Daily market review

United States

Risk appetite stormed back Monday on news of positive vaccine test results, more reopenings, and supportive comments from Fed Chair Jerome Powell. The Dow industrials rose 3.9 percent, the S&P 500 gained 3.2 percent, and the NASDAQ was up 2.4 percent.

Moderna, the US biotech (up 20 percent), said its small, initial-stage human trial for a vaccine produced Covid-19 antibodies, and had been proven safe. It has not been shown whether these antibodies would protect against Covid-19 infection.

Separately, the Fed's Powell, in a television interview, said the Fed has not exhausted its policy options to boost the economy if needed, and warned pessimists not to "bet against the American economy." On the reopening front, California allowed more counties to reopen. Meanwhile, Apple said it would reopen many stores in the US and Canada this week, and Disney said it would partially reopen its Disney World facility Tuesday.

Among sectors, biggest winners were autos, homebuilders, banks, credit cards, airlines, and machinery, while laggards included biotech, managed care, pharma, software, and health & personal care.

Among companies in the news, Hertz, the car rental company, rose 20 percent after naming a new CEO. Best Buy, the electronics retailer, rose 11 percent after an analyst upgrade. General Motors rose 9.6 percent after its CFO said business was perking up in early May and its plants would reopen Monday. International Game Technology, the video game maker, rose 7.7 percent on an earning beat.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.59 to US$35.26, while spot gold fell US$11.89 to US$1,732.18. The US dollar fell sharply against major currencies. The US Treasury 30-year bond yield rose 11 basis points to 1.43 percent while the 10-year note yield rose 8 basis points to 0.73 percent.


Equities rallied Monday as several European countries proceeded with reopenings, and risk appetite feasted on positive vaccine test results from Moderna, the US biotech. The Europe-wide STOXX 600 rose 4.1 percent, the German DAX rose 5.7 percent, the French CAC advanced 5.2 percent, and the UK FTSE-100 rose 4.3 percent.

European equities were bolstered by reports that Germany and France are proposing a huge fund to support economic recovery, and the Bank of England appears to be considering more aggressive stimulus, possibly including negative interest rates and the buying of risky assets.

Among sectors, cyclicals paced the rally, with miners, automakers, oil & gas, and travel & leisure leading. Among the day's big winners, Royal Dutch Shell gained 8.3 percent, French oil supermajor Total rose 7.4 percent, German automaker Daimler gained 11.4 percent, and French automaker Renault rose 5.6 percent.

Asia Pacific

Major Asian markets closed higher Monday, broadly in line with moves on Wall Street Friday. Investor sentiment received some support from comments from Fed Chair Jerome Powell who said that "it won't take long" for the US economy to "get to an even better place" than it was before the onset of the coronavirus pandemic.

Australia's All Ordinaries index was among the stronger performers, closing up 1.2 percent on the day, while Hong Kong's Hang Seng index and the Shanghai Composite index advanced 0.6 percent and 0.2 percent respectively. Japan's Nikkei and Topix indices closed up 0.5 percent and 0.4 percent respectively after release of Japanese data that were weak but broadly consistent with expectations.

Preliminary estimates show Japan's economy moved into technical recession in the three months to March, with GDP falling on the quarter for the second consecutive quarter. Headline GDP fell 0.9 percent on the quarter following a drop of 1.9 percent in the three months to December. Consumer spending, investment spending, and net exports were all weak with public demand flat.

Singapore's non-oil domestic exports rose 9.7 percent on the year in April after increasing 17.6 percent in March. The weaker increase in headline exports growth was largely driven by weaker demand from key regional trading partners, particularly China, but also Hong Kong, Korea, and Taiwan, likely reflecting the impact of the pandemic on regional supply chains.

Looking ahead*

On Tuesday in Asia/Pacific, Reserve Bank of Australia policy meeting minutes are scheduled as are New Zealand producer prices. In Europe, the UK labor market report and German ZEW reports are due. In North America, Fed Chair Jay Powell will speak and the US housing starts report is scheduled.

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