Daily market review

United States

Weakness in mega-cap tech stocks hurt equities Thursday amid concern rising over US-China tensions, while value stocks continued the week's outperformance. The Dow Jones industrial index eased 0.5 percent, the S&P 500 declined 0.3 percent, and the NASDAQ fell 0.7 percent.

Declines in the FAANGs, including Apple, down 1.2 percent, Amazon, off 0.3 percent, and software companies including Microsoft, down 2.0 percent, weakened the major indexes. Consumer discretionary stocks were depressed by declining travel & leisure and restaurant stocks on Covid-19 worries. On the plus side, financials outperformed to lead the value sector higher, with Morgan Stanley up 2.5 percent after upbeat quarterly results.

Among companies in the news, Disney was off 1.2 percent after an analyst downgrade. Twitter fell 1.1 percent amid negative reporting on a hacking scandal. Bank of America fell 2.7 percent as its results were hurt by provisioning for credit losses. Alcoa rose 6.3 percent after upbeat earnings to lead materials higher.

US economic data came in mixed with retail sales and Philadelphia Fed manufacturing figures ahead of expectations, but jobless claims still extremely elevated and highlighting market concerns about the sustainability of the recovery. Meanwhile, reports suggested Democrats and Republicans remain far apart over a new fiscal stimulus package.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 40 cents to US$43.29, while spot gold fell US$15.74 to US$1,796.20. The US dollar rose against most major currencies. The US Treasury 30-year bond yield fell 3 basis points to 1.31 percent while the 10-year note yield fell 2 basis points to 0.62 percent.


Equities retreated from recent highs Thursday amid worries over spreading US Covid-19 cases and caution before a Friday meeting of EU leaders to consider a new European fiscal stimulus package. The Europe-wide STOXX 600 declined 0.5 percent, the German DAX fell 0.4 percent, the French CAC eased 0.5 percent, and the UK FTSE-100 was off 0.7 percent.

Markets were not impressed with Chinese economic data, including retail sales which beat expectations but still left questions over Chinese demand, results that weakened European luxury goods companies. Worries about rising US-China tensions added to the downbeat mood.

Separately, the European Central Bank left rates and policy unchanged Thursday as expected, and ECB President Christine Lagarde pressed EU leaders to act on a fiscal package to boost the European economy. EU leaders appear to agree in principle on a €750 billion package but remain at odds over how to implement it.

Among sectors, the worst performers were personal & household goods, real estate, and travel & leisure. Utilities and construction & materials held up best. LVMH, the French luxury conglomerate, declined 1.0 percent, and Gucci owner Kering fell 1.3 percent.

Asia Pacific

Major Asian markets closed lower Thursday, led by sharp declines in Chinese shares as further concerns about US-China tensions outweighed generally positive Chinese economic data. US Secretary of State Mike Pompeo announced Wednesday that the US administration would support territorial claims of China's neighbours in the South China Sea and impose travel bans on Chinese technology companies deemed to be facilitating violations of human rights by the Chinese government. Chinese officials, meanwhile, have condemned the US response to China's decision to impose tighter security laws in Hong Kong.

After strong increases earlier in the month, the Shanghai Composite index closed sharply lower Wednesday, down 4.5 percent on the day, with losses accelerating late in the trading session. Hong Kong's Hang Seng Index also posted a sharp decline, down 2.0 percent, while Japan's Nikkei and Topix indices fell 0.8 percent and 0.7 percent respectively. Australia's All Ordinaries index fell 0.6 percent after the release of labour market data.

Chinese data published Wednesday showed that key activity indicators have continued to recover. Second-quarter GDP expanded a quarterly 11.5 percent after contracting 9.8 percent in the first quarter with year-on-year growth also rebounding, from a decline of 6.8 percent to an increase of 3.2 percent, above the consensus forecast for an increase of 2.3 percent.

Monthly Chinese data for June were also broadly positive, with industrial production, retail sales, and fixed asset investment all recording month-on-month increases and improved year-on-year growth. House price inflation, meanwhile, was steady at 4.9 percent in June. Speaking after the release of the data, officials expressed confidence that the economy is recovering from the pandemic's impact but cautioned that key activity indicators still remain well below pre-pandemic levels.

Australia's labour market showed signs of improvement in June as business and social restrictions put in place to curb the domestic spread of the Covid-19 virus began to ease. Employment increased by 210,800 people in June after a fall of 277,700 persons in May, while total hours worked rose by 4.0 percent after dropping 0.7 percent. The unemployment rate rose from 7.1 percent to 7.4 percent, its highest level since late 2000, largely due to the return of large numbers of people into the labour force looking for a job, with the participation rate increasing from 62.9 percent to 64.0 percent. Tighter restrictions, however, have been reimposed in some parts of the country in recent weeks in response to an increase in infections, suggesting that a recovery in employment to pre-pandemic levels will be a slow process.

Looking ahead*

On Friday in Asia, the Singapore merchandise trade report is due. In Europe, the Euro area HICP report is scheduled. In North America, US housing starts and US consumer sentiment figures are on tap.

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