Daily market review

United States

Equities ended mixed and mostly weaker Wednesday as energy stocks were hurt by a pullback in oil prices, and quarterly earnings came in mixed. The Dow industrials slipped 0.9 percent, the S&P 500 declined 0.7 percent, but the NASDAQ rose 0.5 percent.

The reopening narrative continues to underpin equities but sentiment has been obliged to contend with terrible economic reports, bleak earnings forecasts, and worries that the pandemic is far from contained.

Among sectors, technology and communications services led the way, with FAANGs remaining in favor, along with semiconductors, and entertainment. Energy stocks lagged the most, along with industrials, materials, consumer staples, financials, and utilities.

Among companies in the news, Walt Disney, off 0.2 percent, reported disappointing quarterly results and said it would continue to suffer from the virus impact. General Motors rose 3 percent after saying it was reopening operations and remained in solid financial condition, despite factory shutdowns and weak sales. CVS, the big drug store chain, fell 1.3 percent despite an earnings and revenues beat.

In US economic data, ADP estimated private payrolls will fall 20.236 million in Friday's employment report for April. Econoday's consensus for ADP's estimate was a loss of 20.0 million jobs, with forecasters seeing actual private payrolls in Friday's employment report falling 20.5 million.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by US$1.28 to US$29.84, while spot gold fell US$18.55 to US$1,690.14. The US dollar was mostly higher against major currencies, but off vs. the yen. The US Treasury 30-year bond yield rose 7 basis points to 1.40 percent while the 10-year note yield rose 4 basis points to 0.71 percent.


Equities slipped Wednesday on a dire European Commission forecast for the regional economy and on fallout from the high German court ruling pointing to new constraints on ECB support. The Europe-wide STOXX 600 fell 0.4 percent, the German DAX lost 1.2 percent, the French CAC declined 1.1 percent, and the UK FTSE-100 gained 0.1 percent.

Energy stocks led the decline as oil prices retreated, with travel, banks, autos, media and telecom also lagging. Holding up better were health care, food & beverage, financial services, and construction & materials.

Among companies in focus, BMW, the German luxury automaker, fell 5 percent after an earnings miss and saying profit will drop in 2020. Index heavyweight Royal Dutch Shell was a big loser, down 3.7 percent as oil prices retreated. On the positive side, UK big pharma Astrazeneca rose 2.5 percent after FDA approval for its heart medication and positive news for its cancer drug. Dialog Semiconductor rose 13 percent after an upbeat quarterly report and raising guidance.

In economic data, Eurozone retail sales plummeted in March. An 11.2 percent monthly drop was actually marginally less than the market consensus but still the steepest on record and sharp enough to slash annual growth from 2.5 percent to minus 9.2 percent. Meanwhile, the Eurozone PMI composite output index was 13.6 in April, an all-time low, vs. March's final 29.7. Separately, German manufacturers' orders fell much more than expected in March. Having shown tentative signs of recovery since the end of last year, coronavirus effects were blamed for a record 15.6 percent monthly decline at quarter-end, with annual growth slashed to minus 15.8 percent.

Asia Pacific

Most major Asian markets closed higher Wednesday, though moves were generally moderate. The Shanghai Composite index closed up 0.6 percent as trading resumed after holidays earlier in the week, while Hong Kong's Hang Seng index advanced 1.1 percent. Australia's All Ordinaries index underperformed with a modest 0.2 percent decline. Markets were closed again in Japan.

PMI survey data published by Markit Wednesday provided further evidence of the extreme impact of the global coronavirus pandemic on regional economies. In addition to the heavy reliance on external demand as a driver of growth, Asian economies have been hit hard by social and business restrictions put in place to curb the spread of the virus. This was particularly evident in the PMI survey of India's services sector, which recorded a drop in its headline index from 49.3 in March to just 5.4 in April, indicating that nearly all respondents reported declines from March after introduction of a national lockdown. Economy-wide PMI surveys for Hong Kong and Singapore also showed further substantial contraction in April, with the headline index increasing from 34.9 in March to a still very weak 36.9 for Hong Kong, and dropping from 33.3 to 28.1 for Singapore.

Australian data showed retail sales surged a record 8.5 percent on the month in March after rising 0.6 percent in February, with year-on-year growth also accelerating from 5.7 percent to 9.4 percent. Stronger headline growth reflects big differences among the main components of retail sales, with the impact of and response to the coronavirus pandemic clearly driving significant shifts in consumers' spending habits. Food sales, in particular, grew at a very strong pace, with sales of household goods also improving, but other categories of spending, including clothing and dining out, dropped heavily.

Looking ahead*

On Thursday in Asia/Pacific, Australian merchandise trade and Chinese general services PMI reports are scheduled. In Europe, the following are scheduled: German industrial production, French industrial production, French merchandise trade, UK Halifax HPI, Italian retail sales, the Bank of England policy announcement, and the Bank of England monetary policy report. In North America, US jobless claims and US productivity and costs reports are due.

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