Daily market review

United States

A rebound in bank and energy stocks helped major equity indexes stage an impressive recovery from steep early losses Thursday. The Dow industrials rose 1.6 percent, the S&P 500 gained 1.2 percent, and the NASDAQ was up 0.9 percent.

An uptick in oil prices lifted energy stocks, with exploration and production leader Haliburton up 4.3 percent. Among banks, Wells Fargo rose 6.8 percent as the beat-up bank found buyers at an 11-year low.

Among other sectors, health care outperformed, paced by big pharma. Technology shares lagged despite gains at Cisco. Industrials and consumer staples lagged, with United Natural Foods off 19 percent.

Among companies in the news, networking leader Cisco rose 4.5 percent as its earnings and guidance were not as bad as feared. Mastercard rose 3 percent after reporting business is stabilizing. Norwegian Cruise lines recovered from early declines to end up 4.7 percent after saying it expects demand to recover. On the downside, Fedex eased 0.2 percent after imposing shipping limits on major retailers to cope with excessive demand. Dow component 3M slipped 0.1 percent after assessing the Covid-19 hit to its business.

In US data, initial jobless claims remained extremely high at 2.981 million in the May 9 week, well above Econoday's high forecast for 2.6 million. Nevertheless, compared to the prior week, claims fell 195,000 for their sixth straight decline from a 6.867 million peak in the March 28 week.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.82 to US$31.07, while spot gold rose US$14.61 to US$1,732.45. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield fell 5 basis points to 1.30 percent while the 10-year note yield fell 2 basis points to 0.62 percent.


Worries about persistent economic weakness and endemic coronavirus hit equities Thursday. The Europe-wide STOXX 600 fell 2.2 percent, the German DAX fell 2.0 percent, the French CAC fell 1.7 percent, and the UK FTSE-100 lost 2.8 percent.

The ECB said Eurozone GDP could fall between 5% and 12% in 2020, and economic recovery in 2021 remains uncertain. Bank of England Governor Andrew Bailey suggested more quantitative easing is likely, and did not rule out negative interest rates in the medium term. And the World Health Organization warned that Covid-19 may become a persistent disease, like HIV.

Among sectors, technology, autos, food, utilities, financial services, retail, and industrials led decliners, while holding up better were basic resources, telecom, banks, travel, real estate, and media.

Among companies in focus, Fiat Chrysler fell 2.8 percent and Peugeot fell 4.6 percent after both announced they would suspend dividends. UK builder Countryside dropped 17 percent on bleak first half earnings and revenues.

Asia Pacific

Major Asian markets closed lower Thursday, with gloomy comments from Fed Chair Jerome Powell Wednesday and weak Australian labour market data reinforcing concerns about the economic impact of the coronavirus pandemic. Australia's All Ordinaries index closed down 1.7 percent, while Japan's Nikkei and Topix indices recorded similar declines of 1.7 percent and 1.9 percent respectively. Hong Kong's Hang Seng index closed down 1.5 percent, with the Shanghai Composite index dropping 1.0 percent.

Australia's labour market was hit hard by the impact of the pandemic in April, with business and social restrictions put in place to curb the domestic spread of the virus putting huge numbers of workers out of a job. The number of employed persons in Australia fell by almost 600,000 from just over 13 million in March to just over 12.4 million in April. Many people who retained their jobs also worked fewer hours, with the aggregate number of hours worked dropping by 9.2 percent on the month. The unemployment rate spiked a point to 6.2 percent while the participation rate plummeted from 66.0 percent to 63.5 percent, a level not seen since 2004. Government wage subsidies have helped limit the damage, but conditions in the labour market are likely to remain very weak until public health measures allow an easing of restrictions.

Looking ahead*

On Friday in Asia/Pacific, Japanese PPI, Chinese fixed asset investment, Chinese industrial production, Chinese retail sales, and Hong Kong GDP reports are on the calendar. In Europe, German GDP flash, German PPI, French CPI, Eurozone GDP flash, Eurozone merchandise trade, and Italian CPI reports are due. In North America, US retail sales, Empire State manufacturing, industrial production, business inventories, consumer sentiment, JOLTS, and Treasury international capital reports are scheduled.

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