Daily market review

United States

A rebound in Apple and other mega-cap technology shares plus semiconductors led equities higher Monday. The Dow Jones industrial index rose 0.4 percent, the S&P 500 0.7 percent, and the tech-heavy NASDAQ 1.7 percent.

Analyst upgrades in share price targets for Apple, up 2.4 percent, and Amazon, up 1.5 percent, helped mega-cap stocks advance, with Facebook up 1.2 percent and Google up 1.4 percent. Last week's weakness in these shares attracted dip-buying Monday. Big tech shares are benefiting from perceptions that the pandemic has accelerated trends that favor these companies, along with investor fear of missing out on their secular growth trend.

Among chipmakers, Taiwan Semiconductor rose 13 percent amid reports Intel may buy chips from TSM to address its own production problems. Materials shares led gainers, with metal miners benefiting from rising precious metals prices. Newmont Mining, a leading gold producer, rose 3.4 percent, and Barrick Gold rose 5.2 percent.

On the downside, oil & gas stocks lagged with oil prices weakening, with drillers like Apache, down 3.6 percent, off the most. Financials suffered as banks continued their declines from last week, and utilities were the worst off.

Among companies in the news, Moderna, the vaccine maker, rose 9.2 percent after getting a second tranche of investment from the US government to support its late-stage clinical trial. On the downside, Hasbro, the toy company, dropped 7.4 percent on a quarterly earnings and revenues miss as its business was disrupted by the pandemic.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 16 cents to US$43.46, while spot gold rose US$35.54 to US$1,937.47. The US dollar dropped against most major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.25 percent while the 10-year note yield rose 1 basis point to 0.60 percent.


Equities were flat to lower with sentiment dampened by news of an uptick in reported Covid-19 cases in Spain, France, and Germany, and concern over US-China tensions. The Europe-wide STOXX 600 eased 0.3 percent, the German DAX was flat, the French CAC declined 0.3 percent, and the UK FTSE-100 slipped 0.3 percent.

Travel stocks were among the worst performers after several countries imposed quarantines on travelers coming from Spain. Other decliners included banks, telecom, real estate, oil & gas, and media. Holding up best were basic resources, technology, autos, chemicals, and retail.

Among companies, TUI, the German travel company, dropped 13 percent amid reports it will seek additional German government aid. Easyjet, the UK carrier, fell 8 percent while British Air owner IAG fell 7.9 percent after the UK imposed quarantines on travelers from Spain. On the positive side, SAP, the German software giant, rose 2 percent on an earnings surprise.

In economic data, German economic sentiment improved for a third time in as many months in July. At 90.5, the overall business climate indicator was up 4.2 points versus June and now stands just 0.4 points short of its pre-lockdown level in February. The July reading was on the strong side of the market consensus.

Asia Pacific

Major Asian markets posted mixed but modest moves Monday, with the regional data calendar doing little to shift investor views and few major developments over the weekend relating to key areas of focus, including the Covid-19 pandemic or US-China tensions. Australia's All Ordinaries index and the Shanghai Composite index advanced 0.4 percent and 0.3 percent respectively, Japan's Nikkei and Topix indices rose 0.2 percent and fell 0.2 percent respectively, and Hong Kong's Hang Seng index underperformed with a decline of 0.4 percent.

Chinese industrial profits dropped 12.8 percent year-to-date in June after falling 19.3 percent in May, suggesting that the impact of the pandemic on the Chinese manufacturing sector is continuing to moderate to some extent, broadly in line with other data. Profits rose 11.5 percent in year-on-year terms in June, picking from an increase of 6.0 percent in May and the strongest growth since March 2019.

Hong Kong's merchandise trade deficit widened from HK$13.7 billion in May to HK$33.3 billion in June. Exports fell 1.3 percent on the year after a decline of 7.4 percent previously, while imports fell 7.1 percent after dropping 12.3 percent previously. The smaller decline in headline exports reflected stronger growth in exports to mainland China and Taiwan, offset by continued weakness in demand from the US, Japan, and the European Union. Officials expect exports to remain "constrained" in coming months, reflecting the ongoing impact of the pandemic and US-China tensions.

Looking ahead*

On Tuesday in Europe, UK CBI distributive trade figures are scheduled. In North America, Case-Shiller home prices, US consumer confidence, and US Richmond Fed manufacturing reports are on tap, plus the first of a two-day FOMC meeting begins.

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