Japan stimulus lifts Asian shares; crude oil prices tumble 2 percent

Wall Street falters as Apple shine fades

NEW YORK, July 27, (Agencies): The yen eased against the dollar on Wednesday after Japan unveiled a surprisingly large $265 billion stimulus package, while US equity markets pared early gains as investors awaited the end of two-day meeting of Federal Reserve policymakers.

The earlier-than-expected announcement to boost the flagging Japanese economy lifted Asian stock markets but weighed on the safe-haven yen. The 28-trillion yen package exceeded initial estimates of about 20 trillion yen.

Wall Street opened higher, bolstered by strong results from Apple. But the benchmark S&P 500 index retreated and the Dow industrials traded just above break-even as technology shares rose.

European shares gained, led by auto stocks and luxury group LVMH after its second-quarter sales beat forecasts. The pan-European FTSEurofirst 300 rose 0.3 percent.

MSCI’s all country world stock index gained 0.07 percent.

“Folks are waiting for the Fed today for some sort of guidance, but it’s a headscratcher that there’s nothing that can hold this market down,” said Jacob Rappaport, head of equity capital markets at INTL FCStone Financial Inc in Winter Park, Florida.

“There are not a lot of places to put money right now in a low-interest rate environment,” he said.

The Dow Jones industrial average rose 8.97 points, or 0.05 percent, to 18,482.72. The S&P 500 fell 3.01 points, or 0.14 percent, to 2,166.17 and the Nasdaq Composite is added 22.50 points, or 0.44 percent, to 5,132.55.

The prospect of more stimulus in Japan has overshadowed the Fed meeting, where the US central bank was expected to leave interest rates unchanged.

Solid economic data has increased expectations that the Fed will raise rates in December, though some traders and analysts believe the Fed could hint on Wednesday that a September hike is possible.

The yen was last down 0.89 percent at 105.57 per dollar. The euro rose slightly to $1.0988.

Oil prices tumbled more than 2 percent after the US government reported a surprise build in crude and gasoline inventories during the peak summer driving season.

Brent was down $1.00 at $43.87 a barrel. WTI crude fell 81 cents to $42.11 a barrel.

US

Wall Street gave up early gains after disappointing earnings from Coca-Cola and weak oil prices offset a boost from Apple.

Coke’s revenue miss and forecast cut sent its stock down 3.4 percent, making it the biggest drag on the S&P and the Dow.

However, Apple shares rose 6.7 percent to $103.09 after the company sold more iPhones than expected in the thirdquarter and gave an upbeat current-quarter forecast.

Investors are also awaiting the US Federal Reserve’s decision on interest rate hikes later in the day.

Traders have priced in a 19.5 percent chance of a rate increase in September and a 42.8 percent chance in December, according to CME Group’s FedWatch tool.

At 11:08 am ET the Dow Jones Industrial Average was up 10.64 points, or 0.06 percent, at 18,484.39.

The S&P 500 was down 2.98 points, or 0.14 percent, at 2,166.2.

The Nasdaq Composite index was up 22.66 points, or 0.44 percent, at 5,132.70.

Seven of the 10 major S&P sectors were lower, led by 1.2 percent drop in the consumer staples index.

Twitter plunged 12.3 percent after the microblogging service provider reported its slowest quarterly revenue growth since going public in 2013.

Facebook, Amgen and Whole Foods are expected to report after the bell on Wednesday.

Declining issues outnumbered advancing ones on the NYSE by 1,463 to 1,371. On the Nasdaq, 1,525 issues rose and 1,137 fell.

The S&P 500 index showed 37 new 52-week highs and no new lows, while the Nasdaq recorded 92 new highs and 11 new lows.

Europe

European shares rose on Wednesday with the market underpinned by wellreceived earning updates from companies including Peugeot and LVMH, while Deutsche Bank fell after a poor update.

The pan-European STOXX 600 index ended up 0.4 percent, while the FTSEurofirst 300 also rose by the same amount.

Auto stocks rose 2.2 percent, making them the top sectoral gainers with Peugeot soaring 9.5 percent after the French car maker said its first-half earnings doubled amid progress in its turnaround plan.

German carmakers including Volkswagen rose, helping the auto-heavy German index DAX recover all the losses it made since UK’s shock vote to leave the EU last month.

Even though it nudged up its full-year earnings guidance, Fiat Chrysler fell 1.9 percent as concerns remained about its exposure to a peaking US market.

LVMH rose 7.5 percent after fashion and leather sales growth beat forecasts, helped by solid demand in the United States and improved trading in Asia, excluding Japan.

“Our buy case on LVMH hinges on the underappreciated resilience of the Louis Vuitton brand combined with the defensiveness and momentum of the wider portfolio. H1 results reinforced our confidence in this view,” UBS said in a note.

