Daily market review

United States

Gains across value and cyclical sectors led major equity indexes higher Tuesday, and late dip-buying in the mega-cap tech sector added to the advance as did Fed Governor Lael Brainard's call for more stimulus. The Dow Jones industrial index rose 2.1 percent, the S&P 500 rose 1.3 percent, and the NASDAQ gained 0.9 percent.

Among sectors, energy fared best, with exploration and production shares leading. Materials advanced, led by miners and packaging. Industrials outperformed, led by machinery and building products. Consumer staples and health care also outperformed. Financials underperformed, with banks hurt by weakness in Wells Fargo and Citigroup. Consumer discretionary lagged with cruise lines and hotels off the most.

Among companies in focus, Dow member JP Morgan Chase rose 0.6 percent on an earnings and revenues beat, despite higher-than-expected loan-loss reserves. Citigroup dropped 4 percent despite topping earnings expectations as its provisions were high. Wells Fargo dropped 4.6 percent after a big earnings miss and saying it will cut its dividend. Delta Airlines fell 2.7 percent after a bigger than expected loss, though revenues beat expectations.

In US economic data, CPI rose 0.6 percent in June with the ex-energy ex-food core up 0.2 percent, both of which exceeded Econoday's consensus by 1 tenth.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 33 cents to US$42.83, while spot gold rose US$10.31 to US$1,809.77. The US dollar fell against most major currencies. The US Treasury 30-year bond yield was flat at 1.31 percent while the 10-year note yield was flat at 0.63 percent.


Rising Covid-19 cases globally, and especially in the US, depressed equities Tuesday. The Europe-wide STOXX 600 and the German DAX both declined 0.8 percent, the French CAC fell 1.0 percent, and the UK FTSE-100 was up 0.1 percent.

Markets focused on news that California and other populous US states have been obliged to roll back their reopenings in the face of surging Covid-19 cases. Meanwhile, disappointing European economic data added to the day's bearish view, with UK growth figures and Eurozone industrial production underperforming market expectations.

Among sectors, the biggest losers were technology and travel & leisure, while insurance and oil & gas held up better than the rest of the market.

In economic data, Eurozone goods production rose by a record 12.4 percent but it was less than expected and failed to reverse April's 18.2 percent slump. And ZEW's July survey was surprisingly soft: current conditions moved further off May's minus 93.5 all-time low with a modest 2.2 point rise versus June to minus 80.9. Expectations also disappointed, posting a 4.1 point drop to 59.3. Turning to GDP, UK economy managed just a 1.8 percent monthly rise which was well short of market expectations and only enough to reduce the annual rate of contraction from a record 25.3 percent to 24.0 percent.

Asia Pacific

Major Asian markets closed lower Tuesday, following the lead set by Wall Street Monday as Covid-19 concerns again dominated investor sentiment. With cases continuing to rise sharply in parts of the US, the spread of the disease in countries including Japan and Australia has also weighed on investor sentiment in the region, with Singapore data published Tuesday providing further confirmation of the pandemic's severe economic impact. Further tensions in the relationship between China and the US were also a focus of attention.

Hong Kong's Hang Seng index was the weakest performer in the region, closing down 1.1 percent, while the Shanghai Composite index fell 0.8 percent. Japan's Nikkei and Topix indices dropped 0.9 percent and 0.5 percent respectively, with shares of semiconductor manufacturers hit hard after declines on the NASDAQ Tuesday. Australia's All Ordinaries index fell 0.7 percent on the day.

China's trade surplus in US dollar terms narrowed from $62.93 billion in May to $46.42 billion in June, smaller than the consensus forecast for a surplus of $58.6 billion. Exports rose 0.5 percent on the year in June, up from a decline of 3.3 percent in May and well above the consensus forecast for a drop of 1.5 percent. Imports rose 2.7 percent on the year, up strongly from a drop of 16.7 percent previously and also well above the consensus forecast. China's exports to and imports from the US both rebounded in June from year-on-year declines in May, with Chinese officials presenting this as evidence that China is meeting its obligations under Phase 1 of its US trade deal.

Advance estimates for Singapore GDP in the second quarter show that the pandemic has resulted in an extraordinarily sharp contraction in the domestic economy. Singapore's GDP is estimated to have fallen at an annual rate of 41.2 percent in the quarter after dropping 3.3 percent in the first quarter. Growth also slowed sharply in year-on-year terms, from a decline of 0.3 percent to a second-quarter drop of 12.6 percent. Weakness was broad-based across major sectors.

India's wholesale price index fell 1.81 percent on the year in June after dropping 3.21 percent in May. The smaller year-on-year decline in the wholesale price index in June largely reflected a bigger increase in food prices, a smaller decline in fuel prices, and a small increase in price of manufactured goods. Data published earlier this week showed the consumer price index rose 6.09 percent on the year in June after increasing 5.91 percent in March.

Looking ahead*

On Wednesday in Asia, merchandise trade from India is due. In Europe, UK CPI, UK PPI, and Italian CPI reports are scheduled. In North America, the Bank of Canada policy announcement and monetary policy report are due, plus Canadian manufacturing sales, US Empire State manufacturing, US import and export prices, US industrial production figures, plus the Fed beige book report.

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