Daily market review

United States

Equities rallied powerfully Wednesday, with health care stocks leading, after Joe Biden's surprisingly strong showing in Super Tuesday primary voting. The Dow industrials rocketed by 4.5 percent, the S&P 500 rallied 4.2 percent, and the NASDAQ advanced 3.9 percent.

Biden's strength and Sen. Bernie Sanders' relative weakness appeared to diminish prospects for significant curbs on insurers and other health sector companies if a Democrat wins in the 2020 presidential election. Gains for the relatively moderate Biden, and oversold conditions fed a wider relief rally that lifted all sectors. Markets also noted favorably that Congress had approved a $8.3 billion package to fight the coronavirus.

Markets also improved as bearish reaction to the Fed's surprising 50 basis point rate cut Tuesday appeared overdone, and as US non-manufacturing ISM data surprised to the upside. Coronavirus fears remained the focus as deaths and cases outside China and inside the US continued to rise.

Industrials and technology shares led the gainers, alongside health care. Dividend-paying utilities, real estate, and consumer staples also showed good gains. Financials and energy lagged, with oil service companies the worst off. Big insurers United Health and Cigna both gained 11 percent.

Among companies in the news, Campbell Soup rallied 10 percent after reporting an earnings beat and raising its guidance. On the downside, Dollar Tree, the discount retailer, fell 3.6 percent after cutting its guidance on the impact of tariffs and other cost increases. Hewlett Packard Enterprise, the IT company, fell 2.6 percent after earnings and revenue misses.

In economic data, ISM's non-manufacturing index jumped to a 57.3 level that topped Econoday's consensus range. And heading the gains are new orders – surging nearly 7 points to a robust 63.1 – along with backlog orders, which rose nearly 8 points to 53.2. Separately, ADP estimated private payroll growth at 183,000 in Friday's employment report for February. Econoday's consensus for ADP's estimate was 165.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 48 cents to US$51.54, while gold declined 40 cents to US$1,638.70. The US dollar rose against most major currencies. The US Treasury 30-year bond yield rose 7 basis points to 1.68 percent while the 10-year note yield rose 3 basis points to 1.03 percent.


Defensive plays led equities higher as markets absorbed rate cuts announced by the Fed and Bank of Canada, and anticipated similar action from the ECB and others. The Europe-wide STOXX 600 rose 1.4 percent, the German DAX gained 1.2 percent, the French CAC percent rose 1.3 percent, and the UK FTSE-100 jumped 1.5 percent.

Utilities and health care were among the winners. Roche Holdings, the Swiss pharma, rose 3.1 percent on news China would use its medicine to treat coronavirus victims. Orsted, a Danish wind power company, rose 7 percent after raising its earnings guidance. Hellofresh, a German food delivery company, jumped 7.6 percent on expectations for a boost to business in light of the coronavirus.

In economic data, Eurozone retail sales moved in line with expectations in January. After a sizeable, but smaller revised, 1.1 percent monthly slump at the end of 2019, volumes staged a partial rebound with a rise of 0.6 percent, just their second advance in the last five months. Even so, annual growth was only unchanged at December's upwardly revised 1.7 percent. Separately, final UK PMI results left intact a surprisingly bullish picture of UK private sector business activity in mid-quarter. The flash composite output index was revised down 0.3 points but at 53.0, was only just short of January's 16-month high.

Asia Pacific

Most major Asian markets were little changed Wednesday, though big moves were recorded in parts of the region. Australia's All Ordinaries index was the major underperformer in the region, with a fall of 1.7 percent extending the significant losses in recent sessions, while Korea's Kospi index posted the largest increase, up 2.2 percent. The Shanghai Composite index and Hong Kong's Hang Seng index advanced 0.6 percent and 0.1 percent respectively, while Japan's Nikkei and Topix indices both closed down 0.2 percent.

Australia's GDP increased by 0.5 percent on the quarter in the three months to December, down slightly from the revised increase of 0.6 percent in the three months to September. Year-on-year growth in GDP accelerated from 1.7 percent to 2.2 percent. Although these data show growth picked up at the end of last year, officials at the Reserve Bank of Australia noted earlier in the week at its policy meeting that the global coronavirus outbreak was already having a "significant effect" on the domestic economy and will likely result in growth in the current quarter being weaker than previously expected. Officials at that meeting cut policy rates by 25 basis points to a record low of 0.50 percent and advised that they are prepared to cut rates further in coming months if the impact of the outbreak slows down progress towards meeting their inflation and unemployment objectives.

PMI surveys published Wednesday provided further evidence of the global coronavirus outbreak's impact on regional economies in recent weeks. The Markit China PMI survey's business activity index for the services sector fell from 51.8 in January to 26.5 in February, the lowest level since the survey was introduced in 2005 and the first time the survey has ever indicated contraction in the sector. The equivalent survey for the Japanese services sector also showed a large fall in its headline index from 51.0 in January to 46.7 in February, in line with the previous published flash estimate, but the equivalent survey for India showed an increase in its headline index from 55.5 to 57.5. Economy-wide PMI surveys for Hong Kong and Singapore both indicated that activity contracted at a sharp pace in February, with the headline index for both dropping to survey-record lows.

Looking ahead*

On Thursday in Asia/Pacific, the Australian merchandise trade report is due. In North America, US jobless claims, productivity and costs, and factory orders reports are on tap.

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