Daily market review

United States

Equities slipped Tuesday on warnings against early reopenings from top US health officials, and reports that new waves of Covid-19 may be brewing in Asia and Europe in addition to US states. The Dow industrials fell 1.9 percent while both the S&P 500 and NASDAQ both fell 1.9 percent.

Sentiment was depressed by warnings from health officials, especially top US health advisor Anthony Fauci who called for more testing and tracing and said states easing limits prematurely risk reigniting the pandemic. Fauci said it was too soon to say whether medicines and vaccines would be ready to allow schools to reopen in the fall. On the plus side were supportive policy measures, including news that the Federal Reserve began its previously announced purchases of corporate bond ETFs. Markets are watching for new policy signals during an appearance from Fed Chair Jerome Powell scheduled Wednesday morning.

Among sectors, consumer staples led the winners, paced by food. Health care was another gainer, led by pharma and managed care. Materials, technology, and consumer discretionary shares also outperformed. Industrials lagged, with airlines a big drag, and energy shares off despite rising oil prices. Real estate suffered the most.

Among companies in the news, PNC Financial Services declined 2.1 percent after saying it will sell its big stake in BlackRock, which slipped by 7.8 percent. On the positive side, General Mills, the food conglomerate, rose 2.8 percent after boosting its guidance and reporting big revenue gains as consumers stocked up on food at home.

In US economic data, CPI fell an as-expected 0.8 percent in April while the core rate, which excludes food and energy, fell a much sharper-than-expected 0.4 percent, a record decline. The yearly rate for the core was less alarming, still safely above zero at 1.4 percent. Separately, NFIB's small business optimism index declined further to 90.9 in April from 96.4 in March, the weakest since March 2013.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by 11 cents to US$29.96, while spot gold rose US$4.86 to US$1,702.81. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield fell 4 basis points to 1.37 percent while the 10-year note yield also fell 4 basis points to 0.67 percent.


Equities were mixed Tuesday as the market keyed on the bullish reopening narrative, offset in part by renewed worries that reopenings have fueled resurgent Covid-19 cases. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX fell 0.1 percent, the French CAC was off 0.4 percent, and the UK FTSE-100 rose 0.9 percent.

UK shares outperformed on positive earnings, especially from telecom Vodaphone which rose 8.7 percent after hitting expectations and maintaining its dividend. Deutsche Post DHL, the freight delivery service, rose 3.5 percent after reporting its business rebounded in April.

Among sectors, telecom outperformed, along with retail, utilities, financial services, health care, personal & household goods, and technology, while lagging were real estate, travel & leisure, autos, insurance, media, and basic resources

Among other companies in focus, Allianz, the German financial services, company, slipped 3.7 percent after reporting a big outflow of retail investor holdings. Thyssenkrupp, the industrial conglomerate, dropped 14 percent after disappointing quarterly earnings and warning on the virus impact to business.

Asia Pacific

Most major Asian markets closed lower Tuesday, though moves were generally moderate. Investor sentiment was impacted by reports published during the Asian trading session that US medical official Anthony Fauci would highlight to the Senate the health risks associated with re-opening the US economy. The Shanghai Composite index closed down 0.1 percent, while Japan's Nikkei and Topix indices fell 0.1 percent and 0.3 percent respectively. Hong Kong's Hang Seng index and Australia's All Ordinaries index posted bigger falls, down 1.5 percent and 1.1 percent respectively.

Chinese inflation data published Tuesday showed weaker price pressures in April. China's headline consumer price index increased 3.3 percent on the year in April, slowing from 4.3 percent in March and below the consensus forecast of 3.7 percent. Food prices rose 14.8 percent on the year in April, down from 18.3 percent in March, while the year-on-year change in non-food prices fell from 0.7 percent to 0.4 percent, partly reflecting bigger declines in housing costs and transport and communication prices. China's producer price index fell 3.1 percent on the year in April, down from a decline of 1.5 percent in March, and the biggest fall since early 2016. Weakness was broad-based across all categories.

India did not release the CPI, saying virus issues limited sampling, but the statistics agency did release industrial production which fell 16.7 percent on the year in March, weakening sharply from growth of 4.5 percent in February as the economic impact of the pandemic took hold. Manufacturing output, which accounts for the great bulk of the report, slumped 20.6 percent on the year after increasing 3.2 percent previously.

Looking ahead*

On Tuesday in Asia/Pacific, the Australian wage price index report and the Reserve Bank of New Zealand policy announcement are scheduled. In Europe, the UK monthly GDP, UK quarterly GDP, UK industrial production, and UK merchandise trade reports are due, plus the Eurozone industrial production report. In North America, Fed Chair Jerome Powell is scheduled to speak, and the US PPI-FD report is scheduled.

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