United States
Gloomy US economic data and word that Republicans and Democrats remain at odds over the next round of government relief depressed cyclicals Thursday while big tech stocks held up. The Dow Jones industrial index fell 0.8 percent, the S&P 500 slipped 0.4 percent while the NASDAQ rose 0.4 percent.
US jobless claims rose for the second straight week, up 12,000 in the July 25 wee, to 1.434 million, suggesting the recovery is faltering amid rising Covid-19 cases. US GDP growth generally matched expectations, but markets were obliged to reckon with a historic 32.9 percent annualized plunge in the second quarter.
Jitters before quarterly earnings reports from tech bellwethers Apple, Amazon, Google, and Facebook due late Thursday contributed to the downbeat tone, though mega-caps held up better than the rest of the market.
Among sectors, energy suffered the most as crude oil dropped on worries over renewed economic slowing. ConocoPhillips fell 5.8 percent after an earnings miss. Materials and financials dropped, with banks dragging financials lower on declining Treasury yields. Industrials sagged on weakness in machinery and airline stocks. Internet and entertainment shares supported communications services. Tech gained with help from chipmakers.
Among companies in the news, Yum China fell 5.6 percent on a revenues miss and slowing sales in June and July after an improvement in April and May. Dunkin Donuts fell 4.2 percent after noting slowing sales.
On the plus side, UPS, the delivery service, rose 17 percent after a huge earnings beat, which boosted expectations for Amazon's results due after the close. Qualcomm, up 14 percent, reported a positive earnings surprise and announced a favorable settlement of its patent dispute with Huawei. Procter & Gamble rose 2.4 percent on an earnings and revenues beat.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 65 cents to US$43.12, while spot gold fell US$12.83 to US$1,954.66. The US dollar fell against most major currencies. The US Treasury 30-year bond yield fell 4 basis points to 1.20 percent while the 10-year note yield fell 3 basis points to 0.55 percent.
Europe
Equities sank Thursday on poor earnings reports, weak economic data, and worries over renewed Covid-19 spread in Europe. The Europe-wide STOXX 600 dropped 2.2 percent, the German DAX slumped by 3.5 percent, the French CAC lost 2.1 percent, and the UK FTSE-100 fell 2.3 percent.
Among big companies reporting misses in earnings, Volkswagen fell 5.9 percent, Renault was off 7.4 percent, Credit Suisse fell 1.6 percent, Standard Chartered fell 6.2 percent, and Lloyds Bank fell 7.8 percent after taking a huge charge against impaired loans. Anglo American, the miner, lost 4.6 percent on disappointing earnings and a dividend cut.
On the positive side, beating expectations were BAE Systems, the UK aerospace leader, up 5.9 percent, Safran, the French aerospace company, up 3.9 percent, and Anheuser-Busch Anbev, the beer company, up 1.7 percent.
US GDP figures matched expectations but the market still reacted poorly to the historic 32.9 percent annualized decline in the second quarter, alongside another uptick in weekly jobless claims to 1.434 million. Meanwhile, German GDP figures, expressed quarter-to-quarter, dropped even more than expected with a 10.1 percent decline in the second quarter.
Asia Pacific
Major Asian markets again posted mixed results Thursday, though moves were generally moderate, with the regional data calendar light and comments from Federal Reserve Chair Powell after Wednesday's FOMC meeting broadly in line with expectations.
Japan's Nikkei and Topix indices fell 0.3 percent and 0.6 percent respectively with sentiment impacted by reports that authorities in Tokyo may re-tighten restrictions in response to a recent increase in new Covid-19 cases. The Shanghai Composite index fell after solid gains earlier in the week, closing down 0.2 percent, while Hong Kong's Hang Seng index dropped 0.7 percent. Australia's All Ordinaries index outperformed with an increase of 0.8 percent, while Singapore's Straits Times index underperformed, closing down 1.5 percent after the Monetary Authority of Singapore issued guidance to local banks to limit dividend payments in order to keep capital positions strong.
Retail sales in Japan fell 1.2 percent on the year in June after dropping 12.5 percent in May, suggesting that the impact of the Covid-19 pandemic on consumer spending moderated over the month. The smaller fall in headline growth reflected improvement across all categories of spending, including a stronger increase for food and beverages and smaller declines for motor vehicles and fuel. Household spending data for June are scheduled for publication next week.
Looking ahead*
On Friday in Asia/Pacific, Japanese unemployment rate, Japanese industrial production, Chinese CFLP manufacturing PMI, and Australian PPI figures will be released. In Europe, French GDP flash, German retail sales, Swiss retail sales, French consumer manufactured goods consumption, French CPI, Italian GDP, Eurozone GDP flash, Eurozone HICP flash, Italian CPI, and Italian retail sales reports are on tap. In North America, US personal income and spending, US employment cost index, Chicago PMI, US consumer sentiment, US farm prices, Canadian IPPI, and Canadian monthly GDP reports are due for release.
