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May 17, 2018

Asia, Europe and U.S. Stock Markets Report - May 17, 2018.


Dollar, US bond yields, stocks and earnings in focus

Cheang Ming

Asian stocks closed narrowly mixed on Thursday as the yield on the U.S. 10-year Treasury stayed above 3 percent. Investors also kept an eye on the second round of U.S.-China trade talks.
The Nikkei 225 rose 0.53 percent, or 121.14 points, to close at 22,838.37 in Tokyo, shrugging off weak core machinery orders — a leading indicator for capital expenditure — for the month of March. The broader Topix was higher by 0.45 percent, with its oil and insurance subindexes among the best-performing sectors.
Over in Seoul, the Kospi finished the day down 0.46 percent at 2,448.45. Technology shares were mixed, with index heavyweight Samsung Electronics easing 0.9 percent.


121.14 0.53%
HSI HSI 30942.15
-168.05 -0.54%
ASX 200 S&P/ASX 200 6094.30 --- UNCH 0%
SHANGHAI Shanghai 3154.24
-15.33 -0.48%
KOSPI KOSPI Index 2448.45
-11.37 -0.46%
CNBC 100 CNBC 100 ASIA IDX 8658.70
-30.96 -0.36%
Hong Kong's Hang Seng Index shed 0.42 percent by 3:10 p.m. HK/SIN as banks and insurers slipped. Most sectors traded in negative territory before the market close, with property developers also weighing on the index, although the technology sector advanced.
That came after shares of Tencent got a boost after the tech giant reported first-quarter net profit rose 61 percent to 23.9 billion yuan ($3.66 billion), topping an average Thomson Reuters forecast of 17.5 billion yuan. Tencent stock jumped 4.34 percent by 3:00 p.m. HK/SIN.
On the mainland, the Shanghai composite edged down by 0.48 percent to 3,154.24 and the Shenzhen composite eased 0.52 percent to end at 1,822.70.
Down Under, the S&P/ASX 200 finished the session lower by 0.21 percent at 6,094.30. The heavily weighted financials subindex declined 0.41 percent, dragging the index lower but paring steeper losses seen earlier. The materials and energy sectors, meanwhile, were among the sectors carving out gains.
MSCI's index of shares in Asia Pacific excluding Japan, which had tracked higher in the morning, slipped 0.23 percent in Asia afternoon trade.
The mostly sideways trade in Asia came after U.S. stocks closed higher on Wednesday, with retail sector stocks climbing following strong results from department store company Macy's. Of note, the small-cap Russell 2000 added 1 percent and finished at a record close.
The yield on the 10-year U.S. Treasury note rose to a fresh near seven-year high on Wednesday, surpassing the 3.1 percent level for the first time since Jul 8, 2011. The 10-year Treasury yield rose to 3.12 percent on Thursday.
Trade was also back in the picture as a second round of U.S.-China talks kicked off, this time taking place in Washington. Trade-related frictions had spooked markets earlier this year, with investors at the time concerned over the impact of tariffs on growth.
Meanwhile, President Donald Trump said on Wednesday that whether his planned meeting with North Korean leader Kim Jong Un goes through remained to be seen. Earlier, North Korea said it would rethink the June 12 summit if the U.S. insisted on denuclearization.
The uncertainty did not appear to have a major impact on markets in the region.
"I think investors are just going to hold on the sidelines and kind of watch this, see how it develops. I expect there to be a lot of this sort of political rhetoric leading into the summit. I don't think it's going to be a big investment thesis for the markets," Jack McIntyre, portfolio manager at Brandywine Global Investment Management, told CNBC's "Squawk Box."
Elsewhere, Italy's right-wing Lega party denied reports that it was seeking a 250 billion euro ($296 billion) debt write-off if it becomes part of a power-sharing deal with the anti-establishment 5-Star Movement. In reaction, the country's FTSE MIB fell 2.32 percent on Wednesday while Italian bond yields moved higher.
On Thursday, the euro extended losses to trade at $1.1801 at 2:59 p.m. HK/SIN. The common currency fell to a five-month low of $1.1763 in the previous session.
The dollar index, which tracks the U.S. currency against a basket of major currencies, was steady at 93.320 after rising to a five-month high of 93.632 overnight. Gains in the greenback in recent week come amid expectations that the Federal Reserve will be more hawkish than other central banks.
Against the yen, the dollar firmed to trade at 110.46 at 2:56 p.m. HK/SIN.
On the energy front, U.S. crude futures rose 0.27 percent to trade at $71.68 per barrel and Brent crude futures added 0.16 percent to trade at $79.41.
— CNBC's Thomas Franck and Silvia Amaro contributed to this report. 


