Daily market review

United States

US-China discord, earnings disappointment, and worries over prospects for more US fiscal stimulus weakened equities Friday. The Dow Jones industrial index declined 0.7 percent, the S&P 500 was off 0.6 percent, and the NASDAQ was down 0.9 percent.

A plunge in Intel (down 16 percent) after it warned of delays in its updated microchips led a selloff in tech stocks, alongside another bad day for the mega-cap tech stocks, the market leaders until recently. Microsoft eased 0.6 percent, Tesla dropped 6.4 percent, Apple was down 0.3 percent, Facebook fell 0.8 percent, and Alphabet eased 0.3 percent. Some late dip-buying reduced losses in the mega-caps, and Amazon ended up 0.8 percent after weakening earlier.

American Express, a Dow heavyweight, lost 1.4 percent after it missed earnings expectations and said consumers scaled back credit card use. Honeywell, the industrial conglomerate, fell 2.8 percent despite an earnings and revenues beat, as it said the pandemic is likely to continue to dent its business, especially aerospace and energy.

Unexpectedly good news on US home sales gave equities a momentary boost at midmorning. New home sales recovered to their pre-virus peak, far exceeding Econoday's consensus range in June at a 776,000 annual rate that is 13.8 percent higher than May.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 14 cents to US$43.30, while spot gold rose US$15.76 to US$1,901.93. The US dollar declined against most major currencies but rose against the Chinese yuan. The US Treasury 30-year bond yield was flat at 1.23 percent while the 10-year note yield was unchanged at 0.59 percent.


US-China tensions hit equities hard Friday after China ordered the closing of a US consulate in retaliation for a similar US action. The Europe-wide STOXX 600 declined 1.7 percent, the German DAX fell 2.0 percent, the French CAC slipped 1.5 percent, and the UK FTSE-100 was off 1.4 percent.

The US-China spat raised worries that the phase one US-China trade deal will collapse, or that the dispute may escalate further headed into the US elections. Technology shares led the selloff, along with telecom, health care, autos & parts, and industrials. Holding up better, but still weaker, were oil & gas, real estate, banks, utilities, and basic resources.

Among companies, chipmaker ASML dropped 5.1 percent to lead the selloff as it tracked US semiconductor stocks lower. Miner Anglo Pacific Group dropped 9 percent on disappointing quarterly results. Dassault, the French aerospace company, dropped 5.2 percent on an analyst downgrade. IAG, owner of British Airways, fell 4.8 percent on a report it will issue more stock.

The market appeared to shrug off some better-than-expected economic data. For Germany, the PMI flash composite output index rose from June's final 47.0 to 55.5 in July, well above market expectations and a 23-month high. This was the first reading in positive growth territory since February. And Eurozone private sector business activity also picked up strongly in July as the flash composite output index rose above the 50-expansion threshold for the first time since February. A 54.8 headline reading was up sharply from June's final 48.5, well above market expectations and a 25-month high.

Asia Pacific

Major Asian markets closed lower Friday but posted mixed results on the week, with escalating US-China tensions the focus for investors at the end of the week. After US authorities shut China's consulate in Houston earlier in the week, Chinese authorities responded Friday by closing the US consulate in Chengdu. A speech by US Secretary of State Mike Pompeo Thursday that was highly critical of the Chinese government also fueled concerns that the relationship is set to deteriorate further in the near-term. Losses on Wall Street Thursday after weak jobless claims data also weighed on sentiment in the region.

Chinese shares sold off heavily Friday, with the Shanghai Composite index closing down 3.9 percent on the day to reverse gains made earlier in the week with a fall of 0.5 percent on the week. Hong Kong's Hang Seng index also fell sharply, closing down 2.2 percent on the day and underperforming on the week with a decline of 1.5 percent. Australia's All Ordinaries index fell 1.1 percent on the day and was little changed on the week with a 0.1 percent gain. Japanese markets were closed for a national holiday Friday, with Japan's Nikkei and Topix indices up 0.2 percent and down 0.1 percent respectively when trading closed this week compared with their levels at the end of last week.

Singapore industrial production data for June show some improvement in conditions in the domestic manufacturing sector but an ongoing negative effect from the Covid-19 pandemic. Output fell 6.7 percent on the year in June after dropping a revised 8.1 percent in May and rose 0.2 percent on the month after a revised fall of 15.8 percent previously. Performance diverged widely across industries within the manufacturing sector in June, with output in the volatile biomedical industry dropping sharply on the year in June but year-on-year growth improving elsewhere, including the electronics industry.

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