Daily market review

United States

Equities plunged Thursday on news of rising US Covid-19 cases, the Federal Reserve's gloomy economic outlook, and sentiment that recent gains have been excessive. The Dow Jones industrial index lost 6.9 percent; the S&P 500 dropped 5.9 percent, and the NASDAQ lost 5.3 percent.

Markets took fright at news that US cases hit 2 million on Wednesday while several Southern and Western states hit new highs in new cases and hospitalizations. Fed Chair Jay Powell's sober assessment of US economic prospects deepened the market's foul mood as did Fed projections that see rates holding near zero through 2022. Investors noted Senate Republicans have delayed discussion of a new round of fiscal stimulus until late July.

Value stocks, which have rallied sharply in recent weeks, were hit hardest, with materials, energy and financials the worst off. Defensives including consumer staples held up best, along with consumer discretionary, and communications services, but all sectors were down sharply, with losses accelerating into the close.

Notable decliners included Spirit Aerosystems, off 15 percent on news Boeing would cut its orders. Retailer Oxford Industries declined 16 percent on a bleak trading update, especially for its Tommy Bahama stores. DR Horton, the builder, fell 9.3 percent on a downgrade at JP Morgan.

Among other companies in focus, food deliverer GrubHub rose 4.6 percent on news it will be acquired by Just Eat Takeaway, its Dutch rival, in an all-stock transaction. Target, the retailer, retreated from early gains in the afternoon washout to fall 1.6 percent despite raising its dividend. Jack in the Box gave up good gains to end down 1.3 percent after reporting its same-store sales rose in May and June.

In US economic data, initial claims were 1.542 million in the June 6 week, showing the ongoing scale of devastation in the job market. Yet claims declined 355,000 from the prior week for the 10th straight decline in the series. Since mid-March when virus effects first took hold, 44.5 million Americans have filed initial claims.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil dropped US$3.24 to US$38.04, while spot gold fell US$11.01 to US$1,727.85. The US dollar rose sharply against most major currencies. The US Treasury 30-year bond yield fell 10 basis points to 1.41 percent while the 10-year note yield fell 6 basis points to 0.67 percent.


Risk-off fears returned Thursday amid fears of a second wave of US coronavirus cases and a bleak economic outlook from the Fed. The Europe-wide STOXX 600 dropped 4.1 percent, the German DAX fell 4.5 percent, the French CAC lost 4.7 percent, and the UK FTSE-100 was off 4.0 percent.

Among sectors, biggest losses occurred in travel & leisure, autos, energy, and banking, all big gainers in recent weeks and now perceived as overly pricey given the economic backdrop. Holding up better were health care, real estate, food & beverage, and personal & household goods, though all sectors were lower.

Among companies in the news, Lufthansa dropped 10 percent after saying it has more than 26,000 unneeded employees. IAG, owner of British Airways, fell 8.8 percent after a downgrade at BBVA. Peugeot Citroen fell 9.0 percent after a report that its proposed merger with Fiat Chrysler, down 7.3 percent, will draw a big antitrust investigation.

In M&A news, Just Eat Takeaway fell 3.1 percent after it agreed to acquire its US rival, Grubhub. Generali, the Italian financial services company, fell 5.1 percent after news it may sell its Swiss insurance unit.

Asia Pacific

Major Asian markets posted heavy falls Thursday, with a very light regional data calendar keeping the focus firmly on the Federal Reserve's sobering assessment of the US economic and policy outlook released Wednesday. Australia's All Ordinaries index underperformed, closing down 3.0 percent on the day, while Japan's Nikkei and Topix indices fell 2.8 percent and 2.2 percent respectively. Hong Kong's Hang Seng index and the Shanghai Composite index closed down 2.2 percent and 0.8 percent respectively

Looking ahead*

On Friday in Asia, Indian CPI and industrial production reports are due. In Europe, UK monthly GDP, UK industrial production, UK merchandise trade, French CPI, Italian unemployment rate, and Eurozone industrial production figures are scheduled. In North America, US import and export prices, and US consumer sentiment reports are on tap.

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