Daily market review

United States

Equities recovered steep early losses to swing back into positive territory Monday after the Federal Reserve launched its corporate bond buying facility. Earlier, markets dropped on concerns about a new global wave of the coronavirus, with new hotspots in Beijing and high new infection rates in India and the US. Investors appeared wary ahead of Fed Chair Jay Powell's congressional testimony scheduled Tuesday. The Dow Jones industrial index rose 0.6 percent; the S&P 500 gained 0.8 percent, and the NASDAQ rose 1.4 percent.

Among sectors, financials led winners on strength in investment banks and life insurers. Technology shares outperformed, led by chipmakers and computer hardware. Communications services, industrials, and materials also beat the tape. Lagging were health care and energy, especially the oil majors.

Among companies in the news, vaccine maker Moderna rose 7.4 percent on a report Israel is planning to buy a supply of its coronavirus vaccine. Shopify, the e-commerce company, rose 8.5 percent on news it will team up with Walmart (up 0.3 percent) in the battle against Amazon, which rose 1.1 percent.

Stability at a lower base -- but at least stability -- is the indication from the Empire State index which at minus 0.2 in June follows record contraction of minus 48.5 and minus 78.2 in May and April. A reading of zero for this index indicates no change in general activity compared to the prior month.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 80 cents to US$39.70, while spot gold fell US$5.20 to US$1,726.39. The US dollar dropped against most major currencies. The US Treasury 30-year bond yield was unchanged at 1.46 percent while the 10-year note yield was unchanged at 0.71 percent.


Equities slipped Monday on news of rising Covid-19 cases in China and India. The Europe-wide STOXX 600 fell 0.3 percent, the German DAX declined 0.3 percent, the French CAC declined 0.5 percent, and the UK FTSE-100 was off 0.7 percent.

New lockdowns in Beijing as well as high continued infection rates in India and rising case levels in the US are renewing market concerns that a second wave of the disease may be underway. On the positive side Monday, France lifted most restrictions, the UK opened non-essential shops for business, and countries across Europe began lifting border controls.

Among sectors, worst performers included basic resources, travel & leisure, banks, retail, oil & gas, food & beverage, telecom, and technology, while holding up best were construction & materials, financial services, industrials, autos, and health care.

Among companies, BP dropped 2.2 percent after writing down up to $17.5 billion in its oilfield holdings on expectations for lower oil prices. On the positive side, H&M, the clothing retailer, rose 0.5 percent after its earnings, though weak, beat expectations.

Asia Pacific

Major Asian markets closed sharply lower Monday, with Chinese economic data showing further signs of stabilization in May but a renewed outbreak of Covid-19 in China and an increase in cases in India renewing investor concerns about a possible second wave of the pandemic. Authorities closed down parts of Beijing in the vicinity of a major wholesale food market after a number of cases were traced to the area, while Covid-19 infection rates remain high in India despite the introduction of a strict national lockdown late March.

Japan's Nikkei and Topix indices were among the weaker performers in the region Monday, closing down 3.5 percent and 2.5 percent respectively, with shares of airlines and major shippers posting large declines. Australia's All Ordinaries index and Hong Kong's Hang Seng index both fell 2.2 percent on the day, while the Shanghai Composite index closed down 1.0 percent.

Chinese activity data published Monday were weaker than expected but showed industrial production, retail sales, and fixed asset investment all posted month-on-month increases and improved year-on-year growth in May. This suggests economic activity is continuing to recover from the impact at the start of the year of the Covid-19 pandemic, broadly in line with PMI survey data for May published earlier in the month.

Chinese industrial production rose 1.53 percent on the month in May after advancing 2.20 percent in April, with year-on-year growth picking up from 3.9 percent to 4.4 percent. Retail sales rose 0.79 percent on the month after a similar increase of 0.77 percent previously, with year-on-year growth improving from a decline of 7.5 percent to minus 2.8 percent. Fixed asset investment, also from China, rose 5.87 percent on the month after increasing 6.20 percent previously with year-to-date growth also improving, from a drop of 10.3 percent to a fall of 6.3 percent. Other data published Monday showed an eleventh consecutive decline in Chinese house price inflation from 5.1 percent in April to 4.9 percent in May.

India's wholesale price index fell 3.21 percent on the year in May, down from 1.00 percent in March. Data for April were not published due to lockdown disruptions to the collection process. This also means that month-on-month change in the index was not reported in May. Weakness in headline wholesale prices in May largely reflected low fuel prices. CPI inflation data for both April and May have not been published.

Looking ahead*

On Tuesday in Asia/Pacific, Australian RBA meeting minutes and the Australian residential property price report are due as well as a monetary policy announcement from the Bank of Japan. In Europe, German CPI, German ZEW, and UK labor market figures are scheduled. In North America, Fed Chair Jay Powell will testify, plus reports on US retail sales, industrial production, business inventories, and the housing market index are all on tap.

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