Daily market review

United States

Rising tech stocks offset weakness in value stocks to help major equity indexes edge up Monday despite worries over accelerating Covid-19 infection rates in many US states. The Dow Jones industrial index rose 0.6 percent; the S&P 500 gained 0.7 percent, and the NASDAQ was up 1.1 percent.

Markets were supported by expectations for another US stimulus package, possibly to include extensions of extra unemployment benefits that have bolstered US income and spending. Cyclical plays tied to the reopening story, including airlines, suffered from worries over renewed closures and the perception that their recent gains were overdone.

Apple, up 2.6 percent, Microsoft, up 2.8 percent, and Nike, up 3.9 percent, led the day's winners. Google, up 1.8 percent, Netflix, up 3.2 percent, added to the day's gains. Gains in pharma helped health care stocks outperform.

Among companies in the news, retailers The Gap, up 8.3 percent, and Walmart, up 1.5 percent, rose on analyst upgrades. On the downside, American Airlines dropped 6.8 percent on news of a new stock and debt offering. Cruise line operator Royal Caribbean fell 6.2 percent on an analyst downgrade.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 98 cents to US$43.08, while spot gold rose US$12.79 to US$1,755.64. The US dollar fell sharply against most major currencies. The US Treasury 30-year bond yield was flat at 1.46 percent while the 10-year note yield was unchanged at 0.70 percent.


Rising Covid-19 cases in Germany and the US unnerved investors Monday as markets grappled with worries about renewed closings. The Europe-wide STOXX 600 declined 0.8 percent, the German DAX was down 0.6 percent, the French CAC was off 0.6 percent, and the UK FTSE-100 declined 0.8 percent.

Among sectors, worst performers were food & beverage, telecom, oil & gas, banks, health care, and insurance. Holding up better were autos, retail, basic resources, and utilities.

Among companies in the news, Lufthansa lost 3.1 percent as a large shareholder remained at odds with management over a planned government bailout. German payments company Wirecard dropped another 45 percent as the scandal over a missing E2 billion deepened.

In economic news, the Eurozone European Commission flash consumer confidence index for June, a month of easing virus restrictions across Europe, improved to minus 14.7 which is slightly better than expectations for minus 15.0 but not that much improved from May's minus 18.8. This index fell as low as minus 22.7 in April.

Asia Pacific

Most major Asian markets closed moderately lower Monday, with a light regional data calendar keeping investor focus on news that Covid-19 cases in parts of the United States had risen at an alarming pace since Friday. Hong Kong's Hang Seng index underperformed with a drop of 0.5 percent on the day, Japan's Nikkei and Topix indices both closed down 0.2 percent, and the Shanghai Composite index and Australia's All Ordinaries index both closed down 0.1 percent.

The People's Bank of China left the one-year loan prime rate unchanged at 3.85 percent at its monthly review, with the equivalent five-year rate also unchanged at 4.65 percent. These rates were also left unchanged in May after they were reduced by 20 basis points and 10 basis points respectively in April. This suggests that officials are comfortable for now with the degree to which monetary policy is supporting domestic activity as the economy recovers from the initial impact of the Covid-19 pandemic.

Hong Kong's headline consumer price index increased 1.5 percent on the year in May, down from 1.9 percent in April, with the underlying inflation rate falling from 2.3 percent to 1.9 percent. Weaker growth in food prices and private housing rentals were the main factors behind the easing. Officials expect headline inflation to moderate further in coming months as the impact of a surge in pork prices in 2019 continues to drop out of year-on-year comparisons.

Looking ahead*

On Tuesday in Asia/Pacific, Japanese composite and manufacturing flash PMI reports are due, along with Singapore CPI. In Europe, French, German, Eurozone and UK composite flash PMI figures are due. In North America, US PMI composite flash and US new home sales figures are scheduled.

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