Among top gainers were French IT services group Atos , which rose 8.5 percent after hiking its outlook, and British broadcaster ITV, which jumped 6.8 percent on the back of its advertising revenue forecast.

In the beaten-down Travel & Leisure sector, airlines got a boost from Air France, whose shares jumped 4.5 percent after lower costs led to an improvement in its earnings.

Among the top fallers, however, was Deutsche Bank which slumped more than 3 percent after revenues fell sharply in the second quarter, while its core capital showed only a modest improvement.

Results at the German lender came two days before the results of EU-wide stress test are released. with Barclays saying Deutsche was among the top three vulnerable banks along with Italy’s Monte dei Paschi and UniCredit, which are both taking steps to raise fresh capital.

French payments provider Ingenico Group dropped more than 9 percent, making it the biggest STOXX faller following the release of its results.

Analyst at Berenberg said the performance of its North American business meant that achieving its double-digit sales growth target for the region in the full year was out of reach.

Asia

Japanese and European shares soared Wednesday after Tokyo launched a massive stimulus package to kickstart the economy, but other Asian markets were more subdued as the Federal Reserve wraps up a key policy meeting.

Prime Minister Shinzo Abe unveiled the 28 trillion yen ($266 billion) programme days before the Bank of Japan holds its own meeting that is widely expected to see it loosen monetary policy.

Abe had promised to ramp up spending on the stuttering economy following Britain’s shock vote to leave the EU and a landslide parliamentary election win earlier this month that bolstered his power.

Promises of support from governments and central banks around the world since the Brexit ballot last month have provided the foundation for big gains across equities markets in recent weeks.

“It seems big and it should probably do quite a bit for the Japanese economy. Whether it’s big enough, we’ll find out. The markets seem to be a little bit undecided whether it is or it isn’t,” Lothar Mentel, chief investment officer at Tatton Investment Management, told Bloomberg TV.

Tokyo stocks ended the day 1.7 percent higher while the dollar rose to 105.70 yen from 104.64.

The BoJ ends its gathering Friday and is widely tipped to unveil fresh stimulus as the world’s number three economy struggles and inflation is virtually nonexistent.

But while expectations of new measures have boosted Japanese stocks and sent the yen tumbling — helping exporters — analysts warned of a sharp sell-off if policymakers disappoint.

“The key is whether the BoJ will surprise us again on Friday,” said Alex Wong, director of asset management at Ample Capital in Hong Kong.

It “has surprised the market several times in the past few years so they are a little bit unpredictable. There may be a disappointment” if the BoJ fails to deliver extra stimulus, he added.

While the Nikkei soared, other markets stuttered. Hong Kong ended 0.4 percent up and Sydney was marginally higher. Seoul and Wellington each dipped 0.1 percent.

Shanghai tumbled 1.9 percent following a report that China’s banking regulator was considering clamping down on the nation’s multi-trillion-dollar wealth management products market.

The 21st Century Business Herald said among measures being considered by the China Banking Regulatory Commission were limits on equities investments.

Japan Display rose 1.6 percent in Tokyo, while Taipei-listed Hon Hai Precision added 1.4 percent and LG Display in Seoul gained 4.1 percent. n Key figures at 0800 GMT Tokyo — Nikkei 225: Up 1.7 percent at 16,664.82 (close)

Hong Kong — Hang Seng: Up 0.4 percent at 22,218.99 (close)

Shanghai — Composite: Down 1.9 points at 2,990.00 (close)

Oil

Oil prices slid to fresh three-month lows Wednesday as worries about a global oversupply resurface ahead of the release of US stockpiles data later in the day.

With the US summer driving season — when demand peaks — drawing to a close investors are growing increasingly concerned that stocks in the world’s top crude consumer remain at elevated levels.

The Energy Information Administration is due to release a report Wednesday, with a survey of analysts warning gasoline inventories rose in the previous week, while oil supplies dipped for a tenth week.

The EIA last week announced a smaller-than-forecast drop, which sparked a sell-off in the commodity.

On Wednesday at around 1115 GMT, US benchmark West Texas Intermediate was down 29 cents at $42.63 while Brent fell 51 cents to $44.36. The losses come after a three-day sell-off.

“The general driver behind the negativity seems to be the excess crude and gasoline stockpiles,” Angus Nicholson, a markets analyst at IG Ltd. in Melbourne, said.

Gold

Gold steadied near $1,320 an ounce on Wednesday as traders awaited the outcome of a two-day Federal Reserve policy meeting later, which will be closely watched for any clues on the scale and pace of interest rate hikes this year.

Spot gold was $1,319.56 an ounce at 1200 GMT, little changed from $1,319.84 late on Tuesday. US gold futures for August delivery were down $1.40 an ounce at $1,319.40.

The dollar rose against a basket of currencies, as reports of a larger than previously expected fiscal stimulus plan for Japan knocked the yen lower. Forex traders are also gearing up for a Bank of Japan policy meeting later this week.