Daily market review

United States

The latest positive news on a potential Covid-19 vaccine, along with more reopenings, gave equities a boost Tuesday, with beaten-down value stocks and cyclicals outperforming. The Dow industrial index gained 2.2 percent; the S&P 500 rose 1.2 percent, and the NASDAQ rose 0.2 percent.

Markets reacted to word that Novovax, the US biotech, would initiate human trials of its vaccine, and expects results in July. Merck added its name to the list of companies rushing to develop a vaccine. Expectations for more government support added to the bullish mood after a report that another bill to help businesses keep employees on payrolls is coming. Markets also liked reports suggesting US sports are likely to resume.

An array of news headlines signaling more reopenings in Europe added to the positive momentum. Stock sectors leveraged to the reopening theme, including airlines, hotels, and restaurants, outperformed sectors that have gained on the stay-at-home theme, including online retailers and consumer staples.

Among stock sectors, financials were the best performer, along with industrials, including airlines, energy, and materials pegged to expectations or recovery.

Among companies in focus, Novovax rose 4.5 percent. Independent Bank Group rose 16 percent after aborting its proposed merger with Texas Commerce Bancshares, which fell 4 percent. Southwest Air rose 12.6 percent on an analyst upgrade. Six Flags, the amusement park company, rose 10 percent after saying it will reopen its Oklahoma theme park.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 79 cents to US$36.17, while spot gold fell US$22.50 to US$1,712.60. The US dollar fell sharply against most major currencies. The US Treasury 30-year bond yield rose 5 basis points to 1.43 percent while the 10-year note yield rose 3 basis points to 0.69 percent.


Equities surged Tuesday as more firms reported progress on a Covid-19 vaccine and on new signs of reopening. The Europe-wide STOXX 600 rose 1.1 percent, the German DAX rose 1.0 percent, the French CAC gained 1.5 percent, and the UK FTSE-100 was up 1.2 percent.

Travel & leisure showed the best gains on reports the EU plans to lift travel restrictions in Europe next month, and news that Spain and Germany are also set to remove travel limits. Air France KLM was a big gainer, up 12.2 percent, and IAG, owner of British Airways, rallied 23 percent. Lufthansa gained 6.4 percent after a report the EU is likely to OK its German bailout package.

UK retailers rose after Prime Minister Boris Johnson said stores would be allowed to reopen next month, and UK pubs and restaurants rallied on reports the UK will loosen rules allowing outdoor cafes. Marks & Spencer, the retailer, rose 7.5 percent, and SSP Group, a UK operator of cafes in airports and railways stations, rose 24 percent. French carmakers rose on news of a French aid package, with Peugeot up 12 percent and Renault rising 7 percent.

Other leading sectors included banks, insurance, autos, industrial goods, basic resources, retail, media, and real estate. Laggards included health care, telecom, chemicals, technology, financial services, oil & gas, and food & beverages.

Among companies in the news, Aston Martin rallied 28 percent after naming a new CEO who is to run the newly-recapitalized luxury automaker. Argenx, the biotech, surged 36 percent on positive news about its clinical trials.

Asia Pacific

Major Asian markets posted strong gains Tuesday, despite a busy regional economic calendar that provided further evidence of the economic impact of Covid-19. Investor sentiment was supported by reports that US biotech firm Novavax has started trials of a potential vaccine and by news that Japan's government plans to lift the state of emergency on remaining parts of the country.

Australia's All Ordinaries index outperformed, closing up 2.8 percent, while Japan's Nikkei and Topix indices advanced 2.6 percent and 2.2 percent respectively. Despite ongoing concerns about the potential impact of proposals by the Chinese government to tighten security laws applying to Hong Kong, the Hang Seng index closed up 1.9 percent while the Shanghai Composite index rose 1.0 percent.

Singapore revised first-quarter GDP to an annualised drop of 4.7 percent, a much smaller decline than the advance estimate of 10.6 percent. The upward revision was mainly driven by a surge in biomedical output which, in separate data for April, underpinned a big 13.0 percent jump in Singapore's industrial output. Singapore also announced another round of fiscal stimulus worth around $23 billion, that will take the total amount of spending announced in recent months to around $70 billion, equivalent to nearly 20 percent of national GDP. Singapore's Straits Time Index closed up 1.2 percent Tuesday.

Looking ahead*

On Wednesday in Europe, the French business climate indicator is scheduled for release. In North America, the Richmond Fed manufacturing index is due.

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