Daily market review

United States

Weakness in mega-cap tech stocks forced the major indexes into negative territory Tuesday but cyclicals and value stocks were mostly higher. The Dow Jones industrial index eased 0.4 percent, the S&P 500 declined 0.8 percent, and the NASDAQ dropped 1.7 percent.

Cyclical shares, including travel, automakers, financials, industrials, and energy shares were buoyed by reports feeding the recovery narrative, including word that Russia had approved a Covid-19 vaccine, slowing new infection rates in the US, and President Trump floating the idea of tax cuts. Markets continue to anticipate a fiscal relief bill to emerge from protracted negotiations between Republicans and Democrats. Still, late comments from Republican Senate Majority Leader Mitch McConnell dampened expectations for a deal.

Energy stocks were winners, with Haliburton up 3.4 percent after unveiling a collaboration with Honeywell. Oil supermajors advanced, with ConocoPhilips up 0.2 percent and ExxonMobil up 1.0 percent. BankAmerica rose 1.4 percent to lead banks higher.

Tech and mega-cap stocks continued their retreat from recent highs, with Apple down 3.0 percent, Amazon down 2.1 percent, and Microsoft off 2.3 percent. Defensive shares, communications, and techs lagged the most.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 45 cents to US$44.50, while spot gold tumbled US$120.14 to US$1,907.20. The US dollar rose slightly against most major currencies. The US Treasury 30-year bond yield rose 6 basis points to 1.31 percent while the 10-year note yield rose 5 basis points to 0.63 percent.


Better economic data from Germany and China gave equities a boost Tuesday, with cyclical stocks leading on recovery hopes. The Europe-wide STOXX 600 rose 1.7 percent, the German DAX gained 2.0 percent, the French CAC jumped 2.4 percent, and the UK FTSE-100 was up 1.7 percent.

Markets reacted to positive Chinese auto sales figures for July, with German and French automakers rallying on the news. German ZEW expectations figures also surprised to the upside, though current conditions figures came in weak. Risk appetite benefited from Covid-19 news, as US new cases appeared to slacken, and after Russian President Putin said a Russian vaccine is ready for initial use.

Among sectors, banks, travel & leisure, and energy joined autos as outperformers, with defensive shares lagging: utilities, real estate, and health care.

Among companies in focus, BMW rose 5.4 percent, Daimler rose 3.3 percent, and Peugeot rose 5.8 percent. Among travel companies, InterContinental Hotels rose 4 percent after its CEO said business was turning around. Plus 500, an online financial trading firm, rose 10.6 percent after reporting surging trading volumes and announcing a share buyback. On the downside, Uniper, the German utility, fell 4.7 percent on an earnings miss, and Aox, the German REIT, fell 3.4 percent on disappointing results.

In economic data, the ZEW indicator of economic expectations for Germany rose to 71.5, up 12.2 points from the previous month and well above the Econoday survey consensus of 58.

Asia Pacific

Most major Asian markets closed higher Tuesday, with gains on Wall Street Monday providing some support for regional investor sentiment. Japan's Nikkei and Topix indices outperformed, advancing 1.9 percent and 2.5 percent respectively after markets there were closed for a national holiday Monday, while Hong Kong's Hang Seng index rebounded from a decline Monday with an 2.1 percent gain Tuesday. Australia's All Ordinaries index rose 0.4 percent on the day. The Shanghai Composite index was the main outlier in the region, closing down 1.2 percent as US-China tensions remain in focus.

Revised second-quarter estimate for Singapore's gross domestic product fell at an annual rate of 42.9 percent on the quarter, a moderately bigger decline than the advance estimate of 41.2 percent. This compares with a first-quarter drop of 3.1 percent. The revised estimate for year-on-year growth in Singapore's GDP was a decline of 13.2 percent, also bigger than the advance estimate of a fall of 12.6 percent and well down from the first quarter's fall of 0.3 percent.

India's index of industrial production fell 16.6 percent on the year in June, reflecting the ongoing impact of the national lockdown implemented late March. The collection and publication of industrial production data were disrupted in April and May as a result of the lockdown, impacting the reliability of year-on-year comparisons, but separately published PMI survey data showed extremely sharp contractions in activity in the manufacturing sector in April and May followed by further but less pronounced contractions in June and July.

Looking ahead*

On Wednesday in Asia/Pacific, the Australian wage price index and the Reserve Bank of New Zealand policy announcement are due. In Europe, UK quarterly and monthly GDP, UK industrial production, UK merchandise trade, Eurozone industrial production, and Italian CPI reports are on tap. In North America, the US CPI report is scheduled.

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