Daily market review

United States

Major stock indexes slipped late Thursday on a report President Trump would hold a press conference about China Friday, amid worries US-China disputes are heating up. Earlier, markets were bolstered by rising health care stocks and the ongoing reopening narrative. The Dow industrial index declined 0.6 percent; the S&P 500 fell 0.2 percent, and the NASDAQ was off 0.5 percent.

Earlier Thursday the NASDAQ was held back by President Trump's threat to sign an executive order to curb social media companies: Twitter (down 4.5 percent) and Facebook (down 1.6 percent). The US-China conflict hit technology hardware stocks particularly hard, with Intel off 3 percent and Qualcomm down 1.5 percent.

On the positive side, markets saw more signs of economic bottoming in US economic data, including reports on improving business at hotels and restaurants. Thursday's US jobless claims report did show new claims continuing to decline, and a decline in the related jobless rate, though both remain disastrously high.

The shift out of momentum stocks into value stocks that has attracted attention this week faded Thursday as the rally in energy and financial stocks stalled.

Alexion, the pharma, rose 7.8 percent as analysts said its filings suggested a settlement of its dispute with Amgen, down 0.3 percent. Big pharma Merck was up 1.9 percent and Pfizer rose 2 percent.

Among other companies in focus, discount retailer Dollar Tree rose 11.6 percent after reporting blowout earnings and revenues on surging same-store sales linked to pandemic spending. Boeing rose 0.2 percent after it resumed production of its 737 Max jets. On the downside, Six Flags, the amusement park operator, fell 12 percent after Goldman Sachs gave it a sell rating. Airlines were hit after Delta (down 2.5 percent) and American (down 8.4 percent) announced layoffs. Hewlett Packard fell 12 percent on a revenues miss and downgrade from JP Morgan.

In economic data, initial jobless claims came in right at expectations for a second week in a row, at 2.123 million in the May 23 week. Since mid-March when virus effects first appeared in this report, initial claims have totaled just over 41 million.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 15 cents to US$35.02, while spot gold rose US$4.79 to US$1,718.57. The US dollar fell sharply against most major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.46 percent while the 10-year note yield rose 2 basis points to 0.70 percent.


Optimism over reopening and positive reaction to the big EU bailout package announced Wednesday gave equities a lift. The Europe-wide STOXX 600 gained 1.6 percent, the German DAX gained 1.1 percent, the French CAC rose 1.8 percent, and the UK FTSE-100 was up 1.2 percent.

Dovish comments from Bank of England policy-makers contributed to better risk appetite. Meanwhile, Ifo, the German think tank, projected a strong rebound next year for the German economy. Health care led winners Thursday with GlaxoSmithKline, a leading vaccine maker, up 2.1 percent after laying out its Covid-19 vaccine plans for next year.

Outperformers, in addition to health care, included retail, personal & household goods, chemicals, telecom, media, utilities, and real estate, while laggards were autos, banks, insurance, oil & gas, basic resources, industrials, technology, and travel & leisure.

Among companies supporting the reopening outlook, Cineworld, the big UK movie operator, rallied 21 percent after saying it would reopen all its theaters in July.

In economic data, the European Commission's economic sentiment index made back a little ground in May. Following an even steeper revised record 29.3 point slump to 64.9 in April, the headline index clawed back 2.6 points to stand at 67.5. However, this was still easily one of the weakest ever readings and was also short of market expectations.

Asia Pacific

Most major Asian markets closed higher Thursday, with country-specific news driving much of the price action. Japan's Nikkei and Topix indices outperformed with gains of 2.3 percent and 1.8 percent respectively, with sentiment supported by an easing of pandemic-related restrictions and further fiscal stimulus announced late Wednesday. Prime Minister Shinzo Abe's cabinet approved an additional set of measures worth around $1.1 trillion, almost doubling the cumulative amount of support promised, which now amounts to around 40 percent of GDP.

The Shanghai Composite index rose 0.3 percent Thursday, but investor sentiment in Hong Kong was again weak, with the Hang Seng index closing down 0.7 percent. This followed the approval by China's National People's Congress of the government's plans to extend national security laws to Hong Kong at its session Thursday. Reports have suggested that the new rules could be implemented ahead of Hong Kong legislative elections due to take place in September. US Secretary of State Mike Pompeo reported to Congress Wednesday that the Trump Administration no longer considers Hong Kong to be autonomous from China, potentially jeopardising bilateral trade arrangements that apply to Hong Kong. Protests against these moves by Beijing continued in Hong Kong on Thursday.

Australia's All Ordinaries index advanced 1.2 percent after Reserve Bank Governor Philip Lowe told legislators that the downturn in the domestic economy caused by the pandemic may be less severe than he initially anticipated. Investment data published Thursday showed capital expenditure was weak in the three months to March and is expected to be weaker than previously estimated in both the current and next fiscal years. Private capital expenditures fell 1.6 percent on the quarter after dropping 2.6 percent previously, the fifth consecutive quarterly decline.

Looking ahead*

On Friday in Asia/Pacific, Japanese unemployment, industrial production and retail sales reports are due, plus Indian GDP. In Europe, UK Nationwide HPI, German retail sales, French consumer manufactured goods, French CPI, French GDP, French PPI, Swiss KOF Leading Indicator, Eurozone M3 money supply, Italian GDP, Eurozone HICP flash, and Italian CPI reports are scheduled for release. In North America, US international trade in goods, US personal income and spending, Chicago PMI, US consumer sentiment, plus Canadian quarterly and monthly GDP reports are all due.

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