Daily market review

United States

Equities gave up early gains to end flat to lower Tuesday as some skepticism crept in regarding the revival in risk assets. Markets have been seizing on signs the COVID-19 pandemic may be peaking in hotpots like New York, even as it accelerates elsewhere. The Dow industrials slipped 0.1 percent, the S&P 500 eased 0.2 percent, and the NASDAQ was off 0.3 percent.

In New York, Gov. Andrew Cuomo reported a jump in the one-day death toll, but a decline in new cases. New Jersey and Los Angeles both cited tentative signs the outbreak may be flattening, though insisting on no change in social distancing measures. Generally, health experts said the US is a long way from having the pandemic under control or from reopening the economy. In Europe, several countries, including Norway and Germany, began planning steps to ease lockdowns, while cases in the UK continued to rise, and Prime Minister Boris Johnson remained in intensive care. Reports suggested some additional stimulus may be coming from Washington.

Among sectors, leaders included autos, airlines, entertainment, apparel, chemicals, banks, and homebuilders, while lagging were software, grocers, biotech, health & personal care, aerospace & defense, and technology.

In company news, Kraft Heinz, the food conglomerate, rose 2.7 percent after preannouncing upbeat Q1 results. Exxon Mobil rose 1.9 percent after slashing investment but pledging to maintain its dividend. AT&T rose 2.2 percent after taking out a big loan and saying it will keep paying dividends. On the downside, NXP Semiconductors fell 3.1 percent after it suffered a downside earnings miss.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by 82 cents to US$32.21, while gold fell US$9.88 to US$1,657.47. The US dollar fell sharply against most major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.30 percent while the 10-year note yield rose 4 basis points to 0.72 percent.


Signs of slowing COVID-19 cases in Europe lifted stocks for a second day Tuesday even as companies took steps to conserve cash in the current downturn. The Europe-wide STOXX 600 rose 1.9 percent, the German DAX rose 2.8 percent, the French CAC gained 2.1 percent, and the UK FTSE-100 was up 2.2 percent.

Reports that virus deaths had declined in Spain and other hard-hit countries, and that governments are considering easing lockdowns boosted risk assets. Reports said Austria laid out a schedule for easing its restrictions, while Czech Republic and Denmark set more modest steps, and Germany has begun planning to ease its lockdown this month. Meanwhile, EU finance ministers are expected to agree on a huge fiscal stimulus package.

Gains were across the board, but sectors leading included travel & leisure, insurance, chemicals, basic resources, autos, and industrials. Laggards included health care, telecom, food & beverage, utilities, and personal and household goods.

Among companies, Thales, the French aerospace equipment maker, slipped 0.6 percent after pulling its guidance and cutting its dividend, but shares were bolstered by news of a new credit facility. Virgin Money, the UK financial services company, rose 25 percent after an analyst upgrade. Cineworld, the UK movie chain, soared 47 percent after slashing its dividend and other cost-cutting steps.

Asia Pacific

Most major Asian markets advanced Tuesday but lagged gains made on Wall Street Monday. Japan's Nikkei and Topix indices both gained 2.0 percent after reports, confirmed later in the day, indicated that Japan's government would declare a state of emergency in response to the coronavirus pandemic and announce an economic support package worth around $1 trillion, or 20 percent of GDP. The Shanghai Composite index gained 2.1 percent as trading resumed after Monday's holiday in China, while Hong Kong's Hang Seng index advanced the same amount. Australia's All Ordinaries index was the main exception to the region trend, closing down 0.4 percent after officials left policy setting on hold.

The Reserve Bank of Australia left policy settings on hold at their regular monthly meeting held Tuesday, in line with the consensus forecast. This leaves in place changes made at an unscheduled policy meeting held 19 March at which officials cut the main policy rate 25 basis points to a new record low of 0.25 percent, introduced an asset purchase program with the aim of keeping the yield on 3-year government bonds close to 0.25 percent, and established a 3-year funding facility for the domestic banking system at a fixed rate of 0.25 percent. Officials expect the coronavirus pandemic to result in "a very large contraction in activity in the current quarter" but consider that that monetary and fiscal stimulus already delivered, as well as measures taken by domestic banks, will "soften" the contraction and assist recovery once the health crisis has passed and various business and social curbs are lifted.

Australia's trade surplus narrowed from a revised A$4.745 billion in January to A$4.361 billion in February. Growth in exports and imports both weakened but broadly in line with each other and also broadly in line with other regional data showing a drop in trade flows as the impact of the global coronavirus pandemic escalated over February. In Japan, household spending, in real terms, fell 0.3 percent on the year in February after falling 3.9 percent in January, a smaller decline than the consensus forecast for a drop of 4.6 percent.

Looking ahead*

On Tuesday in Asia/Pacific, the Japanese machine orders report is due. Europe is light while in the US the FOMC minutes are scheduled, and from Canada, the housing starts report is due.

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