Daily market review

United States

Risk-on powered stocks Monday as buyers continued piling into the market's momentum darlings -- Facebook, Amazon, Apple, Google, Microsoft, plus Tesla, which soared another 13 percent on top of recent huge gains. The Dow Jones industrial index rose 1.8 percent, the S&P 500 gained 1.6 percent, and the NASDAQ was up 2.2 percent.

Investors were inspired by the day's 5.7 percent rally in the Shanghai composite after an official Chinese publication said the stage was set for a bull market. Risk sentiment also drew support from an upside surprise in the US non-manufacturing purchasing managers' report, which returned to expansion. Markets even saw as positive the weekend's Covid-19 news as they focused on lower mortality rates despite surging infection and hospitalization numbers in many states.

Among sectors, consumer discretionary led gainers, along with communication services, tech, and financials. Lagging were consumer staples, energy, and worst off were utilities as defensive shares lost favor.

Among the day's winners, gains in Boeing, up 4.0 percent, and Goldman Sachs, up 5.1 percent, powered the Dow higher on the recovery story. Other leaders included Square, the financial services company, up 4.9 percent on an analyst upgrade. Thermo Fisher, the laboratory instrument maker, rose 4.5 percent after reporting strong gains in sales of testing equipment for Covid-19. Becton Dickinson, the medical devices maker, gained 2,2 percent after the FDA authorized use of its fast-result Covid-19 test.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 26 cents to US$43.07, while spot gold rose US$9.86 to US$1,786.18. The US dollar dropped against most major currencies in the risk-on move. The US Treasury 30-year bond yield rose 1 basis point to 1.44 percent while the 10-year note yield rose 1 basis point to 0.68 percent.

In economic data, the ISM's non-manufacturing index surged to a much higher-than-expected 57.1 in June. Econoday's consensus for 50.1 was looking for virtually no change in the month, with June's result well beyond the high estimate of 52.7.


Cyclicals led equities higher Monday as investors saw progress on treatments and vaccines for Covid-19, along with signs of economic recovery. The Europe-wide STOXX 600 and the German DAX both rose 1.6 percent, the French CAC gained 1.5 percent, and the UK FTSE-100 jumped 2.1 percent.

Gilead's remdesivir treatment for the coronavirus was approved for use in the European Union, and reports said the UK is nearing a deal to buy many doses of a potential vaccine from Sanofi and GlaxoSmithKline. The market chose not to focus on soaring infection rates in many US states, in Latin America, India, and elsewhere.

Among sectors, banks were the biggest winners. HSBC rose 6.6 percent, and Commerbank rose 6.8 percent, with the latter buoyed by news its leaders would resign under pressure from activist shareholder Cerberus. Meanwhile, UK shares outperformed, led by homebuilders, after a report the UK will raise the minimum home price level for stamp tax from Stg125,000 to as much as Stg500,000. Barratt Developments, up 8 percent, and Vistry Group, up 6.8 percent, were two leaders in the UK homebuilding sector.

Other leading sectors included technology, autos, insurance, basic resources, industrial technology, insurance, basic resources, and industrials. Lagging but still higher were utilities, telecom, retail, food & beverage, health care, and real estate.

In economic news, Eurozone retailers outperformed expectations in May. Following a slightly steeper revised 12.1 percent monthly drop in April, volume sales rose a record 17.8 percent to boost annual growth from minus 19.6 percent to minus 5.1 percent. Separately, German manufacturers' orders rebounded sharply in May. However, a 10.4 percent monthly rise was still less than expected and followed a steeper revised 26.2 percent slump in April. Annual growth improved from minus 37.0 percent to minus 29.4 percent.

Asia Pacific

Most major Asian markets started the week with strong gains after an editorial in the state-controlled China Securities Journal advocated for a "healthy bull market" for domestic shares. This editorial has boosted confidence among regional investors that Chinese officials are supportive of further share market gains as part of efforts to drive economic recovery after the Covid-19 downturn. The Shanghai Composite index and Hong Kong's Hang Seng index surged, closing up 5.7 percent and 3.8 percent respectively on the day, with trading volumes also picking up sharply. Japan's Nikkei and Topix indices also advanced 1.8 percent and 1.6 percent respectively. Australia's All Ordinaries index, however, underperformed with a fall of 0.6 percent after authorities announced that the border between the two most populous states, New South Wales and Victoria, will be closed in response to large increases in Covid-19 cases in the latter over the last week.

The Markit Hong Kong PMI survey's headline index rose from 43.9 in May to 49.6 in June, its highest level since April 2018. This indicates that activity in the domestic economy was close to stable in June, albeit at a weak level, as authorities eased restrictions on businesses and households put in place to curb the spread of Covid-19 during the initial months of the pandemic. Fiscal measures to support the local economy may also have contributed to this improvement, though concerns about the Chinese government's decision to tighten security laws in Hong Kong may be a factor that weighs on sentiment in coming months.

Looking ahead*

On Tuesday in Asia/Pacific, the Reserve Bank of Australia policy announcement and the Japanese household spending report are due. In Europe, the following data releases are on tap: German industrial production, French merchandise trade, UK Halifax HPI, and Italian retail sales. In North America, Canadian Ivey purchasing managers and US JOLTS figures are scheduled.

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