Daily market review

United States

A rebound in Boeing shares and better US economic data helped US stocks recover Monday after sharp losses last week. The Dow Jones industrial index rose 2.3 percent; the S&P 500 gained 1.5 percent, and the NASDAQ was up 1.2 percent.

Industrials paced the winners, with aerospace, auto suppliers and airlines leading, as shares appeared oversold on worries about rising Covid-19 cases. Consumer staples outperformed, with support from cosmetics and grocery stores. Energy shares were weak, along with consumer discretionary. Tech shares lagged the most, with chipmakers and software down.

Among companies, Boeing popped up 14 percent on news that US government certification flights began Monday for its troubled 737 Max aircraft. Coty, the cosmetics company, rose 13 percent on news it would invest in Kim Kardashian's cosmetic brand. Facebook rose 2.1 percent but fell earlier as several large advertisers, including Starbucks (up 2.7 percent) and Coca-Cola (up 1.8 percent) joined a boycott aimed at limiting hate speech on social media.

Southwest Air rose 9.6 percent after an analyst upgrade. On the downside, Chesapeake Energy, the fracking pioneer, was off 7.3 percent with trading suspended after filing for bankruptcy.

In US economic data, pending home sales surged 44.3 percent in May, which was far better than expected and which points to sharp gains for final sales in the months of June and July. Of all sectors of the US economy, housing has performed the best this year. Separately, Texas manufacturing bounced back in June, with the general business activity index rising 43.1 points to minus 6.1. The production index rose 41.6 points to plus 13.6, coming out of contraction for the first time after three record low months.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 83 cents to US$41.49, while spot gold rose 52 cents to US$1,771.13. The US dollar was little changed on net against most major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.39 percent while the 10-year note yield fell 1 basis point to 0.63 percent.


European equities tracked US markets higher Monday, with support from news of Gilead Sciences pricing its remdesivir Covid-19 drug. The Europe-wide STOXX 600 rose 0.4 percent, the German DAX gained 1.2 percent, the French CAC was up 0.7 percent, and the UK FTSE-100 rose 1.1 percent.

Despite the gains, markets remained focused on rising Covid-19 cases in the US and resurgent hot spots in Germany and elsewhere, which have prompted some pauses in planned reopenings.

Bank stocks led the winners, along with autos, chemicals, construction, telecom, industrials, insurance, utilities, and media. Lagging were food & beverage, real estate, health care, technology, personal & household goods, travel, and retail. Among companies in focus, Wirecard, the bankrupt German financial services company, soared 123 percent after saying it plans to remain in business. Commerzbank rose 5.5 percent after announcing a cost-cutting plan. Drax, a UK electrical power company, rose 9.6 percent on reports it may be acquired. BP rose 3.4 percent as the oil supermajor said it would sell its petrochemicals business.

In economic data, the EC Eurozone economic sentiment index improved to 75.7 in June, rising 8.2 points for the largest monthly increase on record, recovering about 30 percent since March and April. More encouragingly, the increase was more broad-based in June than it was in May, with "significant increases" across all surveyed business sectors and with the largest gains in the retail sector.

Asia Pacific

Major Asian markets closed lower Monday, following the lead set by Wall Street Friday on renewed concerns about the economic impact of a potential second wave of the global Covid-19 pandemic. Japan's Nikkei and Topix indices underperformed with declines of 2.3 percent and 1.8 percent respectively, while Australia's All Ordinaries index closed down 1.6 percent. Hong Kong's Hang Seng index and the Shanghai Composite index fell 1.0 percent and 0.6 percent respectively.

Retail sales in Japan fell 12.3 percent on the year in May after dropping 13.9 percent in April, underscoring the ongoing impact of the pandemic on economic activity. On the month, retail sales rose 2.1 percent after falling 9.9 percent previously. Further weakness in headline retail sales was largely driven by another month of large declines for key categories including general merchandise, motor vehicles, fuel, and clothing, offset only partly by a stronger growth in food sales.

Hong Kong's merchandise trade deficit narrowed from HK$23.3 billion in April to HK$13.7 billion in May. Exports fell 7.4 percent on the year after a decline of 3.7 percent previously, while imports fell 12.3 percent, weakening from a drop of 6.7 percent previously. The bigger decline in headline exports reflected continued weakness in demand from the US and the EU, offset only partly by modest growth in exports to mainland China. Officials expect exports to remain "under pressure" in coming months, reflecting the ongoing impact of the Covid-19 pandemic and tensions in the US-China trade relationship.

Chinese industrial profits data published over the weekend suggested that the impact of the pandemic on the Chinese manufacturing sector is moderating. Profits dropped 19.3 percent year-to-date in May after falling 27.4 percent in April, and rose 6.0 percent in year-on-year terms, rebounding from a decline of 4.3 percent previously.

Looking ahead*

On Tuesday in Asia/Pacific, Japanese unemployment, Japanese industrial production, and Chinese CFLP manufacturing PMI reports are due. In Europe, UK GDP, Swiss retail sales, Swiss KOF leading indicator, French consumer manufactured goods consumption, French CPI, French PPI, Eurozone HICP flash, and Italian CPI reports are on tap. In North America, Fed Chair Jay Powell will speak, plus Canada monthly GDP, US S&P Corelogic Case-Shiller HPI, Chicago PMI, and US consumer confidence reports are scheduled.

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