Daily market review

United States

Equities firmed in choppy month-end trading Tuesday, with the FAANGs and tech shares leading and old-line industrials lagging. Worries about rising US Covid-19 cases and renewed closures remained a distinct negative. The Dow Jones industrial index was up 0.9 percent, the S&P 500 rose 1.5 percent, and the NASDAQ gained 1.9 percent.

Markets were restrained by top health adviser Anthony Fauci's comment that a Covid-19 vaccine remains uncertain and that the US could see 100,000 new cases a day. China's move to implement curbs on Hong Kong was another negative. On the plus side were month-end rebalancing, and relatively upbeat US economic data. Fed Chair Jay Powell said the economic outlook remains uncertain and hinges on containing the virus as the economy reopens.

Among sectors, technology shares led gainers with software and chipmakers faring best. Regional banks helped financials outperform, along with investment banks and brokers. Amazon (up 2.9 percent) and apparel led consumer discretionary higher. Health care also outperformed despite weakness in pharma. Materials lagged, along with media and telecom. Worst off were industrials, with airlines, aerospace & defense getting hit, along with consumer staples and utilities.

Among companies, chipmaker Micron rose 4.8 percent after an upbeat revenues forecast. Conagra, the food company, rose 4.4 percent on an earnings and revenues beat. Lululemon, the sports clothing retailer, rose 6 percent on news it will acquire Mirror, a home fitness equipment company. Uber, the ride-share company, rose 4.9 percent on news it will acquire Postmates, the food delivery service. Tesla rallied 7 percent on a leaked email from founder Elon Musk urging employees to work hard to help the company break even, a step needed for it to join the S&P 500.

Notable losers included Inovio, off 15 percent as the market was disappointed that its Covid-19 vaccine trial results were not more positive. Boeing fell 5.8 percent, giving up some of Monday's big gains after Norwegian Air canceled a big order.

In US economic data, consumer confidence rose more than 12 points to a better-than-expected 98.1. Econoday's consensus was for 90.0. Cut off date for the survey was June 18 thereby excluding any effects from rising rates of covid infections late in the month. Separately, June wasn't quite as bad as prior months for Chicago's PMI sample but it was still bad, at only 36.6 for the composite index which was up from May's 32.3 and April's 35.4 but short of Econoday's consensus for 44.5.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 34 cents to US$41.15, while spot gold rose US$10.40 to US$1,781.53. The US dollar declined against most major currencies. The US Treasury 30-year bond yield rose 3 basis points 1.41 percent while the 10-year note yield rose 3 basis point to 0.66 percent.


European equities were narrowly mixed Tuesday as focus remained on rising Covid-19 cases and renewed shutdowns in California and other US states. The Europe-wide STOXX 600 firmed 0.1 percent, the German DAX rose 0.6 percent, the French CAC eased 0.2 percent, and the UK FTSE-100 fell 0.9 percent.

Outperforming were technology, basic resources, real estate, insurance, financial services, utilities, autos and industrials. Lagging were oil & gas, health care, banks, travel & leisure, construction, and retail.

Among companies, Royal Dutch Shell fell 3.9 percent after writing down the value of its petroleum reserves because of the pandemic hit to oil prices. SAS, the Scandinavian airline, fell 13 percent after announcing a recapitalization plan. On the positive side, Smiths Group, the UK engineering company, rose 9.3 percent after announcing a restructuring plan. Standard Life Aberdeen, the Scottish financial services company, rose 2.8 percent after choosing a new CEO. Wirecard, the bankrupt German financial services company, soared 96 percent to lead the DAX higher on reports it is seeking a buyer.

In economic data, Eurozone inflation provisionally increased in June for the first time since January. A flash yearly rate of 0.3 percent was stronger than market expectations and fully reversed May's 0.2 percentage point decline. However, it was still 1.1 percentage points short of its level at the start of 2020.

Asia Pacific

Major Asian markets closed higher Tuesday, with regional investor sentiment supported by the strong gains made on Wall Street Monday and better-than-expected Chinese PMI survey data. Australia's All Ordinaries index outperformed, closing up 1.5 percent, while Japan's Nikkei and Topix indices advanced 1.3 percent and 0.6 percent respectively. The Shanghai Composite index gained 0.8 percent. Hong Kong's Hang Seng index underperformed with an increase of 0.5 percent after Chinese officials advised that new security laws for Hong Kong had been approved; more details about how the laws will operate are expected to be provided in a media conference Wednesday.

Official Chinese PMI survey data suggest conditions improved in June as China's economy continues to recover after the initial impact of the Covid-19 pandemic. China's CFLP manufacturing PMI rose from 50.6 in May to 50.9 in June to indicate a small expansion in activity, while the non-manufacturing PMI rose from 53.6 to 54.4, indicating a solid pace of growth.

Japanese data published Tuesday provided further evidence that the economic impact of the pandemic remained severe in May. Japan's unemployment rate rose from 2.6 percent in April to 2.9 percent in May, its third consecutive increase and a 3-year high. Industrial production, meanwhile, fell 8.4 percent on the month in May after dropping 9.8 percent in broad-based weakness in April. Although preliminary PMI survey data published last week indicated that the manufacturing sector contracted further in June, officials forecast industrial production to expand in both June and July.

Looking ahead*

On Wednesday in Asia/Pacific, Japanese Tankan, Japanese PMI manufacturing, Chinese PMI manufacturing, and Indian PMI manufacturing reports are due. In Europe, the following reports are on tap: German retail sales, Swiss SVME purchasing managers, French PMI manufacturing, German PMI manufacturing, Eurozone PMI manufacturing, UK CIPS/PMI manufacturing, and German unemployment. In North America, US ADP employment, US PMI manufacturing, US ISM manufacturing, US construction spending, and FOMC minutes are scheduled.

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