Daily market review

United States

Equities rallied Wednesday on Gilead's positive update on its remdesivir medicine for COVID-19, good earnings reports, and an oil price bounce. The Dow industrials rose 2.2 percent, the S&P 500 gained 2.7 percent, and the NASDAQ jumped 3.6 percent.

Markets were thrilled by White House health adviser Anthony Fauci's comment that the remdesivir drug trial showed "quite good news" and a "clear cut positive effect." Big cap momentum stocks, including the FAANGS, led the way higher, with Google up 9 percent on well-received earnings released late Tuesday, including positive comments on its advertising sales. Boeing, a big Dow stock, rose 6 percent on news of a smaller-than-expected loss.

The Federal Open Market Committee policy announcement was a non-event as the Fed reaffirmed its pledge to continue to support the economy with its full range of tools. Investors appeared to shrug off weaker-than-expected US data and to adopt the view that economic worries have peaked.

Among sectors, energy led the way higher as oil prices rebounded after the US Energy Information Administration reported crude supplies rose much less than expected while gasoline inventories actually dropped, in contrast to expectations for inventories to rise. Other sectors outperforming included travel & leisure, communications services, autos, miners, consumer finance, banks, chipmakers, and airlines. Defensive plays lagged, including utilities, food, discount retail, and tobacco.

In US economic data, at annual contraction of 4.8 percent, first-quarter GDP fell more than expected, with special weakness in real consumer spending which fell at a 7.6 percent pace. Separately, pending home sales fell a deeper-than-expected 20.8 percent in March, pointing to steep declines for final sales of existing homes in April and May. Existing home sales for March, released last week, fell 8.5 percent.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose by US$2.21 to US$22.78, while spot gold rose US$6.50 to US$1,714.54. The US dollar weakened against most major currencies. The US Treasury 30-year bond yield rose 3 basis points 1.23 percent while the 10-year note yield was flat at 0.61 percent.


Better news on the virus front lifted equities Wednesday. The Europe-wide STOXX 600 rose 1.8 percent, the German DAX gained 2.9 percent, the French CAC rose 2.2 percent, and the UK FTSE-100 was up 2.6 percent.

Markets focused on plans for the reopening of more countries, hopes for treatments, and decent economic policy response, plus a bounce in crude oil prices on lower-than-expect growth in inventories.

Among sectors, winners included virus-hit travel & leisure, banks, autos & parts, while laggards included health care and food & beverage. Among stocks in the news, BerGenBio, the UK biotech, soared by 86 percent after it was selected for a national UK clinical trial of its Covid-19 medicine.

In economic data, the coronavirus ensured another dramatic, and much steeper than expected, deterioration in the European Commission's economic sentiment index in April. At 67.0, the headline index was down a record 27.2 points versus a slightly weaker revised March outturn and only just above the 65.5 low seen during the global financial crisis. Meanwhile, Eurozone broad money growth accelerated surprisingly sharply in March. A 7.5 percent annual rate was up 2 percentage points from February's unrevised mark and the strongest since December 2012.

Asia Pacific

Most major Asian markets closed higher Wednesday, though moves were moderate in much of the region ahead of the Federal Reserve meeting. Australia's All Ordinaries index was among the stronger performers, closing up 1.5 percent, with energy producers supported by an increase in global oil prices late in the Asian session and major banks also posting strong gains. Japan's markets were closed while the Shanghai Composite index advanced 0.4 percent, and Hong Kong's Hang Seng index rose 0.3 percent.

Australian inflation data published Wednesday showed firmer price pressures largely reflecting bigger increases in food prices and was driven in part by earlier drought conditions and wildfires but also by strong stockpiling by consumers. The headline consumer price index increased 2.2 percent on the year in the three months to March, up from 1.8 percent in the three months to December. And though underlying inflation measures of inflation also increased, the Reserve Bank of Australia expects core inflation to remain below its target range "over the next couple of years" due to the virus.

New Zealand's merchandise trade surplus widened from NZ$531 million in February to NZ$672 million in March. Growth in both exports and imports improved after initial virus impact as New Zealand's trade flows shifted from China and Australia to other markets, including Japan and the United States. Exports of goods rose 3.8 percent on the year in March, picking up from a rise of 3.4 percent in February, with food exports particularly strong. Imports of goods advanced 7.7 percent on the year, rebounding strongly from a drop of 9.6 percent previously and mainly driven by a big increase in imports of petroleum and related products.

Looking ahead*

On Thursday in Asia/Pacific, Japanese industrial production, Japanese retail sales, and Chinese manufacturing PMI figures are scheduled. In Europe, the following are scheduled: French GDP flash, German retail sales, Swiss retail sales, French consumer manufactured goods consumption, French CPI and PPI, Swiss KOF leading indicator, German unemployment, Eurozone GDP flash, Eurozone HICP flash, Eurozone unemployment, Italian CPI, Italian GDP, and the ECB policy announcement. In US data, jobless claims, employment cost index, personal income and outlays, and Chicago PMI reports are due. From Canada, the monthly GDP report will be released.

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