European markets close higher amid earnings; Ocado shares rally 44%

Justina Crabtree, Sam Meredith

European markets closed higher Thursday afternoon as commodities-related stocks rallied and shares of Ocado skyrocketed after the company signed a partnership deal.


FTSE FTSE 7787.97
53.77 0.70% 805460412
DAX DAX 13114.61
118.28 0.91% 94862320
CAC CAC 5621.92
54.38 0.98% 82802281
IBEX 35 --- --- --- --- --- ---
The pan-European Stoxx 600 rose during afternoon trade to close higher by 0.5 percent, with all major bourses and most sectors in positive territory.
Europe's retail sector was the strongest performer Thursday afternoon, rallying to close up nearly 2 percent. Ocado boosted the sector, closing up over 44 percent after the British online supermarket said it had signed an exclusive deal with U.S. grocer Kroger. Ocado's shares were up over 50 percent earlier on in the day. The agreement allows Ocado to use Kroger's technology for grocery deliveries in the world's biggest market.
Europe's utility stocks also did well on Thursday, up over 1.4 percent amid earnings news. French waste and water group Suez reported stronger-than-anticipated first-quarter revenues due to an improvement in the volumes of waste treated in Europe. The Paris-listed stock closed 3.6 percent to the upside, though it had seen stronger trade earlier on in the afternoon.
The oil and gas sector also rose during afternoon trade to close 1.6 percent to the upside, propped up by oil prices that are at multi-year highs. Benchmark Brent crude traded above $80 per barrel on Thursday, marking its highest price since November 2014. Sanctions from the U.S. on major crude exporter Iran, compounding on tighter supply generally, have been pushing up prices.
Travel and leisure stocks moved higher in afternoon trade, closing up just over 1 percent despite bookmakers' concerns over plans to cut the maximum stake on fixed-odds betting terminals in Britain. William Hill, which anticipated total gaming revenue would be hit by up to 45 percent, erased earlier losses and rallied in afternoon trade, ending the day up 4.2 percent.
Altice, the Dutch telecoms multinational, was near the top of the European benchmark. The firm closed 12.4 percent higher. This followed news that SFR, Altice's French division, had shown signs of recovery in the first three months of this year, adding broadband customers for the first time since 2014. Although the revenue of its French arm has continued to fall, this has been recorded at a slower pace than the previous quarter.
Meanwhile, shipping group Moller-Maersk missed first-quarter core profit expectations. The Danish conglomerate cited high oil prices, geopolitical risks and trade tensions as ongoing challenges to the group's business. Its shares closed off 8.9 percent, placing it second from bottom on the Stoxx 600.

Stock fall as Trump says China trade talks may not be successful

Fred Imbert, Silvia Amaro

Stocks fell on Thursday after President Donald Trump indicated trade talks between the U.S. and China may not be fruitful.
The Dow Jones industrial average closed 54.95 points lower at 24,713.98, with Cisco Systems and Walmart dropping 3.8 percent and 1.9 percent, respectively. The S&P 500 declined 0.1 percent to 2,720.13 as tech declined 0.5 percent. The Nasdaq composite slipped 0.2 percent to 7,382.47 with Amazon, Netflix, Apple and Alphabet all falling.
"Will that be successful? I tend to doubt it," Trump said Thursday afternoon as the U.S. and China kicked off the second round of trade talks. "The reason I doubt it is because China has become very spoiled. The European Union has become very spoiled. Other countries have become very spoiled, because they always got 100 percent of whatever they wanted from the United States."
Tensions between the U.S. and China have increased in recent months as both countries have hit each other with tariffs targeting some of their exports. The U.S. also banned companies from exporting goods to Chinese tech companies ZTE. Those tensions have sparked worries that the two largest world economies could engage each other in a trade war.
"China will placate the U.S., but how we get there is very complicated and the market has to digest that," said Salvatore Ruscitti, equity specialist at MRB Partners. "If you look at what happened over the weekend, it suggests the negotiations will take some time."
Tech shares hit their session lows after Trump made his remarks Thursday. The Technology Select Sector SPDR ETF (XLK) closed 0.5 percent lower.
Higher interest rates also helped push stocks lower. The benchmark 10-year Treasury note yield broke above 3.1 percent for the first time since 2011, while the two-year yield hovered around its highest levels in a decade.
"Interest rate sensitivity has been the most significant negative factor over this period. Given the substantial repricing of short term interest rates since September this is hardly surprising," Michael Shaoul, chairman and CEO of Marketfield Asset Management, wrote in a note.
Investors have been selling Treasurys amid fears that rising inflation could lead the Federal Reserve to tighten monetary policy faster than the market is expecting.
"There's a tug-of-war between the positives — good economic data, strong earnings and tax cuts — and all the negatives, including geopolitics, higher interest rates and trade talks with China," said Jeff Carbone, managing partner of Cornerstone Financial Partners.

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