Daily market review

United States

Equities gave up midday gains to end mostly weaker Tuesday after a batch of negative corporate results reflecting the coronavirus impact. The market was also cautious ahead of earnings for Google and others due after the US close. The Dow industrials eased 0.1 percent, the S&P 500 declined 0.5 percent, and the NASDAQ was off 1.4 percent.

Dow member Merck fell 3.4 percent after cutting its guidance in light of the virus effect. Another big pharma and Dow component, Pfizer, was off 0.9 percent after cutting its guidance. UPS fell 6 percent after suspending its dividend and pulling its guidance.

In US economic data, a big drop in current conditions offset actual improvement in expectations to drive the consumer confidence down more than 30 points to 86.9 and a bit short of Econoday's consensus for 90.0. This is a 6-year low for this index which, back in the financial crisis 12 years ago, was suffering much worse, dipping into the 30s.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose by 55 cents to US$20.57, while spot gold fell US$8.45 to US$1,708.04. The US dollar weakened against most major currencies. The US Treasury 30-year bond yield fell 6 basis points 1.20 percent while the 10-year note yield fell 6 basis points to 0.60 percent.


Good news on bank earnings and more signs of reopening for European economies gave stocks a lift Tuesday. The Europe-wide STOXX 600 rose 1.7 percent, the German DAX gained 1.3 percent, the French CAC rose 1.4 percent, and the UK FTSE-100 was up 1.9 percent.

News that Spain and France would spell out their reopening plans gave markets a boost, in addition to plans from Germany, Austria, the Netherlands and Switzerland. Markets noted reports that UK Prime Minister Boris Johnson may ease restrictions soon despite high infection rates.

Among banks, UBS rose 7.1 percent after a big earnings beat led by its wealth management business, even though the bank warned of credit problems ahead. Banco Santander rose 4.8 percent and HSBC was up 1 percent despite huge credit provisions.

Among sectors, in addition to banks, the day's winners included insurance, oil & gas, media, and basic resources, while lagging were health care, telecom, utilities, and retail.

In economic data, the UK CBI Distributive Trades Survey shows unprecedented weakness in retail demand this month. At minus 55 percent, the balance of respondents signaling higher volume sales than a year ago matched the all-time low seen in December 2008 and, at minus 54 percent, May's expected print is little better.

Asia Pacific

Most major Asian markets were little changed Tuesday, with the regional data calendar light. Hong Kong's Hang Seng index recorded the biggest move in the region, closing up 1.2 percent after the government announced an easing of social and business restrictions as no new coronavirus cases were reported for the third day in a row. Shares in Hong Kong-listed bank HSBC were little changed despite its announcement of a worse-than-expected drop in profits in the first quarter. Elsewhere in the region, Japan's Nikkei and Topix indices closed down 0.1 percent and up 0.1 percent respectively after weak labour market data, the Shanghai Composite index closed down 0.2 percent, and Australia's All Ordinaries index closed down 0.1 percent.

Japanese labor market data for March weakened somewhat as the economic impact of the global coronavirus pandemic continued. The seasonally-adjusted unemployment rate rose slightly from 2.4 percent in February to 2.5 percent in March, in line with the consensus forecast and the highest level since March 2019, while the number of employed persons rose 130,000 on the year in March, down from 350,000 persons in February and 590,000 persons in January. Officials at the Bank of Japan now expect a sharp contraction in Japan's economy in the current fiscal year, suggesting they expect conditions in the labour market will also weaken further in coming months.

Looking ahead*

On Wednesday in Asia/Pacific, Australian CPI and New Zealand merchandise trade figures are scheduled. In Europe, Eurozone M3, Eurozone EC Economic Sentiment, and German CPI reports are scheduled. In US data, GDP, pending home sales reports will be released, but the big event is the FOMC monetary policy announcement and press conference with Fed Chair Jerome Powell.

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