Daily market review

United States

Equities ended mixed and down from the day's highs Monday with FAANGs, biotech, and software outperforming as the market grappled with a muddled picture on hopes for economic recovery. The Dow industrials fell 0.5 percent, the S&P 500 firmed 0.1 percent, and the NASDAQ was up 0.8 percent.

Markets appear hopeful about re-openings around the US and in Europe but have been disconcerted by news of virus cases in the White House, and by reports of resurgent infection rates in Germany, China, Korea, and elsewhere after lockdowns eased.

Health care was the best performer, led by biotech, along with technology, with support from the FAANGs, especially Google, up 1.4 percent, and Facebook, up 0.4 percent. Strength in Amazon, up 1.2 percent, lifted consumer discretionary shares. Lagging were credit cards, banks, airlines, autos, and homebuilders on concerns over the near-term virus effects.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by 75 cents to US$30.07, while spot gold fell US$8.46 to US$1,697.95. The US dollar rose against most major currencies. The US Treasury 30-year bond yield rose 5 basis points to 1.43 percent while the 10-year note yield rose 2 basis points to 0.71 percent.


Worries about a second wave of coronavirus infections hurt equities Monday as Korea and Germany reported an uptick in cases after lockdowns were lifted. The Europe-wide STOXX 600 eased 0.4 percent, the German DAX slipped 0.7 percent, the French CAC fell 1.3 percent, and the UK FTSE-100 rose 0.1 percent.

European markets have also been unsettled by the dispute between Germany and the European Union over the legality of the ECB's asset purchase program, which has been the key macroeconomic policy support in Europe. The European Court of Justice on Friday rebuked Germany's top court for ruling against the ECB's bond-buying program.

Mining shares and airlines were among the weakest performers, with airlines hit by UK Prime Minister Boris Johnson's plan to impose a 14-day quarantine on some travelers entering the UK. Miners came under pressure on virus worries, with ArcelorMittal, the giant steelmaker, down 16 percent on a Moody's downgrade. Other sectors underperforming included banks, construction, autos, and insurance, while outperformers included health care,food & beverage, and personal & household goods.

Among companies reporting, German consumer goods maker Henkel fell 2.5 percent on a gloomy earnings report and after withdrawing its guidance for 2020. Bank of Ireland Group dropped 14 percent after huge loan impairment charges against earnings.

Asia Pacific

Most major Asian markets closed higher Monday, with a light regional data calendar keeping investors' focus on coronavirus developments. Authorities in Australian and New Zealand announced that public health restrictions will be eased in coming days, while reports indicate that the Japanese government will deliver a supplementary budget to allow additional spending to offset the economic impact of the pandemic. Renewed civil unrest in Hong Kong over the weekend resulted in several arrests and hospitalizations. Japan's Nikkei and Topix indices rose 1.1 percent and 1.5 percent respectively, Australia's All Ordinaries index closed up 1.3 percent, and Hong Kong's Hang Seng index advanced 1.5 percent. The Shanghai Composite index underperformed, closing flat on the day.

Total new yuan loans made by Chinese banks in April amounted to CNY1,700 billion, down from CNY2,850 billion in March, but well above the CNY1,020 billion recorded in April 2019 and the CNY1,180 billion recorded in April 2018. This stronger-than-normal level of lending likely reflects ongoing efforts to provide additional credit and liquidity in response to the economic impact of the coronavirus pandemic. Total outstanding loans rose by 13.1 percent on the year at the end of March, picking up from 12.7 percent in March.

Looking ahead*

On Tuesday in Asia/Pacific, Chinese CPI, Chinese PPI, Indian industrial production and Indian CPI reports are scheduled. In North America, the US CPI report is scheduled.

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