Daily market review

United States

Equities sold off broadly Wednesday as the impression sank in that recent optimism over the outlook has been overdone, including expectations for a decent recovery in the second half. Dow industrials lost 2.2 percent, the S&P 500 declined 1.8 percent, and the NASDAQ was off 1.6 percent.

Markets reacted poorly to gloomy comments from Fed Chair Jerome Powell, who warned of the prospect of "prolonged recession and weak recovery" and urged fiscal policy-makers to act aggressively to limit the damage. Adding to the bearish mood were reports of rising Covid-19 infection rates in the US heartland, and resurgent cases in countries where lockdowns have been eased.

All stock sectors fell, with financials, industrials, and energy the worst off. Holding up best were health care, consumer staples, and consumer discretionary. Bank stocks suffered from concern that regulators may force them to suspend dividends, along with growing doubts about the V-shaped recovery that has underpinned markets. Wells Fargo was off 6.3 percent and Hartford Financial services was down 6.1 percent to lead financials lower. Market champions Apple, off 1.2 percent, and Google, off 2.0 percent, came off on the day's shift away from risk.

Among companies in the news, United Natural Foods rallied 46 percent on big earnings and revenue beats amid strong consumer demand for food at home. Uber rose 1.9 percent and Grubhub fell 3.7 percent as the two remained at odds over a price for the ride-sharing company to acquire the food delivery company.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by 71 cents to US$29.25, while spot gold rose US$15.03 to US$1,717.84. The US dollar rose against major currencies. The US Treasury 30-year bond yield fell 3 basis points to 1.34 percent while the 10-year note yield fell 4 basis points to 0.64 percent.


Poor corporate earnings, renewed coronavirus worries, and downbeat comments from Fed Chair Jerome Powell hurt equities Wednesday. The Europe-wide STOXX 600 fell 1.9 percent, the German DAX dropped 2.6 percent, the French CAC fell 2.9 percent, and the UK FTSE-100 declined 1.5 percent.

Travel, banks, autos, insurance, and media were among the worst performers, with health care, utilities, real estate, and technology holding up best, though declines were across the board.

Among other companies in focus, Commerzbank fell 6 percent and ABN Amro was off 9 percent after poor earnings and bleak guidance. In the travel sector, TUI Group fell 3 percent after the Anglo-German travel agency announced huge layoffs. Maersk, the Danish shipping giant, fell 5.8 percent after warning of falling demand in the second quarter. Aston Martin, the iconic UK automaker, fell 16 percent after its sales plunged and it pulled its guidance.

Asia Pacific

Major Asian markets posted mixed but generally moderate moves Wednesday, with the regional data calendar light and little major coronavirus news during the trading session. Japan's Nikkei and Topix indices fell 0.5 percent and 0.1 percent respectively, while Hong Kong's Hang Seng index closed down 0.3 percent. The Shanghai Composite index and Australia's All Ordinaries index closed up 0.2 percent and 0.3 percent respectively.

The Reserve Bank of New Zealand left its official cash rate unchanged at 0.25 percent at its meeting Wednesday after the rate was cut by 75 basis points at its previous meeting in March to help counter the economic impact of the coronavirus pandemic. Officials, however, decided to almost double the upper limit for the RBNZ's asset purchase program from NZ$33 billion to NZ$60 billion to help keep domestic interest rates low. They also reaffirmed their commitment to keep the policy rate at 0.25 percent until early 2021 and advised that they will consider cutting this rate below zero once operational changes are made to domestic financial institutions. Officials noted that the pandemic's impact on the domestic economy has already been severe and is expected to persist.

Australia's wage price index rose 0.5 percent on the quarter in the three months to March, as it did in the three months to December, while year-on-year growth in the index eased from 2.2 percent to 2.1 percent. In its quarterly Statement on Monetary Policy published last week, officials at the Reserve Bank of Australia noted that declines in employment caused by the pandemic will likely put downward pressure on wage growth in coming months.

Looking ahead*

On Thursday in Asia/Pacific, Australian labor force survey and Indian WPI reports are scheduled. In Europe, French ILO unemployment, German CPI, and Swiss producer and import prices are due. In North America, Canadian manufacturing sales, US import and export prices and US jobless claims are scheduled.

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