Daily market review

United States

Positive sentiment linked to Friday's amazing US jobs report and the bullish reopening narrative boosted equities again Monday. The Dow Jones industrial index gained 1.7 percent, the S&P 500 was up 1.2 percent, and the NASDAQ rose 1.1 percent to end at a record high.

Expectations for more re-openings, upbeat corporate commentary on business conditions, and monetary policy stimulus remain the market focus. The Federal Reserve Monday expanded its highly-anticipated Main Street Lending programs. Meanwhile, White House economic adviser Kevin Hassett said another fiscal package is coming. Markets generally don't see this week's Fed policy meeting yielding any new moves but they do expect the Fed to pledge to keep conditions highly accommodative.

Among sectors, energy was the best performer, led by oilfield services companies. Real estate and utilities beat the tape, along with industrials, especially airlines and aerospace, financials, travel & leisure, and retail. Laggards included health care, especially pharma, communications services, and the FAANGs.

Among companies in focus, Thor Industries, the recreational vehicle maker, rallied 11 percent after an earnings beat and its announcement that it sees more people using their vehicles to "work from anywhere".

AstraZenaca, the big UK pharma, fell 2.4 percent in US trading after a Bloomberg report that it has approached Gilead Sciences, up 0.3 percent, about a possible takeover of the US biopharma and maker of anti-Covid-19 drug remdesivir. Subsequent reports suggested the merger was unlikely.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.30 to US$40.84, while spot gold rose US$16.76 to US$1,698.35. The US dollar weakened against most major currencies. The US Treasury 30-year bond yield fell 3 basis points to 1.64 percent while the 10-year note yield fell 3 basis points to 0.87 percent.


Equity indexes ended slightly weaker Monday as the market pared last week's huge gains, but focus remained on the reopening story. Weakness in tech and health care was mostly offset by strength in banks and energy stocks. The Europe-wide STOXX 600 declined 0.3 percent, the German DAX eased 0.2 percent, the French CAC declined 0.4 percent, and the UK FTSE-100 was off 0.2 percent.

Declines in semiconductors depressed tech shares, with STMicroelectronics off 4.4 percent and ASML down 4.8 percent. In health care, AstraZeneca fell 2.7 percent on reports it may bid for Gilead Laboratories.

Meanwhile, energy shares, including Total, up 1.3 percent, and Royal Dutch Shell, up 1.8 percent, benefited from rising crude oil prices after the weekend OPEC accord to limit output. Bank shares rose after Keefe, Bruyette & Woods recommended the still-beaten-up sector.

Among the day's winners were Urban Exposure Real Estate, up 9.6 percent on reports of a pending buyer for the UK property company, and Marston's, the UK pub chain, up 9 percent after the UK set June 22 to reopen restaurants and pubs.

In economic data, German industrial production declined a record 17.9 percent in April from March, below expectations and following a 8.9 percent decrease in March, to cut annual growth from minus 11.1 percent to minus 25.3 percent, also a new all-time low.

Asia Pacific

Major Asian markets closed higher Monday, broadly following the lead set by Wall Street Friday after the release of much better-than-expected US payrolls data. OPEC's decision over the weekend to extend oil production cuts for another month was also a focus of attention for regional investors, with global oil prices moving higher during the Asian trading session. New Zealand authorities announced Monday that there are now no known active Covid-19 cases in the country, with public health restrictions lifted but its border to remain closed. New Zealand indexes rose sharply including the S&P/NZX 20, up 3.1 percent.

Japan's Nikkei and Topix closed up 1.4 percent and 1.1 percent respectively, while the Shanghai Composite index advanced 0.2 percent and Hong Kong's Hang Seng index closed the day flat. Markets in Australia were closed for a national holiday.

Revised Japanese GDP data published Monday confirmed that the economy entered into a technical recession in the first quarter with a second consecutive quarterly decline. The contraction in activity, however was smaller than initially estimated and less pronounced than that recorded in the previous quarter when household consumption fell sharply in response to an increase in consumption tax rate at the start of October. GDP fell 0.6 percent on the quarter compared with the initial estimate of a drop of 0.9 percent and a fall of 1.9 percent in the fourth quarter.

Chinese trade data published over the weekend showed the country's trade surplus widened from US$45.3 billion in April to a record $62.93 billion in May. But exports fell 3.3 percent on the year, weakening from an increase of 3.5 percent in April, while imports fell much more sharply, down 16.7 percent after dropping 14.2 percent previously. The large drop in imports largely reflected lower global commodity prices. China's exports to the US fell 1.2 percent on the year in May, weakening from growth of 2.2 percent in April, while imports from the US fell 13.5 percent after dropping 11.1 percent previously. This pushed China's bilateral trade surplus with the United States up from $22.87 billion in April to $27.89 billion in May.

Looking ahead*

On Tuesday in Europe, Swiss unemployment, French and German merchandise trade, and Eurozone GDP reports are scheduled. In North America, the US JOLTS report is due.

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