Daily market review

United States

Though well down from the day's highs, US equities ended higher Tuesday on improved economic data and positive trade news with tech and momentum stocks continuing their recent run. The Dow Jones industrial index rose 0.5 percent; the S&P 500 rose 0.4 percent, and the NASDAQ rose 0.7 percent.

On the trade front, President Trump tweeted late Monday the US-China trade pact remains "fully intact," which reassured investors after White House trade adviser Peter Navarro's earlier comment that the deal was "over." Meanwhile, Treasury Secretary Steven Mnuchin said shutting down the US economy again is highly unlikely despite rising Covid-19 cases.

FAANGs paced the market higher, with Apple up 2.1 percent, Amazon up 1.9 percent, plus Microsoft up 0.7 percent. Other winners included road/rail stocks, consumer discretionary, especially restaurants and homebuilders, media, entertainment, managed care, and apparel. Lagging were real estate, utilities, aerospace & defense, airlines, and retailers.

Among companies in the news, Nike rose 2.4 percent to extend its recent rally as the market anticipates strong earnings Thursday from the sportswear giant. Shoe Carnival, the beat-up retailer, rose 7.2 percent after announcing it has opened all but one of its stores, and sales have surged. ON Semiconductor rose 3 percent after an upgrade at Piper Sandler.

Among decliners, Spirit Aerosystems, a big Boeing supplier, dropped 13 percent after Boeing said it would cut its 737 production plans. Boeing was off 0.2 percent.

In US economic data, new home sales rose 16.6 percent in May to a very respectable 676,000 annual rate. This is up 12.7 percent from May last year, which was just before new home sales started their 2019 surge into the 700,000 zone. Separately, US PMI samples are reporting only limited contraction in June: manufacturing moved from deep contraction under 40 to nearly breakeven activity just under 50, at 49.6 for June's flash report; services moved from severe contraction in the mid-30s to moderate contraction at 46.7.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 65 cents to US$42.43, while spot gold rose US$14.22 to US$1,769.86. The US dollar fell against most major currencies. The US Treasury 30-year bond yield rose 3 basis points 1.49 percent while the 10-year note yield rose 1 basis point to 0.71 percent.


Better economic data and positive comments on US-China trade helped equities rise Tuesday, with German equities leading the way higher. The Europe-wide STOXX 600 rose 1.3 percent, the German DAX advanced 2.1 percent, the French CAC rose 1.4 percent, and the UK FTSE-100 was up 1.2 percent.

Markets also took positive note of UK Prime Minister Boris Johnson's announcement that pubs, restaurants, and hair salons can reopen on July 4, subject to precautions. Also positive from the UK: continued weekly declines in Covid-19 deaths.

Among European sectors, autos led the gainers, followed by banks, basic resources, insurance, financial services, oil & gas, technology, chemicals, and personal & household goods. Lagging were real estate, travel, construction & materials, media, retail, and food & beverage.

Among companies in the news, Bayer rose 6.2 percent on a report the German life sciences leader will settle claims its weed killer caused cancer. Wirecard, the German financial services company, rebounded 26 percent after successive steep declines linked to an accounting scandal. Aegon, the Dutch insurer, rose 9 percent after an analyst upgrade.

In economic news, June was a better month for the Eurozone economy, but still not a good one. The flash composite output index weighed in at 47.5, up from May's final 31.9 and easily firmer than the market consensus. It was also a 4-month high. Even so, the indications are that Covid-19 effects were still strong enough to force another contraction in real GDP.

Asia Pacific

Major Asian markets closed higher Tuesday, though moves were generally modest. Regional sentiment was supported by reassurances from the Trump administration that the US-China trade deal remains intact after a media interview with senior White House official Peter Navarro late Monday had raised uncertainty about the deal's status.

Hong Kong's Hang Seng index was the strongest regional performer, closing up 1.6 percent, boosted by a surge in tech company Tencent Holdings to a record high. Japan's Nikkei and Topix indices both advanced 0.5 percent after PMI survey data showed some easing in economic contraction, while Australia's All Ordinaries index and the Shanghai Composite index both closed up 0.2 percent.

Flash PMI survey data for Japan published Friday showed the composite output index increasing from 27.8 in May to 37.9 in June, indicating that the impact of the Covid-19 pandemic on the domestic economy has eased but remains severe, with aggregate activity still contracting at a sharp pace. The services component rose from 26.5 to 42.3 in June, with the manufacturing component dropping slightly from 38.4 to 37.8. Respondents to both surveys reported continued weakness in output, new orders, employment, business sentiment, and prices.

Singapore's headline consumer price index fell 0.8 percent on the year in May, little changed from a drop of 0.7 percent in April, while core inflation picked up slightly from a decline of 0.3 percent to a fall of 0.2 percent. The small drop in headline inflation was largely driven by a bigger decline in private transport costs, partly offset by slightly stronger increases in food prices, housing and utilities charges. Officials at the Monetary Authority of Singapore expect price pressures to remain subdued in coming months, reflecting both global oil prices and further weakness in the domestic economy caused by the pandemic. Both headline and core inflation are expected to average between minus 1.0 percent and zero over 2020.

Looking ahead*

On Wednesday in Asia/Pacific, the Reserve Bank of New Zealand will issue its policy announcement. In Europe, French business climate and German Ifo figures are due. In North America, the FHFA housing index report is scheduled.

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