential election in April.
Polls released Monday and late Tuesday showed far-right candidate Marine Le Pen pulling ahead of her two main rivals, a worry for some investors as she’s called for France to leave the European Union and the euro. Read:French bonds drop, euro may retest $1.03 as Le Pen rises in the polls
HSBC slides: Shares of HSBC HSBA, -6.54% HSBC, -5.31% 0005, -5.00%   tumbled 6.5%, the largest drop since March 2009. The slide was triggered after the Asia-focused bank reported a fourth-quarter net loss of $4.23 billion, widening from a loss of $1.33 billion a year ago. HSBC did say it plans to buy back an additional $1 billion of shares.
The extension of the share buyback is within HSBC’s current cash resource, said Ken Odeluga, market analyst at City Index, in a note. “However, we think applause for the additional payout is somewhat muted, in view of HSBC’s backsliding common-equity tier-one ratio.”
Odeluga noted that the ratio was at 13.6% at the end of its year, compared with 13.9% in its third quarter.
“It’s a modest retreat of regulatory capital, so direct consequences will be immaterial, but again, the timing is unfortunate,” he said.
HSBC weighed on the U.K.’s FTSE 100 UKX, -0.34% leaving that index down 0.3% at 7,274.83.
Movers: Landing at the bottom of the Stoxx 600 were shares of John Wood Group PLC WG., -7.95%  , as they tanked 8%. The oil-services company’s yearly net profit fell to $27.8 million, from $79 million the previous year, as revenue fell.
Elsewhere in the commodities group, BHP Billiton BLT, +0.39% BHP, +0.98% BHP, +1.17%   shares closed up 0.4%, but off session highs. The world’s largest miner by market value swung to a profit of $3.20 billion in its fiscal first half, aided by higher commodity prices and cost-cutting. BHP also said it’s raising its dividend.
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 WALL STREET

Wallace Witkowski, Ryan Vlastelica
U.S. stocks rallied on Tuesday, with major indexes simultaneously closing at records for a second session in a row on the back of gains in defensive sectors and energy, even as concerns remained about the market’s valuation.
Stocks finished near their highs of the session with the day’s gains broad as all 11 of the S&P 500’s sectors finished higher.
The Dow Jones Industrial Average DJIA, +0.58%  rose 0.6%, or 118.95 points, to a record 20,743.00, led by gains in Wal-Mart Stores Inc. WMT, +3.00%  and UnitedHealth Group Inc. UNH, +1.87% Tuesday marked the eighth straight session of closing records for the blue-chip average, representing the longest winning streak since July 20, 2016, according to Dow Jones data.
The S&P 500 index SPX, +0.60%  rose 0.6% to finish at a record 2,365.38, a gain of 14.22 points, led by 1% or more gains in defensive sectors like real estate, utilities, and consumer staples. The energy sector finished up 0.7% on crude-oil gains.
The Nasdaq Composite Index COMP, +0.47%  added 27.37 points, or 0.5%, to close at a record 5,865.95.
For 2017, the Dow and S&P 500 have logged 10 record closes, while the Nasdaq has scored 19, according to Dow Jones data.
The market has been in a pronounced uptrend since the election of Donald Trump in November. Investors are hoping that the policies he is expected to pursue, including tax cuts and deregulation, will accelerate economic expansion and lift corporate profits. Trump’s recent suggestions that policies would be unveiled soon have spurred recent buying, although few details have emerged.
Karyn Cavanaugh, senior market strategist at Voya Financial, said she believes—with some minor pullbacks—stock market gains can continue for a while.
“Those waiting for the other shoe to drop can be waiting for a long time,” Cavanaugh told MarketWatch. She said while a lot of Trump’s promises may be baked into current prices, so many different variables are in play with changes to tax policy, trade, and deregulation, that there is still room left to run.
