United States
Value stocks led US equities mostly higher Monday as the market anticipated action on US Covid-19 relief spending and slightly better news on US Covid-19 cases. Weakness in mega-caps limited gains. The Dow Jones industrial index rose 1.3 percent and the S&P 500 gained 0.3 percent, but the NASDAQ eased 0.4 percent.
Industrials, energy, and material stocks outperformed, with the FAANGs and technology shares lagging. The market still expects some agreement on a US stimulus package, alongside President Trump's executive actions announced over the weekend. Also on the plus side for cyclicals, markets noted data suggesting a downtrend in the number of new Covid-19 cases, but that may reflect problems with testing.
Energy was a winner Monday with exploration and production companies leading. Apache rose 4.8 percent, as oil prices perked up. Industrials were bolstered by aerospace, with Dow heavyweight Boeing up 5.5 percent. Boeing also benefited from better TSA US air traffic data.
Financials gained with support from banks. Cruise lines led consumer discretionary stocks up with Carnival surging 8.6 percent, but Amazon was off 0.6 percent to limit the gains. Tech and communications fared worst, with Microsoft a big drag, down 2.0 percent.
Among companies in focus, Fedex surged 9.0 percent after an upgrade at Bernstein. Airlines rallied with American Airlines up 7.4 percent and United up 9.2 percent on the TSA data. Footlocker rose 7.8 percent on upbeat guidance for the second quarter.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 31 cents to US$44.95, while spot gold fell US$5.63 to US$2,025.16. The US dollar rose 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 0.58 percent.
Europe
US fiscal stimulus hopes gave equities a modest lift while concern about rising European Covid-19 cases capped gains Monday. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX edged up 0.1 percent, the French CAC rose 0.4 percent, and the UK FTSE-100 firmed 0.3 percent.
Markets reacted somewhat favorably to President Trump's actions on Covid-19 relief, but risk sentiment was hurt by worries about a second wave of infections in Italy, Spain, UK, Germany, and France, and in Japan.
Among sectors, energy stocks outperformed on an uptick in oil prices. Other winners were banks and insurers, while technology lagged the most.
Among companies in focus, Rolls-Royce rose 5.1 percent on news the UK aerospace industry is planning a fund to boost its suppliers. Credit Suisse rose 3.1 percent after it said it would pursue partnerships to push into the retail banking business. On the downside, Infineon, the German chipmaker, fell 3.5 percent after saying it is not planning acquisitions or to be acquired. Alstom, the French railway equipment maker, fell 1.1 percent on bad news about its acquisition target, Bombardier.
Asia Pacific
Japanese markets were closed Monday for a national holiday, with moves elsewhere mixed in the region. Australia's All Ordinaries index outperformed with an increase of 1.7 percent as signs emerge that Covid-19 cases may be peaking in Melbourne in response to the recent tightening of restrictions. The Shanghai Composite index also closed higher, up 0.8 percent, after the release of inflation data that were in line with expectations.
Hong Kong's Hang Seng index, however, fell 0.6 percent on the day, with political developments again a major focus of attention. The US Treasury Department announced Friday that it would impose sanctions on Hong Kong Chief Executive Carrie Lam in response to her role in implementing stricter national security laws in June. On Monday Hong Kong police announced it had arrested seven people on suspicion of breaching this law, including high-profile publisher Jimmy Lai, owner of the popular tabloid newspaper Apple Daily and a prominent pro-democracy supporter.
China's headline consumer price index increased 2.7 percent on the year in July, up from 2.5 percent in June and matching the consensus forecast. The index rose 0.6 percent on the month after falling 0.1 percent previously, the first month-on-month increase in the index since February. Food prices rose 13.2 percent on the year in July, accelerating from 8.3 percent in June, but this was offset by weaker non-food inflation, which fell from an increase of 1.4 percent in June to no change in July. China's producer price index fell 2.4 percent on the year in July, up from a fall of 3.0 percent in June, and close to the consensus forecast for a drop of 2.5 percent. The index rose 0.4 percent on the month after falling 0.3 percent previously.
Looking ahead*
On Tuesday in Asia, the Indian industrial production report is due. In Europe, UK labor market and German ZEW reports are on tap. In North America, Canadian housing starts, US NFIB small business optimism, and US PPI-FD reports are scheduled.
