Daily market review

United States

Monday's session was lifted by the apparent easing in US-China tensions as well as the lifting of lockdown restrictions, offset however by extended social unrest over police brutality following last week's death of George Floyd. The Dow and S&P 500 both rose 0.4 percent with the NASDAQ up 0.7 percent.

President Trump triggered a rally late last Friday when he criticized Chinese security and economic policies but did not undermine the phase one trade deal. On the virus, reopenings are underway in all 50 states though their degree varies greatly state-by-state amid the developing risk that social unrest may trigger new delays.

The market moved higher in early trading following an ISM manufacturing report that showed less severe rates of contraction for new orders and employment. Separately, construction spending was likewise less weak than expected for a sector that has been holding up better than others during the shutdown.

Amid burning and looting, major retailers were closing stores at hotspots including Target, down 2.3 percent, and Wal-Mart down 0.1 percent. Gilead Sciences fell 3.4 percent after its remdesivir antiviral drug showed no better than mixed results in a Covid-10 study; Pfizer fell very sharply, down 7.1 percent after announcing a late stage trial failure for its breast cancer drug Ibrance.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 69 cents to US$38.53, while spot gold rose US$8.57 to US$1,738.84. The US dollar fell sharply against most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.45 percent while the 10-year note yield rose 1 basis point to 0.66 percent.


European shares rallied on President Trump's limited reaction late Friday US time to China's security move into Hong Kong. France's CAC rose 1.4 percent with both Italy's FTSE MIB and Spain's Ibex 35 up 1.8 percent. Several markets, including those Germany and Switzerland, were closed in observance of Whit Monday.

Economic news included final manufacturing PMIs for May and whether for France or Germany or the UK, all are trending at about the 40 level to show less severe contraction than April. Service PMIs will be posted on Wednesday.

Companies in the news were led by Italy's Mediobanca, rising 8.1 percent on news Leonardo Del Vecchio is preparing to increase his stake in the Italian investment bank.

Asia Pacific

Major Asian markets closed higher Monday with PMI data showing some further improvement in Chinese manufacturing conditions in May and concerns about US-China relations moderating after President Trump's press conference Friday. Hong Kong's Hang Seng index and the Shanghai Composite index outperformed, gaining 3.4 percent and 2.2 percent respectively, while Australia's All Ordinaries index also recorded a solid gain, closing up 1.1 percent ahead of the Reserve Bank of Australia's monthly policy meeting Tuesday. Japan's Nikkei and Topix indices rose 0.8 percent and 0.3 percent.

The Markit PMI for Chinese manufacturing rose from 49.4 in April to 50.7 in May suggesting that conditions in the sector, as restrictions were loosened, continued to improve gradually. This is in line with the official CFLP PMI survey, published over the weekend, which came in at 50.6 for May. The headline index for the CFLP non-manufacturing survey rose slightly to 53.6 in May, with the Markit PMI for services scheduled for release later in the week.

In contrast, the Markit PMI surveys for the Japanese and Indian manufacturing sectors were much weaker. The headline index for Japan fell from 41.9 in April to 38.4 in May, its lowest level since 2009, while the equivalent index for India rose slightly but remained at very low levels, up from a record low of 27.4 previously to 30.8. Manufacturers in both countries reported large declines in output and new orders, providing clear evidence that the economic impact of the Covid-19 pandemic remained severe in May.

Looking ahead*

In Asia on Tuesday, the Reserve Bank of Australia will hold a scheduled meeting. In Europe, Swiss retail sales and the monthly SVME purchasing managers index will be posted, while Nationwide house prices are scheduled in the UK. In the US, weekly Redbook store sales are set.

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