Daily market review

United States

Equities slipped Tuesday after disappointing quarterly results from McDonalds and 3M, and nervousness over prospects for an expected fifth US stimulus package. Defensive sectors held up best as investors awaited news including the Federal Reserve's policy announcement Wednesday and quarterly reports from Apple and other bellwethers. The Dow Jones industrial index declined 0.8 percent, the S&P 500 fell 0.6 percent, and the NASDAQ lost 1.3 percent.

Markets are watching with increasing concern as negotiations get under way involving Congress and the White House on a fifth virus Covid-19 relief bill. Comments Tuesday from top Republicans and Democrats suggested an uncertain outlook, with the two sides far apart on key elements of the bill.

Among sectors, the cyclical energy sector lagged as crude oil prices fell. Materials underperformed with losses in chemicals and industrial metals more than offsetting strength in precious metals. Tech stocks struggled, with chipmakers and hardware companies worst off.

On the plus side, health care rose with support from pharma. Pfizer rose 3.9 percent on an earnings and revenues beat, and hopes for its vaccine development.

Among companies in the news, 3M fell 4.9 percent as the pandemic hammered the industrial conglomerate and sales and profits fell more than expected. Still, the company reported a recovery underway across its various businesses. Chemical giant Dow Inc. fell 3.1 percent, and McDonalds declined 2.5 percent on negative earnings surprises. National Oilwell Varco slumped 11 percent on disappointing quarterly results.

Markets are keying on Wednesday's House Antitrust Subcommittee hearing with appearances from CEOs of Amazon, Facebook, Google, and Apple, followed by earnings from the same companies late Thursday.

Expectations call for no big news from the Fed after its policy meeting ends Wednesday. Meanwhile, reports suggested some plateauing in new Covid-19 cases in hard-hit Sun Belt states, including California, in response to touch mitigation efforts, even as Midwest states face surging cases, including Indiana, Kentucky, and Ohio.

In US economic data, the Conference Board's consumer confidence index fell a sharp 5.7 points in July to a 92.6 level that was within Econoday's consensus range but more than 3 points below the median. Sizable declines were posted in Florida, Texas, and California, three very large states that Covid-19 has hit hard this month.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 34 cents to US$43.12, while spot gold rose US$19.31 to US$1,956.78. The US dollar was mixed against most major currencies. The US Treasury 30-year bond yield fell 4 basis points to 1.22 percent while the 10-year note yield fell 2 basis points to 0.58 percent.


Equities were mixed but mostly higher Tuesday with quarterly company earnings reports in focus. The Europe-wide STOXX 600 gained 0.4 percent, the German DAX was flat, the French CAC declined 0.2 percent, and the UK FTSE-100 rose 0.4 percent.

Limiting risk appetite and giving defensive sectors a boost were renewed worries over Covid-19 cases in China, Japan, Hong Kong as well as Spain, France, and Germany. Outperforming were health care, real estate, utilities, and food & beverage, while lagging were basic resources, financial services, technology, construction, oil & gas, and autos & parts.

UK homebuilders were winners on reports the UK will extend subsidies for homebuyers beyond December when they would otherwise have rolled off. Barratt Developments rose 4.7 percent and Bellway gained 4.9 percent. Luxury shares underperformed, with French luxury conglomerate LVMH and French clothing company Moncler down 4.1 percent and 5.3 percent, respectively, as store closings led to very disappointing quarterly earnings.

Saatchi, the UK ad agency, was a big winner, up 19 percent on a positive earnings surprise. Arcadis, the UK design and engineering firm, rose 13 percent on upbeat quarterly results. On the downside, Akka Technologies, the Belgian consulting group, fell 20 percent on a revenues miss for the first half and a downgrade at Louis Capital Markets. Sig Combibloc, the Swiss packaging company, fell 7 percent after weaker than expected first half results.

Asia Pacific

Major Asian markets again posted mixed results Tuesday, with a bare regional data calendar keeping much of the focus on company-specific news. Japan's Nikkei and Topix indices underperformed with losses of 0.3 percent and 0.5 percent, with shares of auto-makers Mitsubishi dropping sharply after it reported Monday that it expects a large operating loss this fiscal year. This was partly offset by a solid gain in shares of manufacturer Fujifilm after the US Administration awarded it a major contract to develop a potential coronavirus vaccine. Australia's All Ordinaries index fell 0.4 percent on the day, largely reflecting declines for major banks.

Hong Kong's Hang Seng index closed up 0.7 percent, with a new index consisting of major locally-listed technology firms posting a solid gain and outperforming the broader market on Tuesday after it was launched Monday. Hong Kong listed automaker Dongfeng Motor Group also surged after announcing plans to list on the Shenzhen stock exchange. The Shanghai Composite index also rose 0.7 percent on the day.

Looking ahead*

On Wednesday in Asia/Pacific, Australian CPI and Hong Kong GDP reports are scheduled. In Europe, Italian PPI and UK M4 money supply figures will be released. In North America, the FOMC will make its policy announcement and the Fed chair will conduct a press conference, plus US international trade in goods, US retail and wholesale inventories, and US pending home sales reports are due for release.

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