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Asian Markets at Close Report

European Markets at Close Report

May 24, 2017

Asia, Europe and U.S. Stocks' Markets Closing Reports on May 24, 2017


marketwatch.com
 
Kenan Machado

Chinese stocks closed higher Wednesday, shaking off losses as initial concerns wore off from Moody’s Investors Service’s decision to lower the country’s credit rating for the first time since 1989.
Equities fell more than 1% in early trading in both Shanghai and Shenzhen, with the downgrade reminding investors of China’s continued growth in outstanding borrowings—especially among companies.
Read: Moody’s downgrades China rating for the first time in nearly 30 years
But the declines soon eased, and the Shenzhen Composite Index 399106, +0.53%   finished up 0.5%. The Shanghai Composite SHCOMP, +0.07%  finished up 0.1%.
“I don’t think [the downgrade] came as a surprise to people invested in China,” said Hao Hong, head of research at BoCom International in Hong Kong.
Chinese authorities have started pushing entities to cut debt levels, particularly targeting loans made by nonbank firms with little regulatory oversight. The push has hurt Chinese asset prices.
Nomura equities strategist Wendy Liu noted global fixed-income, currency and commodity investors are more concerned about potential household and government deleveraging than equity investors. Even so, there were muted movements in other asset classes as well.
In Hong Kong, the Hang Seng HSI, +0.10%  logged a 0.1% rise.
The ratings downgrade also came about a month before MSCI Inc. announces whether to include Chinese-listed stocks into its indexes. Finally getting a yes on that could send equities there jumping as money enters the market from the likes of large index-tracking funds.
The ratings cut has raised some concern Chinese firms may face higher overseas borrowing costs, forcing them to raise more financing at home and squeeze market liquidity.
Elsewhere in Asia, shares ended mostly higher.
An overnight rebound in the dollar versus the yen helped send Japan’s Nikkei Stock Average NIK, +0.66%  up 0.7%. Meanwhile, Korea’s Kospi SEU, +0.24%  rose 0.2% to end at an all-time of 2,317.34.
Taiwan’s Taiex Y9999, +0.37%  rose 0.4%, but India’s Sensex 1, -0.21%  fell 0.7%.
Australian stocks XJO, +0.15%  finished with a 0.2% rise. Equities there sold off briefly following the China downgrade, but the impact was largely been confined to the Australian dollar AUDUSD, +0.0267%  , which fell some 0.5% against major currencies in Asian trading.
China is the largest market for Australian exports, but near-term worries are unwarranted, said Greg McKenna, chief market strategist at AxiTrader. “China has got control of its capital account,” he said, noting that the level of the country’s economic growth is more important to Australia than its credit rating.
Europe 
 
Carla Mozee, Sara Sjolin

Most major European stock markets closed out a choppy session slightly lower, with investors staying on the sidelines ahead of the Federal Reserve minutes due later in the day.
Dovish comments from European Central Bank President Mario Draghi did little to pull markets out of their narrow trading ranges.
Among benchmarks, Germany’s DAX DAX, -0.13% ended 0.1% lower at 12,642.87 and Italy’s FTSE MIB I945, -0.21%  declined 0.2% to 21,369.73. France’s CAC 40 index PX1, -0.13%  fell 0.1% to 5,341.34.
However, the U.K.’s FTSE 100 UKX, +0.40% rose 0.4% to 7,514.90, helping lift the Stoxx Europe 600 SXXP, +0.09% 0.1% to close at 392.37.
“We have not seen any major moves today as dealers are waiting to see the minutes from the Federal Reserve meeting earlier this month,” said David Madden, market analyst at CMC Markets, in a note.
“Investors will use the update to try to determine how likely the Federal Reserve is to increase interest rates next month,” he added.
The minutes will be released at 7 p.m. London time, or 2 p.m. Eastern Time. Investors have largely priced in a rate hike by the Fed at its June 13-14 meeting.
Read: Fed minutes may quell doubt about a June interest-rate hike
China cut: Investors entered Wednesday’s session with a downgrade of China’s credit rating at Moody’s for the first time in nearly 30 years, to A1 from Aa3. Moody’s cited concerns about the impact that rising levels of debt will have on the world’s second-largest economy, which is a major buyer of industrial and precious metals.
Some mining shares were lower after the downgrade, but pared losses into the close, with Fresnillo PLC FRES, -0.44%  down 0.4% and iron ore heavyweight Rio Tinto PLC RIO, -0.53% RIO, -0.86% RIO, -1.33%  off 0.5%. Boliden AB BOL, -0.28%  lost 0.3% and Norwegian aluminum company Norsk Hydro ASA NHY, -0.15%  gave up 0.2%.
Investors have already been aware of China’s credit-expansion issue, said Mark Williams, chief China economist at Capital Economics, in note.
“The greater concern, in our view, is not what the debt buildup is doing to government creditworthiness. Instead, it is that loose credit policies designed to prevent struggling firms from failing are eroding the economy’s long-run growth potential by preventing resources from being allocated to areas where they could be used more efficiently,” he wrote.
Central banks: There’s been “an increasingly solid recovery” in the eurozone economy although underlying inflation pressures are still subdued, said Draghi at a speech in Madrid at Banco de España. Eurozone PMIs released Tuesday showed economic activity has remained at a six-year high.
But Draghi also said he doesn’t see it necessary to change course on its policy direction, which includes an overnight deposit rate set at negative 0.4%. The ECB has said it could increase the size or lengthen the duration of its asset-buying program if inflation looks set to fall far back below its target of near but just below 2%.
“[I]n in a multicountry monetary union such as the euro area, made up of segmented national financial markets, asset purchases are inevitably more difficult to calibrate, more complex to implement, and more likely to produce side effects than other instruments, including moderately negative rates,” Draghi said. “Negative rates may also have unwarranted side effects, but those have so far remained limited.”
After Draghi’s speech, the euro EURUSD, +0.3219% was buying $1.1174, up from $1.1184 late Tuesday in New York.
Stock movers: Daimler AG DAI, -1.62%  fell 1.6%, leading decliners on the DAX, after German authorities raided the company’s Stuttgart headquarters and other sites to secure evidence in their investigation in possible diesel-emissions fraud by the car maker. Prosecutors said on Tuesday the offices were raided.
Fiat Chrysler Automobiles NV FCA, -0.58% FCAU, +2.33%  fell 0.6%, with the car maker late Tuesday saying it was “disappointed” the U.S. Justice Department filed a complaint against the company related to allegations it used software to cheat diesel-emission tests.
Kingfisher PLC shares KGF, -7.02%  slumped 7% after the parent of home-improvement stores B&Q and Castorama said first-quarter comparable sales fell 0.6% on weak sales in France and disruption caused by a company overhaul.
Shares of French aerospace supplier Safran SA SAF, -0.08%  and Zodiac Aerospace ZC, -0.46%  each remained halted after Safran said it cut its bid price for the plane cabin-interior specialist following Zodiac’s profit warnin
U.S.

