Daily market review

United States

Value and cyclical stocks rose on upbeat earnings while growth shares lagged Tuesday as hopes for a Covid-19 vaccine remained in focus, along with European fiscal stimulus. The Dow Jones industrial index rose 0.6 percent and the S&P 500 rose 0.2 percent but the NASDAQ declined 0.8 percent as tech shares weakened.

The Dow and S&P 500 fell back sharply from their best levels in the afternoon, and the NASDAQ tacked on more losses amid reports of discord among Republicans and likely delay for an expected fifth US fiscal spending package to counter the pandemic.

Energy stocks fared best as crude oil prices advanced. Financials outperformed, with positive news from regional banks, including Comerica which gained 6.6 percent. Industrials were winners, led by machinery and aerospace stocks. Health care lagged as did communications services with Facebook down 1.5 percent and Netflix down 2.5 percent. Technology shares fared worst including most chipmakers. Among mega-caps, Microsoft fell 1.4 percent, Apple was off 1.4 percent, and Google was down 0.5 percent. Amazon, down 1.8 percent, retreated after recent huge gains.

Among companies in the news, Dow component IBM ended down 0.3 percent after giving up initial good gains scored on an earnings and revenues beat. Coca-Cola rose 2.5 percent on an earnings beat and after reporting sequential monthly improvement in sales. Lockheed Martin was another winner, up 2.6 percent on earnings and revenues beats and better full-year guidance for all its business segments. Philip Morris, the tobacco giant, rose 4.2 percent on a strong recovery in sales, especially in Europe.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.09 to US$44.28, while spot gold rose US$22.41 to US$1,840.32. The US dollar dropped sharply against most major currencies. The US Treasury 30-year bond yield was steady at 1.31 percent while the 10-year note yield declined 1 basis point to 0.61 percent.


News that European Union leaders finally clinched a stimulus deal helped stocks end higher Tuesday, but many traders took profits on the as-expected €750 billion package. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX gained 1.0 percent, the French CAC rose 0.2 percent, and the UK FTSE-100 firmed 0.1 percent.

Outperforming sectors included oil & gas, autos & parts, retail, banks, media, real estate, and good & beverage. Laggards included health care, basic resources, telecom, chemicals, personal & household goods, and construction & materials. German stocks outperformed on positive company news, including Continental, the auto parts maker, which rose 4.1 percent on better than expected quarterly results.

Among companies topping earnings expectations: Randstad Holding, the Dutch staffing company, rose 6.6 percent; Ted Baker, the UK clothier, rose 14 percent; and UBS, the big Swiss bank, gained 2.6 percent.

On the downside, Novartis, the Swiss pharma, declined 2.2 percent on a revenues disappointment and weaker guidance. Deutsche Bank fell 4.5 percent after the lender reported higher capital reserves against possible losses.

Asia Pacific

Major Asian markets closed mostly higher Tuesday after the NASDAQ outperformed on Monday and following some positive Covid-19 news. Investor sentiment was supported both by reports that separate Covid-19 vaccine trials were making good progress as well as optimism that the EU fiscal package announced on Monday would help the global economy's recovery from the pandemic.

Australia's All Ordinaries index was one of the strongest performers in the region, closing up 2.6 percent after the Australian government confirmed Tuesday that it would extend wage subsidies to help offset the economic impact of the pandemic. Hong Kong's Hang Seng index closed up 2.3 percent, Japan's Nikkei and Topix indices advanced 0.7 percent and 0.4 percent respectively, and the Shanghai Composite index rose 0.2 percent.

Japanese inflation data showed price pressures were steady and subdued in June. The headline consumer price index advanced 0.1 percent on the year in June, as it did in May, with a smaller increase in food prices offset by a smaller decline in transportation and communication prices. The Bank of Japan's preferred measure of underlying inflation, CPI excluding fresh food and energy prices, increased 0.4 percent on the year in June, as it did in May. The data suggest that progress towards the BoJ's 2.0 percent inflation target remains stalled and may strengthen the case for additional policy measures. The BoJ's next policy meeting is scheduled to take place mid-September.

Hong Kong's headline consumer price index increased 0.7 percent on the year in June, down from 1.5 percent in May, while its core inflation measure fell from 1.9 percent to 1.2 percent. This decline in inflation largely reflected weaker growth in food prices as the impact of a surge in pork prices in 2019 continues to drop out of year-on-year comparisons. Officials expect price pressures to moderate further in coming months as global and domestic economic conditions remain "austere".

Looking ahead*

On Wednesday in Asia/Pacific, Japanese composite flash PMI and manufacturing flash PMI figures are due. In North America, Canadian CPI, US FHFA home prices, and US existing home sales figures are on tap.

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