United States
Mega-cap stocks Apple, Amazon, and Facebook rallied again Friday on huge earnings beats but much of the rest of the market traded weaker amid mixed corporate results and worries about the global recovery. The Dow Jones industrial index rose 0.4 percent, the S&P 500 gained 0.8 percent, and the NASDAQ gained 1.5 percent.
Apple soared 10.5 percent after blowing away earnings expectations to trade above $400 for the first time and it announced a 4 for 1 split. Amazon rose 3.7 percent. Facebook jumped by 8.2 percent as ad revenues surged. Google, down 3.2 percent, was the lone mega-cap disappointment to report, as weakness in its ad business offset strength in cloud computing.
The rest of the market was much less exciting, with energy the biggest laggard on disappointing earnings from supermajors Chevron, off 2.7 percent, and ConocoPhilips, down 0.7 percent. Industrials suffered, with Caterpillar down 2.8 percent after an earnings disappointment. Tobacco and beverage shares held down consumer staples. On the positive side, Facebook and Charter Communications (up 2.9 percent) boosted communications services. Apple's surge led tech stocks higher.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 28 cents to US$43.40, while spot gold rose US$20.18 to US$1,974.84. The US dollar rose against against most major currencies but declined vs. the Canadian dollar and Chinese yuan. The US Treasury 30-year bond yield was unchanged at 1.20 percent while the 10-year note yield fell 1 basis points to 0.54 percent.
Europe
Worries about slowing growth and the prospect of renewed lockdowns hurt equities Friday. The Europe-wide STOXX 600 declined 0.9 percent, the German DAX slipped 0.5 percent, the French CAC fell 1.4 percent, and the UK FTSE-100 was off 1.5 percent.
A spike in Covid-19 cases in the north of England, and Prime Minister Boris Johnson's comments postponing further re-openings added to worries over an uptick in cases in France and Germany. Risk appetite was hurt by disappointing economic data, including news that the Eurozone economy duly registered its worst ever performance last quarter. Real GDP fell a record 12.1 percent on the quarter, more than the market consensus and enough to slash annual growth from minus 3.1 percent to minus 15.0 percent, another all-time low.
Among sectors, real estate, financial services, and tech held up best, while worst off were autos, travel & leisure and construction & materials. Among companies, IAG, owner of British Airways, fell 5.8 percent after announcing another round of cost-savings and emergency financing. British American Tobacco was off 5 percent as the market was disappointed in the company's earnings guidance. On the positive side, Nokia, the telecom equipment maker, rose 13 percent on an earnings beat and relatively upbeat guidance.
Asia Pacific
Most major Asian markets sold off Friday, closing down on both the day and on the week after the release of GDP data confirming sharp contraction in major global economies. Japan's Nikkei and Topix indices were particularly weak, both falling 2.8 percent on the day and extending weekly declines to 4.6 percent and 4.9 percent respectively after the release of data showing further weakness in the labor market. Australia's All Ordinaries index also dropped sharply Friday as Covid-19 pandemic cases continued to rise in its two largest cities, Sydney and Melbourne, closing down 1.9 percent on the day and 1.5 percent on the week. Hong Kong's Hang Seng index fell 0.4 percent on the day and dropped 0.5 percent on the week. The Shanghai Composite index was the main exception to these declines, closing up 0.7 percent on the day after the release of solid PMI data, taking the weekly gain to 3.5 percent.
Official Chinese PMI survey data suggest conditions improved at a steady rate in both the manufacturing and services sectors in July as China's economy continues to recover from the impact of the pandemic. The CFLP manufacturing PMI index rose from 50.9 in June to 51.1 in July, just above the consensus forecast of 51.0 and indicating a slightly firmer expansion in activity. The non-manufacturing PMI index fell slightly from 54.4 to 54.2, indicating that activity in the sector continued to expand at a strong pace.
Japanese labour market data for June show conditions remained weak. The unemployment rate fell slightly from 2.9 percent in May to 2.8 percent, still well above pre-pandemic levels, while the number of employed persons fell by 770,000 on the year after dropping 760,000 previously. Although substantial monetary and fiscal stimulus have been put in place in recent months to counter the economic impact of the pandemic, the timing and strength of any improvement in labour market conditions remain highly uncertain.
Japan's industrial production index, in contrast, rose 2.7 percent on the month in June, rebounding from a decline of 8.9 percent in May, and fell 17.7 percent on the year after dropping 26.3 percent previously.. This is the first month-on-month increase in the index since January, providing some indication that the sector has started to recover from the initial impact of the pandemic. Officials expect industrial output to expand further in the next two months, forecasting month-on-month increases of 11.3 percent in July and 3.4 percent in August.
