Daily market review

United States

Strength in mega-cap tech stocks lifted the NASDAQ sharply though value stocks were weak in a reversal from last week's trade. The NASDAQ jumped 2.5 percent in contrast to the Dow Jones industrial index which was unchanged. The S&P 500 rose 0.8 percent.

Negative news on the spread of Covid-19 and concern that it will torpedo hopes for a speedy US recovery hit sectors including travel & leisure, financials, materials, and energy, the so-called reopening trade. Airlines suffered, with Delta off 3.1 percent and United down 4.7 percent.

On the positive side, information technology stocks led winners, with Microsoft up 4.3 percent after an upgrade at Barclays. Other megacap leaders included Amazon, which surged 7.9 percent after an upgrade from Goldman Sachs. Among pharma shares, Pfizer gained 0.7 percent after reporting more promising results on its Covid-19 vaccine trials, and on news the UK had agreed to buy a huge amount of the vaccine.

Among other companies in the news, CBL Properties, the shopping-center owner, fell 24.7 percent on reports it is entering bankruptcy. PetMed Express fell 17.7 percent after an earnings miss. Moderna declined 12.8 percent after it was downgraded at JP Morgan not because of the biopharma's progress toward a vaccine which the bank describes as "impressive", but because of the giant 4-fold surge in its share price so far this year.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 7 cents to US$43.19, while spot gold rose US$7.49 to US$1,817.91. The US dollar declined against most major currencies. The US Treasury 30-year bond yield fell 1 basis point to 1.31 percent as did the 10-year note yield to 0.61 percent.


Positive news on Covid-19 treatments gave stocks a boost Monday. The Europe-wide STOXX 600 rose 0.8 percent, the German DAX rose 1.0 percent, the French CAC gained 0.5 percent, but the UK FTSE-100 fell 0.5 percent on UK-China discord.

Markets reacted positively to more positive reports on a Covid-19 vaccine including Oxford University's clinical trial with AstraZeneca, up 1.5 percent, plus news that a trial of interferon treatment from UK biopharma Synairgen, up 421 percent, had cut risk of death among Covid-19 patients.

Apparent movement among EU leaders toward a pact on an EU fiscal stimulus package also helped the market recover from initial losses. On the downside, UK shares, especially travel & leisure, fell on concern over UK-China tensions after the UK suspended its extradition agreement with Hong Kong and imposed an arms embargo on Hong Kong, both in response to China imposing its new security law on Hong Kong.

Among sectors, best performing were health care, technology, construction, and industrials, while lagging were energy and travel & leisure. Among companies, Enzymatica rose 62 percent after the Swedish biopharma said its medicine showed success in deactivating the Covid-19 virus.

Asia Pacific

Major Asian markets posted mixed results Monday, with moves generally moderate except for a strong increase in Chinese shares. The Shanghai Composite index closed up 3.1 percent after officials left key policy rates on hold, reversing some of the losses made last week and extending the sharp gains made since the start of the month.

Japan's Nikkei and Topix indices posted small increases of 0.1 percent and 0.2 percent respectively, while Australia's All Ordinaries index and Hong Kong's Hang Seng index dropped 0.5 percent and 0.1 percent respectively, partly reflecting negative Covid-19 news. Cases in Australia's second-largest city, Melbourne, have continued to increase at an alarming rate, but there has also been an increase in daily new cases in the largest city, Sydney. Cases in Hong Kong have also jumped sharply higher in recent days.

The People's Bank of China left the one-year loan prime rate unchanged at 3.85 percent at its monthly review Monday, with the equivalent five-year rate also unchanged at 4.65 percent. This suggests that officials remain comfortable with the degree to which monetary policy is supporting domestic activity after data published last week showed the economy continues to recover from the initial impact of the Covid-19 pandemic.

Japanese trade data indicate that the Covid-19 pandemic continued to have a severe impact on global and regional trade flows in June, with growth in Japan's exports and imports again contracting at a relatively sharp pace. Japan's merchandise trade deficit narrowed from ¥838.2 billion in May to ¥268.8 billion in June, considerably wider than the consensus forecast for a deficit of ¥35.8 billion. Exports fell 26.2 percent on the year in June after dropping 28.3 percent in May, with exports to the United States and the European Union particularly weak but those to China stabilising. Imports fell 14.4 percent on the year after dropping 26.2 percent previously.

Looking ahead*

On Tuesday in Asia/Pacific, Japanese and Hong Kong CPIs as well as Reserve Bank of Australia meeting minutes are due. In Europe, the UK public sector finances and Swiss merchandise trade reports are scheduled. In North America, Canadian retail sales and US national activity index figures are on tap.

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