While you were sleeping: Earnings lift Wall St

Friday 27th October 2017

Wall Street climbed amid better-than-expected corporate earnings including from DowDuPont.

In 2.26pm trading in New York, the Dow Jones Industrial Average rose 0.4 percent, while the Nasdaq Composite Index added 0.1 percent. In 2.11pm trading, the Standard & Poor’s 500 Index gained 0.3 percent.

“That was a nice change of pace from yesterday, where we had that slight sell-off in the markets due to some bad earnings,” Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Wisconsin, told Bloomberg. “And I think that’s actually a positive thing, that earnings still matter.”

The Dow moved higher as gains in shares of Nike and those of DowDuPont, recently up 3.9 percent and 3.4 percent respectively, outweighed declines in shares of 3M and those of General Electric, recently down 2 percent and 1.2 percent respectively.

“It’s not terribly popular to be saying it makes sense the markets are hitting new highs, but I look and I see a good economic backdrop, I see earnings growth and I see central banks basically managing quite well on the exit,” Ron Temple, Head of US Equities and Co-Head of Multi Asset Investing at Lazard Asset Management in New York, told Reuters.

The European Central Bank announced it would cut its monthly pace of asset purchases to 30 billion euros from January 2018 until the end of September, “or beyond, if necessary,” while maintaining its current rate of 60 billion euros a month until the end of this year.

“The recalibration of our asset purchases reflects growing confidence in the gradual convergence of inflation rates towards our inflation aim, on account of the increasingly robust and broad-based economic expansion, an uptick in measures of underlying inflation and the continued effective pass-through of our policy measures to the financing conditions of the real economy,” ECB President Mario Draghi said in prepared remarks for reporters in Frankfurt.

Europe’s Stoxx 600 Index finished the day with a 1.1 percent increase from the previous close. The UK’s FTSE 100 Index rose 0.5 percent, while Germany’s DAX Index rallied 1.4 percent and France’s CAC 40 Index climbed 1.5 percent.

Shares of Anheuser-Busch InBev fell after the world's largest brewer report weaker-than-expected beer sales amid a decline in market shares in the US.

The Belgium-based company said beer volume declined 1.5 percent in the third quarter from the year-earlier period.

“Continued strong growth in Mexico, Argentina, and Africa was more than offset by soft shipment volumes in the US, primarily driven by the substantial weather impact in many parts of the country, and Brazil,” the company said in a statement.

Some analysts said weather wasn’t the only cause for US weakness.

"Our view remains that unless and until AB InBev can get volumes growing sustainably the business model will remain under significant pressure,"James Edwardes Jones, analyst at RBC Capital Markets, told Reuters.

The stock closed 0.7 percent weaker in Brussels.

Meanwhile, Germany’s Bayer has cut the value of its takeover of Monsanto by US$2.5 billion, which combined with windfalls from asset sales means it may have to raise less than expected from shareholders, Reuters reported.

The Monsanto deal is now valued at US$63.5 billion including debt, down from an initial US$66 billion, because the US seeds giant had lowered its financial liabilities, Bayer's finance chief said on Thursday, according to Reuters.

Bayer said in September 2016 when the deal was announced that it would raise US$19 billion worth of fresh equity capital, some of which would be covered by 4 billion euros in mandatory convertible notes issued in November 2016. Analysts had expected Bayer's cash call to be around US$12 billion, but estimates have since dropped below US$10 billion, according to Reuters.

"We will examine whether and to what extent the equity component of the financing will change," Bayer Chief Executive Werner Baumann, the deal's main architect, said on Thursday, Reuters reported.

Shares of Bayer closed 1.6 percent weaker in Frankfurt.

(BusinessDesk)

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