Sue Chang, Ryan Vlastelica


Investors were reassured by the Federal Reserve minutes which indicated that the unwinding of the Fed’s balance sheet will likely be slow and cautious.
The S&P 500 gained ground for a fifth consecutive session Wednesday to close at a record as minutes of the Federal Reserve’s latest policy meeting showed broad agreement on plans to begin shrinking the central bank’s balance sheet and also pointed to a likely rate increase next month, as widely expected.
The S&P 500 SPX, +0.25%  rose 5.97 points, or 0.3%, to close at 2,404.39. The Dow Jones Industrial Average DJIA, +0.36%  also rose for a fifth straight day, gaining 74.51 points, or 0.4%, to finish at 21,012.42. The five-day run is the longest winning streak for both the S&P and the Dow since February.
The Nasdaq Composite Index COMP, +0.40% climbed 24.31 points, or 0.4%, to end at 6,163.02.
The minutes of the early May meeting showed that members were in agreement on a general approach to unwinding the massive balance sheet built up over the course of the asset-buying spree that was at the center of the Fed’s quantitative easing strategy. The minutes also showed most Fed officials agreed it would “soon” be time to raise rates again.
Read: Seeing another rate hike ‘soon,’ Fed outlines plan to reduce bondholdings
“The unwind in the Federal Reserve’s balance sheet holds Chair Yellen’s signature gradual approach; she will not allow a quick unwind, nor anything that surprises markets,” said Quincy Krosby, chief market strategist at Prudential Financial, in emailed comments.
Caution had been slightly elevated after Moody’s Investors Service cut China’s foreign credit rating for the first in nearly three decades. However, stocks in China erased losses and closed slightly higher, while European stocks also shook off early weakness and traded in positive territory.
Read: Can investors afford do shrug off China’s credit downgrade?
In other central bank events on Wednesday, Dallas Fed President Rob Kaplan will participate in a moderated discussion at an event in Toronto at 6 p.m. Eastern. Minneapolis Fed President Neel Kashkari participates in a town hall discussion in Ashland, Wis., at 6:30 p.m. Eastern.
On the economic front, existing home sales fell 2.3% in April, coming in below expectations as lean inventory constrained demand.
Stock movers: Shares of Bunge Ltd. BG, +1.03%  rose 1%, extending a 17% rally from Tuesday that came on news that commodities giant Glencore PLC GLEN, -0.07% GLCNF, +1.05% 0805, -1.01%  had approached the grain trader about a potential takeover.
Nvidia Corp. NVDA, +1.12%  gained 1.1% after Bloomberg reported that Japanese SoftBank Group Corp. 9984, +0.05%  had amassed a $4 billion stake in the chip maker.
Intuit Inc. INTU, +6.72%  soared 6.7% to a record a day after it reported strong quarterly results.
Shares of Lowe’s Cos. LOW, -3.02%  slid 3% after the home-improvement retailer posted quarterly sales and adjusted earnings that fell short of Wall Street’s forecasts.
Tiffany & Co. TIF, -8.71%  reported profit ahead of expectations, but same-store sales unexpectedly fell, sending shares down 8.7%.
Earnings from Advance Auto Parts Inc. AAP, -5.43%  missed forecasts by a wide mark. Shares fell 5.4%.
Container Store Group Inc. TCS, +32.53%  soared 33% after its earnings showed profits doubled in the fourth fiscal quarter.
Other markets: Oil prices CLN7, -0.33%  declined for the first time in six sessions as traders await a meeting of the Organization of the Petroleum Exporting Countries and other major producers on Thursday that’s expected to produce an agreement to extend output cuts.
See: 4 potential outcomes for OPEC’s crucial meeting
Metals prices ended mostly lower, with gold GCM7, +0.25%  off 0.2% and the ICE dollar index DXY, -0.30%  edging down 0.2%.
—William Watts and Sara Sjolin contributed to this article.