“Economic data is coming in on the upside, global growth is accelerating, there’s an increase in M&A, and optimism is higher, so the good outweighs the bad until we get anything that changes that scenario,” Cavanaugh said, adding that while equity valuations may be above historic highs, compared with bonds they are still relatively cheap.
Lofty valuations have some investors concerned that the market could be vulnerable in the event the policies disappoint in their magnitude or structure.
“The rally is getting long in the tooth, and once the euphoria wears off we will need to know when we’ll get policies and how they will impact corporate profits,” said Katrina Lamb, head of investment strategy and research at MV Financial. “If you think there are still double-digit gains left to be had, that seems optimistic. A lot of what we’ve seen lately seems to be people who didn’t buy into the rally at first and are coming in now in something of a ‘pain trade.’”
Read: How Trump’s stock market ranks in his first 30 days in office
Economic docket: In the latest economic data, Markit’s read on manufacturing fell in February, as did the firm’s services gauge.
Data preview: ‘Soft’ side of economy soars under Trump. But here’s the ‘hard’ truth
Philadelphia Fed President Patrick Harker, who spoke at the Wharton School of the University of Pennsylvania, said the U.S. needs to approach higher education differently and suggested student debt reform, pointing to income-linked repayment plans that are in use in Australia.
Regarding a potential hike in U.S. interest rates, Harker said in a Friday interview for Market News International that he “would not take March off the table at this point.” That view sent Treasury yields and the dollar higher in Asian trading Tuesday.
Trump taps Gen. H.R. McMaster as national security adviser
One week after President Trump fired his first national security adviser, Mike Flynn, he announced the replacement for the role, Lt. Gen. H.R. McMaster, currently director of the Army Capabilities Integration Center at Fort Eustis, Va.
Stocks movers: Retailers were in the spotlight, with shares of Home Depot Inc. HD, +1.41% closing up 1.4% after the company reported better-than-expected results, upping its dividend and setting a $15 billion buyback.
Wal-Mart Stores Inc. WMT, +3.00% shares finished up 3% after posting earnings that beat forecasts and guidance that was in line with its forecast. The retailer also raised its dividend 2% to $2.04.
Verizon Communications Inc. VZ, +0.49%  and Yahoo Inc. YHOO, +0.89%  are expected to cut their merger price by as much as $350 million, The Wall Street Journal reported. Verizon rose 0.5% while Yahoo added 0.9%.
Shares of Apple Inc. AAPL, +0.72% the largest U.S. company by market cap, closed up 0.7% and hit an intraday record after Morgan Stanley raised its price target on the company, citing optimism over China sales.
U.S.-listed shares of HSBC Holdings PLC HSBC, -5.31%  fell 5.3%. The Asia-focused bank said its net loss widened to $4.23 billion in the fourth quarter from $1.33 billion in the year-ago period.
U.S.-listed shares of Unilever PLC UL, -7.54% tumbled 7.5% and Kraft-Heinz Co. KHC, -1.84% dropped 1.8% after Heinz on Sunday dropped its $143 billion offer for the food rival just two days after making public a bid to combine the two companies. Meanwhile, shares of Mondelez International Inc. MDLZ, +5.81%  rallied 5.8%.
Other markets: Asian markets ADOW, -0.01%  traded mixed, with the Nikkei 225 index NIK, +0.68%  closing up 0.7% and the Hong Kong Hang Seng Index HSI, -0.76%  dropping 0.8%. European stocks SXXP, +0.64% finished higher across the board after data showed a better-than-expected reading on preliminary manufacturing data.
The ICE Dollar Index DXY, +0.55%  was higher, with the dollar gaining against both the euro EURUSD, +0.0000%  and the British pound GBPUSD, +0.0321% Crude-oil futures CLH7, +1.16%  settled up 1% at $54.33 a barrel, while gold prices GCJ7, -0.19%  settled down 20 cents at $1,238.90 an ounce.
Read: Why the ‘next leg in the oil bull market’ is coming soon
—Barbara Kollmeyer in Madrid contributed to this article