Daily market review

United States

Good news from Gilead Sciences on its treatment for Covid-19 gave stocks a boost Friday. Cyclicals most exposed to the reopening trade led the gainers, with travel, finance, and energy outperforming, while momentum stocks paused. The Dow Jones industrial index rose 1.4 percent, the S&P 500 gained 1.0 percent, and the NASDAQ rose 0.7 percent.

Among other sectors, utilities recovered some of the week's losses. Materials outperformed, along with consumer staples, communication services, and industrials. Tech shares lagged, with weakness in chipmakers and software; real estate and health care were worst off.

Gilead rose 2.2 percent after the US biopharma reported additional favorable clinical results for its remdesivir medication in speeding recovery and reducing deaths from Covid-19.

Among other companies in focus, Matson, the transportation company rallied 33 percent after issuing improved guidance. Airlines were winners on the reopening trade, with American Airlines up 6.8 percent, JetBlue up 6.2 percent, and Southwest Air up 5.2 percent.

Carnival, the beat-up cruise company, gained 11 percent after saying bookings for 2021 have been surprisingly strong. Tech stocks appeared to pull back after rallying through the week, with Microsoft down 0.3 percent on the day. Paypal, the payments leader, fell 2.6 percent from Thursday's record high. Netflix rose 8 percent on an upgrade at Goldman Sachs.

In US economic data, falling prices for services pulled producer prices 0.2 percent lower in June, well short of expectations for a 0.4 percent gain. But when excluding trade services (wholesalers and retailers) as well as food and energy, producer prices rose 0.3 percent in the month.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 84 cents to US$43.16, while spot gold fell US$3.98 to US$1,799.46. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.34 percent while the 10-year note yield rose 3 basis points to 0.64 percent.


Rebounding French and Italian industrial production figures gave equities a lift Friday and fed the narrative that the economic recovery can be fast in Europe. Markets also reacted favorably to rising expectations for EU leaders meeting next week to agree on a recovery plan for Europe. The Europe-wide STOXX 600 rose 0.9 percent, the German DAX gained 1.2 percent, the French CAC was up 1.0 percent, and the UK FTSE-100 rose 0.8 percent.

French industrial production began to recover in May. Having fallen more than 37 percent in March/April, output rebounded by a stronger than expected 19.6 percent on the month in mid-quarter to lift annual growth from minus 35.0 to minus 23.4 percent. Separately, Italian Goods production rebounded in style in May. A record 42.1 percent monthly leap was more than double market expectations and the first increase of any size since January. Following a slightly steeper revised 20.5 percent slump in April, annual growth climbed from minus 43.4 percent to minus 20.3 percent.

Among sectors, banks and autos outperformed while basic resources and technology lagged the market. Among companies in the news, Carlsberg rose 6.4 percent after the Danish brewer reported better than expected results and recovering business in key markets, including China. ST Microelectronics rose 5.1 percent on news it will develop biometric payment cards. ING, the Dutch bank, rose 4.6 percent after unveiling its cost-cutting plan. Intrum, the Swedish debt collector, rose 14 percent after raising its earnings guidance and saying European markets are returning to normal faster than expected.

Asia Pacific

Major Asian markets closed lower Friday, with performance over the week diverging widely across the region. Renewed concerns about Covid-19 developments were the main focus for investors Friday, with more large increases in cases in parts of the United States on Thursday followed by news of tighter public health restrictions in parts of Australia and reports that schools in Hong Kong will be suspended to help curb the spread of the virus.

Hong Kong's Hang Seng index was among the weaker performers in the region, closing down 1.9 percent on the day and up 1.3 percent on the week. The Shanghai Composite index also fell 1.9 percent on the day, with sentiment there also impacted by reports that state-owned investment funds were planning to reduce their equity market exposure after the strong gains recorded in recent weeks. Despite the fall on Friday, the index still closed the week up 7.3 percent. Japan's Nikkei and Topix indices closed down 1.1 percent and 1.4 percent respectively on the day and fell 0.1 percent and 1.1 percent respectively on the week, while Australia's All Ordinaries index fell 0.6 percent on the day and 2.1 percent on the week.

Japan's producer price index fell 1.6 percent on the year in June after falling a revised 2.8 percent in May. This is the fourth consecutive year-on-year decline in producer prices. The index rose 0.6 percent on the month after falling a revised 0.5 percent previously. The smaller year-on-year decline in headline producer prices in June was mainly driven by a less pronounced - though still large - fall in energy prices, with price changes relatively steady for other major categories, including food.

Total new yuan loans made by Chinese banks in June amounted to CNY1,810 billion, up from CNY1,480 billion in May and above the CNY1,660 billion recorded in June 2019. This level of lending likely reflects ongoing efforts to provide additional credit and liquidity in response to the economic impact of the Covid-19 pandemic. Total outstanding loans rose by 13.2 percent on the year at the end of June, unchanged from May.

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