Daily market review

United States

Worries that accelerating Covid-19 infections will torpedo the economy hit stocks once again on Thursday. Technology momentum stocks held up relatively well, plus chipmakers, but cyclicals, especially energy, financials, and industrials, dragged the market lower. The Dow Jones industrial index fell 1.4 percent, the S&P 500 eased 0.6 percent, and the NASDAQ edged up 0.5 percent.

Markets reacted badly as US infections passed 3 million, and California, Texas, and Florida reported fresh daily record highs in new cases, with new hotspots across the South and West. Reports of spending cutbacks coming as state and local governments face budget shortfalls added to negative sentiment.

Among sectors, tech stocks outperformed, led by the FAANGs, with Apple up 0.4 percent, and Microsoft, up 0.7, plus chipmakers, up 1.3 percent as a group. Networking leader Cisco rose 1.9 percent after an analyst upgrade.

In US economic data, initial unemployment claims fell for the 14th straight week. The bad news is that the weekly level is still well over 1 million, at 1.314 million in the July 4 week for a 99,000 decline and modestly below Econoday's consensus for 1.375 million.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 91 cents to US$42.32, while spot gold fell US$5.77 to US$1,803.44. The US dollar rose against most major currencies. The US Treasury 30-year bond yield fell 9 basis points to 1.31 percent while the 10-year note yield fell 6 basis points to 0.60 percent.


Worries about spreading Covid-19 infections in the US hurt equities Thursday as concerns over renewed lockdowns increased. The Europe-wide STOXX 600 declined 0.8 percent, the German DAX was flat, the French CAC fell 1.2 percent, and the UK FTSE-100 was off 1.7 percent. Risk appetite also suffered from rising US-China tensions, including a report that the Trump administration will soon implement new restrictions on companies doing business with China's telecom champion, Huawei.

Among sectors, energy was among the hardest hit as pandemic worries hurt oil prices. Other underperformers included utilities, banks, media, insurance, travel & leisure, industrials, and real estate. Holding up better were technology, basic resources, and chemicals.

Among companies, Airbus fell 2.5 percent after reporting a huge drop in deliveries for the first half of the year, despite an uptick in June. Swiss biotech Idorsia was down 11 percent on news a major shareholder was selling its stake. Rolls-Royce, the auto and engine maker, dropped 11 percent after a gloomy first half update.

On the plus side, SAP, the German software giant, rose 4.3 percent after reporting its business rebounded in the second quarter and affirming its full-year guidance. Big pharma Roche (up 0.7 percent) advanced on reports the European Commission had agreed to buy Covid-19 treatments from the company.

Asia Pacific

Asian equities ended higher Thursday with China outperforming as Chinese markets remained buoyed by expectations for official support. The gains occurred despite news of rising Covid-19 cases in the US. The Shanghai composite rose 1.4 percent, the Bombay Sensex gained 1.1 percent, and the Australian All Ordinaries was up index 0.7 percent. News that Covid-19 cases in Tokyo set a new record Thursday kept Japanese equities in check as the Nikkei rose 0.4 percent.

Japanese machinery orders data surprised to the upside. Orders rose 1.7 percent on the month in May, rebounding from a decline of 12.0 percent in April and much better than the forecast for a decline of 9.0 percent. This suggests that parts of the Japanese economy have begun to steady and, in some cases, recover from the initial impact of the Covid-19 pandemic, though manufacturing orders as well as the level of total activity remains weak.

Looking ahead*

On Friday in Asia, the Japanese PPI and Indian industrial production reports are on tap. In Europe, French and Italian industrial production reports are scheduled. In North America, Canadian Labour Force Survey and US PPI-FD figures are due.

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