Daily market review

United States

Good vaccine news, rising oil prices, and Facebook's move into online shopping gave equities a boost Wednesday. The Dow industrials rose 1.5 percent, the S&P 500 gained 1.7 percent, and the NASDAQ was up 2.1 percent.

Inovio Pharmaceuticals, up 8.5 percent, lifted risk assets when it reported its test vaccine had produced Covid-19 antibodies in mice and guinea pigs. Inovio said human trials would begin in June. Meanwhile, biotech Moderna, up 2.5 percent, said its vaccine could be ready by year end, though STAT, the news agency, quoted experts who doubted Moderna's data.

Among sectors, energy shares outperformed as oil prices perked up, with refiners and oil servicers leading. Communications stocks were ahead, with Facebook, up 6 percent, and Twitter up 7.9 percent. Facebook advanced on news it would introduce online shopping, and Amazon surged too given its powerful results during the shutdown period.

Among companies, Lowes, the home-improvement retailer, rose 0.2 percent after an earnings and revenues beat, despite withdrawing its guidance on uncertainty over the virus effect. Penn National Gambling rose 13 percent after saying it has reopened several casinos in Louisiana and will open more in Mississippi soon. On the downside, Target, the discount retailer, fell 3.3 percent despite earnings and revenues beats, as it declined to provide guidance and warned on the virus impact.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.21 to US$35.88, while spot gold rose US$3.48 to US$1,749.48. The US dollar fell against most major currencies. The US Treasury 30-year bond yield fell 1 basis point to 1.41 percent while the 10-year note yield fell 2 basis points to 0.69 percent.


A strong US open, led by gains in Facebook and Amazon, helped European stocks recover from early declines to end higher. The Europe-wide STOXX 600 gained 1.0 percent, the German DAX rose 1.3 percent, the French CAC was up 0.9 percent, and the UK FTSE-100 rose 1.1 percent.

Facebook rallied on news it will introduce online shopping. Amazon gained too, as its online shopping business has boomed during the shutdown period. Among European sectors, leaders were technology, oil & gas, chemicals, utilities, industrials, banks, and basic resources. Lagging were real estate, insurance, financial services, food & beverage, and retail.

AstraZeneca, the UK pharma, rose 2.4 percent after the FDA approved its cancer drug. Experian, the Irish credit bureau, rose 7.4 percent after keeping its dividend and announcing cost cuts. Marks & Spencer gained 10.8 percent as the market liked the UK retailer's turnaround plan.

In economic news, Bank of England Governor Andrew Bailey said the BOE was reviewing its policy options in case more stimulus is needed, and declined to rule out negative interest rates. Meanwhile, UK consumer prices were on the soft side of market expectations in April. A 0.2 percent monthly fall in the CPI reduced the annual inflation rate from 1.5 percent in March to just 0.8 percent, its lowest mark since August 2016.

Asia Pacific

Most major Asian markets closed higher Wednesday, though moves were generally modest. Japan's Nikkei and Topix indices outperformed, up 0.8 percent and 0.6 percent respectively, with reports indicating that authorities will ease pandemic restrictions in Osaka and Kyoto. Australia's All Ordinaries index rose 0.4 percent despite weak retail sales data, while Hong Kong's Hang Seng index advanced 0.1 percent.

The Shanghai Composite index underperformed, closing down 0.5 percent after official rates were left unchanged. The People's Bank of China left the one-year loan prime rate unchanged at 3.85 percent at its monthly review, with the equivalent five-year rate also unchanged at 4.65 percent. These rates were reduced by 20 basis points and 10 basis points respectively in April.

Preliminary estimates show Australian retail sales fell 17.9 on the month in April, dropping sharply from growth of 8.5 percent in March. The increase in March and decline in April were both records and largely reflected the impact of stockpiling purchases in the early stages of the pandemic, with food sales up 24.1 percent on the month in March and then down 17.1 percent in April. Consumers also spent less on dining out and clothing in April but increased their online purchases. Final retail sales data for April are scheduled to be published in early June.

Japan's private sector machinery orders (excluding volatile items) fell 0.4 percent on the month in March, weakening from growth of 2.3 percent in February and in line with other data indicating that the Covid-19 pandemic had begun to impact Japanese economic activity that month. In quarterly terms, orders fell by 5.1 percent on the quarter, a somewhat bigger decline than the fall in non-residential investment reported in GDP data published earlier in the week. Officials expect a solid rebound in orders in the second quarter, forecasting a quarterly increase of 2.8 percent.

Looking ahead*

On Thursday in Asia/Pacific: Japanese merchandise trade and Japanese flash PMIs are scheduled. In Europe: flash PMIs are due from France, Germany, the Eurozone, and the UK, plus the UK CBI industrial trends report. In North America, US jobless claims, Philadelphia Fed manufacturing, US PMI flash, US existing home sales, and US leading indicators reports are all scheduled.

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