Daily market review

United States

US equities retreated in the final hour Monday as virus worries returned. Earlier, news that the Food and Drug Administration will accelerate testing on vaccine candidates from Pfizer and BioNtech gave risk assets a lift, with Amazon, Apple, and other mega-cap stocks leading, but momentum stocks faltered late. The Dow Jones industrial index ended flat, the S&P 500 fell 0.9 percent, and the NASDAQ fell 2.1 percent.

Tesla soared as much as 14 percent at one point Monday as the speculative frenzy for the automaker continued, but the stock retreated from its highs late in the day, and that spurred other high-flying momentum stocks to give up some gains too. The carmaker ended down 3.1 percent.

The fallback from the day's highs reflected news that Los Angeles and San Diego schools will start the next school year in online format. The market also reacted poorly to a Wall Street Journal report that the US will take a much harder line on China's territorial claim in the Pacific. This was in addition to news over the weekend that virus cases and the death toll accelerated.

Among sectors, health care, consumer discretionary, materials, and information technology outperformed while airlines, energy, and banks trailed. Banks are to kick off the earnings season next week.

Among companies in focus, Pfizer rose 4.1 percent and BioNtech was up 10.6 percent. Pfizer CEO Albert Bourla told Time Magazine he believes FDA OK for their vaccine could come as early as October. Bourla said he is so confident the vaccine will work that Pfizer will start producing the vaccine at scale before receiving the FDA approval. Another winner Monday was Pepsico, up 0.3 percent after earnings and revenues beats, largely because sales of snacks for homebound customers offset disappointing soda sales.

In US economic data, the Treasury budget deficit rose to an enormous $864.1 billion IN June to dwarf the $8.5 billion deficit recorded in June last year. The monthly shortfall widened the deficit for the first nine months of the 2020 fiscal year to $2.744 trillion, an increase of 267 percent from the same period in fiscal 2019.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 82 cents to US$42.34, while spot gold rose US$2.40 to US$1,801.86. The US dollar was little changed against most major currencies. The US Treasury 30-year bond yield fell1 basis point to 1.32 percent while the 10-year note yield fell 2 basis points to 0.62 percent.


Hopes for progress on a Covid-19 vaccine and expectations for European fiscal stimulus boosted stocks Monday. The Europe-wide STOXX 600 rose 1.0 percent, the German DAX gained 1.3 percent, the French CAC rose 1.7 percent, and the UK FTSE-100 rose 1.3 percent.

Risk assets reacted favorably to news the US FDA has fast-tracked two vaccines being tested by Pfizer and BioNtech, the German biopharma. Investors also noted French Finance Minister Bruno Le Maire's promise of corporate tax cuts and new youth unemployment programs next month. This would supplement a E750 billion package of European fiscal measures expected to be hammered out later this week.

Monday's gains came despite caution ahead of earnings season set to begin next week and difficulty projecting future results given uncertainty about the course of the virus. Covid-19 cases continue to accelerate in the US, Brail, and elsewhere.

Among sectors, best performing were travel & leisure, chemicals, and basic resources. Lagging were real estate, utilities, and media. Among companies, Daimler rose 0.6 percent despite reports its planned layoffs will exceed previous estimates. Air France rose 2.0 percent after announcing its planned expanded flight schedule.

Asia Pacific

Major Asian markets started the week with solid gains Monday, with further optimism among Chinese retail investors providing a boost across the region. The regional data calendar was light Monday, while further increases in global Covid-19 cases over the weekend appeared to have little impact on investor sentiment.

Japan's Nikkei and Topix indices outperformed, closing up 2.2 percent and 2.5 percent respectively, with shares of tech conglomerate Softbank extending recent gains. The Shanghai Composite index rose 1.8 percent ahead of key Chinese activity data later in the week, while Australia's All Ordinaries index advanced 0.9 percent. Hong Kong's Hang Seng index posted a modest gain, closing up 0.2 percent, despite a strong rally for HSBC bank.

Japan's index of tertiary industry activity fell 2.1 percent on the month in May after falling 6.0 percent in April, broadly in line with other data showing the ongoing impact of the Covid-19 pandemic on the Japanese economy that month. The index fell 15.9 percent on the year in May after falling 11.5 percent in April. Previously published Markit PMI survey data for the Japanese services sector indicated that activity in the sector contracted sharply in May and then dropped further but at a more moderate pace in June.

India's consumer price index rose 6.09 percent on the year in June, up from the most recently published inflation rate of 5.84 percent in March. Inflation data for April and May were not published due to restrictions caused by the national lockdown put in place late March. At 6.09 percent, headline inflation in June was just above the Reserve Bank of India's target range of 2.0 percent to 6.0 percent. RBI officials, however, have made it clear in recent months that meeting their inflation target is not their immediate policy priority. Officials have instead stressed the need for policy to offset the impact of the Covid-19 pandemic on economic activity, cutting rates by a further 40 basis points at their most recent meeting held late May.

Looking ahead*

On Tuesday in Asia, the Bank of Japan monetary policy announcement, Chinese merchandise trade, Indian WPI, and Singapore GDP reports are on tap. In Europe, UK monthly GDP, UK industrial production, UK merchandise trade, German CPI, German ZEW survey, ECB lending survey, and Eurozone industrial production reports are scheduled. In North America, US NFIB small business optimism and US CPI figures are due.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies