Daily market review

United States

Risk appetite eroded Thursday as the accelerating spread of the coronavirus in several US states added to worries that the economic recovery will be delayed. The Dow Jones industrial index eased 0.2 percent; the S&P 500 rose 0.1 percent, and the NASDAQ gained 0.3 percent.

Declines in major indexes were limited by strength in energy stocks as oil prices rose after major oil exporters pledged stricter adherence to output limits. Confidence in the Federal Reserve and other central banks is limiting big overall market declines for now, and major indexes recovered from afternoon lows into the close.

Among sectors outside energy, real estate fared worst along with health care. Industrials were depressed by weakness in airlines on pandemic worries. Other losers included construction and engineering names. Consumer discretionary was off, along with communication services and financials.

Among companies in the news, notable decliners included US Steel, off 13 percent after announcing a share offering and saying it may not pay dividends in the future, though it will pay the latest quarterly dividend. Kroger fell 3 percent after the grocery chain pulled its guidance on virus uncertainty. Carnival, the cruise line company, fell 1.4 percent on an earnings and revenues miss and ongoing uncertainty about when cruises can resume. Hertz fell 10 percent after the bankrupt car rental company formally shelved its plan to sell more shares. On the positive side, Clorox rose 1.2 percent to a fresh high as demand for anti-virus cleaners remained strong. Procter & Gamble rose 1.1 percent as virus worries bolstered the appeal of consumer staples.

In US economic data, initial claims fell only 58,000 in the June 13 week to a 1.508 million level that was well above expectations for 1.220 million. Weekly claims, after peaking at 6.867 million in late March, have eased each week since though the latest result shows the least improvement of this catastrophic run. Meanwhile, in the latest indication that the factory sector has bottomed, the Philadelphia Fed manufacturing index surged more than 70 points in June to a far higher-than-expected 27.5 with the outlook for future activity jumping more than 16 points to 66.3.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 96 cents to US$41.49, while spot gold fell US$3.90 to US$1,725.33. The US dollar rose against most major currencies. The US Treasury 30-year bond yield fell 6 basis points to 1.47 percent while the 10-year note yield fell 3 basis points to 0.70 percent.


Worries about Covid-19 cases in China and the US hurt equities Thursday along with disappointment that Bank of England policy action was not more aggressive. The Europe-wide STOXX 600 slipped 0.7 percent, the German DAX and the French CAC percent both fell 0.8 percent, and the UK FTSE-100 was off 0.5 percent.

Risk assets were hurt by news of fast-rising Covid-19 cases across the South and West in the US, and partial lockdowns in Beijing to stem the spread of the virus. Separately, the Bank of England raised its asset purchases by Stg 100 billion and left rates unchanged, which disappointed some investors who looked for a larger increase in asset purchases.

In economic news, the Swiss National Bank left its policy rate at minus 0.75 percent and the central bank reaffirmed its commitment to intervene strongly in the FX markets to prevent further appreciation of the Swiss franc which it continues to describe as "highly valued". Separately, the BoE's June MPC meeting saw the asset purchase ceiling raised by a further £100 billion to £745 billion. Purchases are expected to be completed by the end of the year. Also as expected, UK Bank Rate was unchanged at its 0.10 percent record low.

Asia Pacific

Most major Asian markets closed lower Thursday, with regional economic data showing the ongoing impact of the Covid-19 pandemic and investors also focused on renewed concerns about the spread of the disease in the US and China. Australia's All Ordinaries index posted the biggest regional loss on the day, down 0.9 percent after release of weak labour market data, while Japan's Nikkei and Topix indices fell 0.5 percent and 0.3 percent respectively. Moves elsewhere were modest, with Hong Kong's Hang Seng index closing down 0.3 percent and the Shanghai Composite index advancing 0.1 percent.

Australia's workforce fell by 277,000 in May after falling 607,400 in April, with the unemployment rate increasing from 6.4 percent to 7.1 percent, its highest level since 2000. The participation rate dropped from 63.6 percent to 62.9 percent, a level not seen since 2001. Business and social restrictions have clearly kept conditions in the labour market very weak, but the smaller decline in employment likely reflected the easing in those restrictions that have picked up pace in recent weeks. Nevertheless, recovery in employment to pre-pandemic levels looks to be a slow process.

The economic impact of the pandemic was also evident in New Zealand GDP data also published Thursday, with weaker external demand, a ban on foreign travel, and business and social restrictions all weighing on activity. New Zealand's economy contracted 1.6 percent on the quarter in the three months to March, weakening sharply from growth of 0.5 percent in the three months to December. This is the first quarterly contraction in New Zealand's economy since 2010 and the biggest since 1991. Year-on-year growth also slowed sharply from an increase of 1.8 percent to a fall of 0.2 percent. Officials at the Reserve Bank of New Zealand noted at their previous meeting in May that this weakness in growth is expected to persist and are likely to keep policy very accommodative at their next meeting scheduled for next week.

Looking ahead*

On Friday in Asia/Pacific, the Bank of Japan will release its monetary board minutes and Japanese CPI data are due. In Europe, UK public sector finances, German PPI, and UK retail sales figures are due. In North America, Canadian retail sales and US current account reports are due.

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