United States
Equities advanced Wednesday after the Federal Reserve renewed its promise to keep boosting the economy in the face of the pandemic. The Dow Jones industrial index rose 0.6 percent, the S&P 500 gained 1.3 percent, and the NASDAQ rose 1.4 percent.
Markets rose on relief the Fed signaled no let-up in its accommodative stance, and some analysts said Powell's emphasis on downside risks opened the door to bigger asset purchases or other supportive steps after its next policy meeting in September.
Mega-caps Apple, up 1.9 percent, Amazon, up 1.1 percent, Google, up 1.5 percent, and Facebook, up 1.4 percent, rose as the four appeared unscathed after their respective CEOs faced questions from a congressional panel considering anti-trust action. The four companies are due to release their quarterly results after the close Thursday, and expectations are favorable.
Among sectors, financials bounced back from early losses, with JP Morgan up 2.5 percent. Technology shares outperformed on upbeat earnings, with Advanced Micro Devices up 13 percent after the chipmaker reported an unexpectedly strong second quarter, in contrast to Intel which fell 2.4 percent as the market continued to react badly to the company's announcement that its next-generation chips would be delayed.
Health care stocks outperformed with support from managed care and hospitals, despite declines in biotech shares, with Amgen off 2.5 percent after disappointing guidance. Energy shares rebounded from early declines with refiners leading. Lagging were consumer staples and utilities.
Among companies in the news, Kodak soared 318 percent on news it secured a huge loan to launch a new pharmaceuticals unit. FireEye, the technology services company, rose 18 percent on an earnings beat. Starbucks rose 3.7 percent after saying its sales are bouncing back. On the downside, General Electric fell 4.4 percent after an earnings miss.
In US economic data, pending home sales jumped 16.6 percent in June to beat expectations. The month's 116.1 index level was roughly 5 points above its pre-virus level and yet another US housing indicator to post long-term highs. Year-on-year, the index was up what the National Association of Realtors described as a "remarkable" 6.3 percent.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 65 cents to US$43.77, while spot gold rose US$10.71 to US$1,967.49. The US dollar fell against most major currencies. The US Treasury 30-year bond yield rose 1 basis point to 1.23 percent while the 10-year note yield fell 1 basis point to 0.57 percent.
Europe
Equities were flat to weaker Wednesday on mixed corporate results and with virus news dampening sentiment. The Europe-wide STOXX 600 and the German DAX both eased 0.1 percent, the French CAC outperformed to rise 0.6 percent, and the UK FTSE-100 was flat.
Markets reacted to UK Prime Minister Boris Johnson's comment that Europe is seeing a second wave of virus infection, and on reports the UK may impose new curbs on visitors from European hotspots. Activity lacked conviction ahead of the Federal Reserve's policy announcement after the European close.
Among sectors, retail, food & beverage, personal & household goods, and telecom outperformed while lagging were autos, banks, chemicals, technology, basic resources, health care, and insurance.
Among companies reporting earnings, Deutsche Bank fell 3.2 percent, Banco Santander slumped by 4.2 percent, and Barclays was down 5.5 percent after missing earnings expectations. Among pharma companies, GlaxoSmithKline fell 3.2 percent after a miss, while Sanofi rose 0.5 percent after better-than-expected earnings and raising its guidance. BASF, the German chemicals giant, fell 4.8 percent after a miss and saying it would consider cutting its dividend.
On the positive side, Kering rose 0.8 percent after better results from the French luxury goods company. CapGemini, the French consultant, gained 6.5 percent on a positive earnings surprise.
Asia Pacific
Major Asian markets posted mixed results Wednesday ahead of the Federal Reserve's meeting. Japan's Nikkei and Topix indices underperformed with losses of 1.2 percent and 1.3 percent respectively, with shares of automaker Nissan and manufacturer Canon among those driving the decline after they reported negative quarterly results and forecasts.
Australia's All Ordinaries index fell 0.3 percent after the release of weak inflation data and news of tighter border controls between states as Covid-19 cases continue to increase in parts of the country. The Shanghai Composite index rose 2.1 percent, led by strong gains in the pharmaceuticals sector, while Hong Kong's Hang Seng index advanced 0.5 percent on the day.
Australia's CPI fell 0.3 percent on the year in the second quarter for the first negative showing since 1999. On the quarter, the CPI fell 1.9 percent for the biggest quarterly drop in 70 years of data. The weakness reflected lower fuel prices and also full subsidization of child care and pre-school education in response to the Covid-19 pandemic. Measures of core inflation, which exclude the impact of volatile price changes, also weakened in the quarter.
Hong Kong's economy contracted for the fifth consecutive quarter in the second quarter, with GDP dropping by 0.1 percent on the quarter after the first quarter's record decline of 5.3 percent. GDP fell 9.0 percent on the year after dropping 9.1 percent previously. Private consumption and business investment spending were again very weak, partly offset by ongoing fiscal stimulus and smaller declines in both exports and imports as activity picked up in mainland China. Officials expect headline GDP growth to remain weak, reflecting both the impact of the Covid-19 pandemic on major trading partners and a recent pick-up in domestic cases. Growing US-China tensions were also cited as a risk to the near-term outlook.
Looking ahead*
On Thursday in Asia/Pacific, Japanese retail sales will be released. In Europe, German GDP flash, French PPI, Swiss KOF leading indicator, German unemployment rate, Eurozone EC Economic Sentiment, Eurozone unemployment rate, and German CPI reports are on tap. North America, US GDP and US jobless claims reports are due for release.
