Daily market review

United States

Risk-on returned Tuesday as the market latched onto the possibility that a US economic reopening is coming amid signs of slower virus infections. The Dow industrials rose 2.4 percent and the S&P 500 gained 3.1 percent. The NASDAQ rallied 4.0 percent.

President Trump fed expectations for a wide economic reopening as he said he would make a decision within days on a national restart. Yet Anthony Fauci, the top health adviser, warned the US is far from having the testing and tracing infrastructure in place to allow it.

Among sectors, the FAANGs were back in favor, with Amazon up 5.3 percent to set a new record high, and Apple rallying 5.1 percent on news that iPhone sales have rebounded in China. Other winners included chipmakers, airlines, cruise lines, consumer staples, homebuilders, managed care, and drug stores. Laggards included banks, energy, and credit cards. Energy suffered from weak oil prices on the supply overhang.

In company news, big banks started off earnings season by boosting reserves to cope with losses. Dow component JP Morgan fell 2.7 percent after raising its credit reserve by $6.8 billion due to the pandemic. Wells Fargo fell 4.0 percent, largely on its $3.1 billion addition to credit reserves. On the positive side, Dow component Johnson & Johnson rose 4.3 percent on an earnings and revenues beat, and dividend increase.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by US$1.94 to US$30.08, while gold rose US$9.51 to US$1,751.60. The US dollar weakened against most major currencies. The US Treasury 30-year bond yield was unchanged at 1.41 percent while the 10-year note yield fell 2 basis points to 0.75 percent.


European equities were mostly higher Tuesday as European countries took first steps to reopen their economies, but UK shares lagged as the UK appeared likely to keep lockdowns in place longer. The Europe-wide STOXX 600 rose 0.6 percent, the German DAX gained 1.3 percent, the French CAC rose 0.4 percent, and the UK FTSE-100 slipped 0.9 percent.

Among sectors, health care, chemicals, technology and retail outperformed, while travel & leisure, oil & gas, real estate, and banks lagged. UK shares were also depressed by oil stocks, as BP and Royal Dutch Shell both fell 4 percent on weak crude prices. Among travel stocks, cruise line company Carnival lost 6 percent, and Intercontinental Hotels was down 8 percent. Mitchells & Butler, the pub operator, was off 9 percent as it struggles with the impact of forced closures.

Among companies in focus, UK pharma AstraZeneca rose 7 percent on positive clinical trial results for its Tagrisso cancer drug. On the downside, Norwegian Air dropped 44 percent on news of a financial rescue package, and downgrade at Nordea.

Asia Pacific

Major Asian markets closed higher Tuesday after Chinese data showed a smaller-than-expected fall in exports and imports in March. The Shanghai Composite index closed up 1.6 percent, Hong Kong's Hang Seng index rose 0.6 percent, and Australia's All Ordinaries index advanced 1.9 percent. Japan's Nikkei and Topix indices were among the stronger performers in the region, increasing 3.1 percent and 2.0 percent respectively. Markets were closed in India as Prime Minister Narendra Modi announced an extension of the national lockdown, due to end today, until May 3.

China's trade balance in US dollar terms swung from a deficit of US$7.09 billion for January and February combined to a surplus of $19.9 billion in March, more than the consensus forecast of $18 billion. Exports fell 6.6 percent on the year in March, improving from a decline of 17.2 percent in the prior two months and a smaller decline than the consensus forecast for a drop of 15.0 percent. Imports fell 0.9 percent after dropping 4.0 percent previously, again a smaller decline than the consensus forecast for a drop of 8.0 percent. In line with previously published PMI survey data for March, these data suggest that Chinese trade flows remain weak but are not continuing to deteriorate at the same pace as they did during the initial impact of the coronavirus.

Looking ahead*

On Wednesday in Asia/Pacific, the Indian WPI report is due. In Europe, French CPI and Italian CPI reports are scheduled. In the US, retail sales, Empire State manufacturing survey, industrial production, business inventories, housing market index, and Treasury TICS data are on tap, plus the Fed Beige Book. From Canada, the Bank of Canada will release its policy announcement and monetary policy report.

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