Daily market review

United States

Tech stocks led equities lower Thursday with Microsoft and Tesla leading the decline after both issued quarterly updates that disappointed the market's high expectations. The Dow Jones industrial index fell 1.3 percent, the S&P 500 declined 1.2 percent, and the NASDAQ dropped 2.3 percent.

Apple was another weight on the indexes as it fell 4.6 percent after a downgrade at Goldman and news that it faced new regulatory scrutiny. Amazon was another loser, down 3.7 percent, as was Google which declined 3.1 percent. Facebook was off 3 percent as the market fretted over pending regulatory inquiries and valuations appeared stretched. Microsoft was off 4.4 percent and Tesla down 5 percent despite huge gains in earnings and sales for both.

Selling spread into other sectors and accelerated into the close, with utilities holding up best. Pandemic worries added to the negative sentiment as confirmed US cases approached 4 million and daily deaths exceeded 1,100 on Wednesday for the first time since May.

Bleak US jobless claims figures pointed to the pandemic's continuing impact as the Labor Department reported the first weekly increase in initial jobless claims since the seismic collapse in March. Claims rose 109,000 in the July 18 week to a 1.416 million level that exceeded Econoday's consensus for 1.308 million.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 89 cents to US$43.44, while spot gold rose US$16.03 to US$1,886.17. The US dollar was little changed against most major currencies. The US Treasury 30-year bond yield declined 6 basis points to 1.24 percent while the 10-year note yield declined 2 basis points to 0.57 percent.


Equities were narrowly mixed on an array of quarterly corporate reports, with US-China tensions depressing risk appetite. The Europe-wide STOXX 600 edged up 0.1 percent, the German DAX was flat, the French CAC was off 0.1 percent, and the UK FTSE-100 rose 0.1 percent.

Among companies beating earnings expectations: Neste, the Finnish engineering company, rose 12 percent; Publicis, the French ad agency, rose 8 percent; Unilever, the UK consumer goods giant, rose 7.9 percent; and Daimler, the German automaker, rose 3.4 percent.

On the downside, Roche Holdings, the big Swiss pharma and diagnostics company, fell 3.1 percent on an earnings miss and disappointing guidance. Countryside Properties, the UK builder, fell 8 percent on a big share issuance. Skanska, the Swedish builder, declined 5.8 percent on hefty earnings and revenues misses.

In economic data, the tentative improvement in consumer confidence cited by the European Commission in June failed to extend to July as the month's flash index edged lower to minus 15.0 from minus 14.7. The index remains at 6-year lows and, according to the report, "well below" its long-term average of minus 11.1.

Asia Pacific

Major Asian markets posted mixed results Thursday, though moves were generally moderate with the regional data calendar light. US-China tensions were again a major focus of attention as Chinese authorities warned they would retaliate after the US State Department ordered the closure of the Chinese consulate in Houston. Yet the immediate market impact has been limited, with the Shanghai Composite index closing down 0.2 percent. Hong Kong's Hang Seng index outperformed with a gain of 0.8 percent, while Australia's All Ordinaries index advanced 0.3 percent.

Yearly inflation in Singapore picked up from minus 0.8 percent in May to minus 0.5 percent in June, with core inflation unchanged at minus 0.2 percent. Private transport costs as well as housing and utilities charges both recorded smaller declines, while food prices rose at a slightly faster rate. Officials expect price pressures to remain subdued in coming months, reflecting both global oil prices and ongoing weakness in the domestic economy caused by the Covid-19 pandemic.

The Australian government published updated forecasts Thursday showing both the impact of the Covid-19 pandemic on the economy and the cost of its fiscal response to the pandemic. Officials forecast the Australian economy will shrink by 3.75 percent in 2020, the biggest annual contraction on record, before rebounding with an increase of 2.5 percent in 2021. They also expect the unemployment rate to increase further in coming months and to peak at around 9.25 percent late in the year. Government fiscal and balance sheet measures designed to offset this economic impact are estimated to be almost A$300 billion or 14.6 percent of GDP, resulting in an estimated budget deficit of 4.3 percent of GDP in the 2019-20 fiscal year and 9.7 percent in the 2020-21 fiscal year.

Looking ahead*

On Friday in Asia/Pacific, New Zealand merchandise trade and Singapore industrial production reports are due. To be released in Europe: UK retail sales; PMI composite flashes from France, Germany, the Eurozone, and the UK; as well as Italian business and consumer confidence. In North America, US PMI composite flash, and US new home sales reports are on tap.

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