United States
Signs of improvement in selected US economic data and hopes for wider economic reopening kept selling pressure in check Friday despite a return of the US-China trade dispute. The Dow industrials rose 0.3 percent, the S&P 500 gained 0.4 percent, and the NASDAQ was up 0.8 percent.
Markets keyed on two US economic reports that were somewhat less gloomy than expected. Consumer sentiment actually edged up nearly 2 points to 73.7 in May, well above the expected 66.0. Also somewhat better than expectations, the New York Empire State manufacturers index came in at minus 48.5, up from April's disastrous minus 78.2. By contrast, other big US data releases, retail sales, and industrial production, showed no relief from the virus shock.
Meanwhile, on the US-China trade front, the Commerce Department said foreign companies using American chip-making equipment would be required to apply for permits before they could supply semiconductors to Huawei, China's telecom champion. China's Global Times newspaper reported China may retaliate by placing US companies and others affected by the permit requirement on an "unreliable entities list" that would subject them to restrictions.
Among sectors, consumer discretionary shares outperformed on the reopening narrative, led by retailers. Health care outperformed, led by managed care and biotech. Consumer staples advanced, along with materials, miners, and energy. Laggards included utilities and real estate, along with technology, with chipmakers hit by the Huawei dispute.
Among companies in the news, semiconductor bellwether Applied Materials fell 4 percent after reporting an earnings and revenues miss, but losses were limited as the firm spoke of recovering underlying business conditions. VF Corporation, owner of North Face and other outdoorsy brands, fell 6 percent after earnings and revenue misses. On the positive side, Dow member Nike rose 0.5 percent after talking up signs of recovering demand in Asia and elsewhere.
In US data, retail sales fell 16.4 percent, steeper than Econoday's consensus for 11.2 percent contraction, following a revised 8.3 percent decline in March. Auto sales, down 12.4 percent, were actually strong relative to other groups: apparel down 78.8 percent, electronics & appliances down 60.6 percent, furniture down 58.7 percent, restaurants down 29.5 percent, general merchandise down 20.8 percent, food & beverage stores down 13.1 percent. Industrial production fell 11.2 percent in April compared to March. Manufacturing production fell 13.7 percent. Capacity utilization fell nearly 8 percentage points to 64.9 percent.
These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.60 to US$32.67, while spot gold rose US$11.62 to US$1,744.07. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.32 percent while the 10-year note yield rose 3 basis points to 0.65 percent.
Europe
Better Chinese data, suggesting stabilizing industrial conditions, gave equities a lift Friday, though markets ended down on the week. For Friday, the Europe-wide STOXX 600 rose 0.5 percent, the German DAX rose 1.2 percent, the French CAC firmed 0.1 percent, and the UK FTSE-100 rose 1.0 percent.
Reports of more fiscal stimulus ahead from Germany and other Eurozone countries supported stocks. On the negative side were worries that the US-China trade dispute is heating up again, along with ongoing concerns about a second wave of Covid-19 cases as many countries begin reopening.
Among sectors, outperforming were basic resources, autos, travel, industrials, chemicals, food & beverage, financial services, personal & household goods, and media, while underperformers were construction, utilities, retail, banks, real estate, telecom, technology, insurance, health care, and oil & gas.
Among companies in focus, French chipmaker STMicroelectronics, a heavyweight in the CAC, dropped 3 percent on the US-China trade dispute after the US blocked chip sales to Huawei. On the positive side, Swiss pharma Roche rose 1.8 percent after announcing it would sell new diagnostics for Covid-19 patients.
Asia Pacific
Most major Asian markets closed Friday little changed or higher on the day and little changed or lower on the week. Chinese activity data published Friday indicated that economic conditions have continued to stabilise from the initial impact of the coronavirus pandemic at the start of the year. Regional investor sentiment was also guided by a move higher in global oil prices during the Asian trading session, concerns about the potential for renewed trade tensions between China and other major economies as a result of the pandemic, and uncertainty about US economic data scheduled for release later in the day.
Australia's All Ordinaries index was among the stronger performers in the region Friday, closing up 1.4 percent on the day to post a small 0.1 percent gain on the week as public health restrictions were eased in response to a drop in coronavirus cases. Japan's Nikkei and Topix indices also rose on the day, up 0.6 percent and 0.7 percent respectively, but finished the week down 0.7 percent and 0.3 percent respectively. The Shanghai Composite index fell 0.1 percent on the day and 0.9 percent on the week, while Hong Kong's Hang Seng index also fell 0.1 percent on the day but underperformed on the week with a decline of 1.8 percent.
Chinese data showed industrial production, retail sales, and fixed asset investment all posted month-on-month increases and improved year-on-year growth in April, suggesting that economic activity remains well below pre-pandemic levels but that the stabilization in conditions that began in March has continued. This is broadly in line with previously published PMI survey data. Industrial production rose 2.27 percent on the month in April after surging 33.04 percent in March, with year-on-year growth picking up from a decline of 1.1 percent to an increase of 3.9 percent. Retail sales rose 0.32 percent on the month after a similarly modest increase of 0.38 percent previously, with year-on-year growth improving from a decline of 15.8 percent to a fall of 7.5 percent. Fixed asset investment rose 6.19 percent on the month after increasing 6.10 percent previously, with year-to-date growth also improving from a drop of 16.1 percent to a fall of 10.3 percent.
Revised Hong Kong GDP data showed headline growth rates for the three months to March were unchanged from initial estimates published earlier in the month, confirming the severe impact of the coronavirus pandemic on the domestic economy. GDP contracted by a record 5.3 percent on the quarter and by a record 8.9 percent on the year, after dropping 0.3 percent on the quarter and 3.0 percent on the year in the three months to December. Household consumption, investment spending, and exports all fell sharply in the three months to March, only partly offset by a large increase in government spending. Also published Friday, Japanese data showed the producer price index fell 2.3 percent on the year in April after falling 0.4 percent in March, the biggest decline since mid-2016, mainly reflecting weaker energy prices.
