Daily market review

United States

Mega-caps rebounded from their recent doldrums to lead equities higher Wednesday, while cyclical stocks underperformed. The Dow Jones industrial index rose 1.1 percent, the S&P 500 gained 1.4 percent, and the NASDAQ rallied 2.1 percent.

Cyclical shares appeared less favored after their recent gains amid concern over the impasse in Washington over new federal Covid-19 relief spending. Mega-cap advancers included Apple up 3.3 percent, Microsoft up 2.9 percent, Amazon up 2.7 percent, and Facebook up 1.5 percent.

Among sectors, tech, financials, and consumer sectors fared best, with defensives -- utilities, real estate, and health care -- holding up well. Lagging but still slightly higher were energy, materials, and industrials.

Among companies in focus, Tesla rose 13 percent after announcing a 5-1 stock split following recent huge gains. Nvidia, the chipmaker, rose 5.4 percent after an upgrade at Cascend Securities. FedEx continued its recent run, up 2.8 percent, with UPS up 1.1 percent. Moderna, the vaccine maker, rose 0.8 percent after announcing a huge sale of its expected Covid-19 vaccine to the US government. American Eagle, the apparel retailer, rose 5.6 percent on an upgrade at JP Morgan.

In economic data, US CPI rose 0.6 percent both overall and, in a showing certain to make Federal Reserve officials take notice, for the core as well. July's increase reflected wide increases punctuated by a 9.3 percent spike in auto insurance and a 3.6 percent jump in wireless services.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose $0.82 to US$45.32 while spot gold rose US$9.62 to US$1916.82. The US dollar fell against most major currencies. The US Treasury 30-year bond yield rose 4 basis points to 1.36 percent while the 10-year note yield rose 3 basis points to 0.67 percent.


Economic data and M&A news gave equities a boost Wednesday. The Europe-wide STOXX 600 rose 1.1 percent, the German DAX and the French CAC both rose 0.9 percent, and the UK FTSE-100 surged by 2.0 percent.

UK markets outperformed as investors looked beyond news of an as-expected 20.4 percent second-quarter plunge in UK GDP to see output growth of 2.4 percent in May and 8.7 percent in June. Markets were obliged to contend with news of upticks in Covid-19 infection rates in Germany, Spain, and the UK.

Among sectors, financial services, retail, and utilities outperformed, while travel & leisure was the worst performer as it retreated from strong gains this week, and was hurt by the latest European pandemic figures.

M&A news also gave equities a boost, with Sunrise Communications, the Swiss telecom, up 26 percent on news it will be acquired by Liberty Global, the US-based serial acquirer of telecom companies.

Among companies, ABN Amro rose 8 percent after saying it will slash its investment bank and other steps to realign its business to focus on Europe. Just Eat Takeaway, the UK food deliverer, rose 3.9 percent after reporting surging business and that it will soon close its acquisition of Grubhub, its US rival.

Asia Pacific

Major Asian markets posted mixed results Wednesday, with regional price action guided by a range of factors, including losses on Wall Street Tuesday, a sharp drop in gold prices, anticipation that additional fiscal stimulus in the US will eventually be approved, and uncertainty about a potential Covid-19 vaccine developed by Russian researchers. The Shanghai Composite index and Australia's All Ordinaries index were among the weaker performers in the region dropping 0.6 percent and 0.4 percent respectively. Hong Kong's Hang Seng index outperformed with an increase of 1.4 percent, while Japan's Nikkei and Topix indices advanced 0.4 percent and 1.2 percent respectively.

The Reserve Bank of New Zealand left its official cash rate unchanged at a record low of 0.25 percent at its policy meeting Wednesday, but raised the upper limit for its asset purchase program from NZ$60 billion to NZ$100 billion to further their efforts to keep domestic interest rates low. Officials noted that containment of the Covid-19 virus in recent months had allowed economic conditions to improve more quickly than they anticipated but highlighted that the near-term outlook remains highly dependent on public health conditions, with the first new cases in more than 100 days detected earlier this week. Officials also announced that they are making preparations to implement additional policy tools to help support the economy, including a cut in policy rates into negative territory.

Australia's wage price index rose 0.2 percent in the June quarter, down from growth of 0.5 percent in the March quarter. Year-on-year growth dropped from 2.1 percent to 1.8 percent, its weakest showing since the index was introduced in 1998, consistent with reports that many companies have implemented wage freezes and in some cases wage cuts in response to the Covid-19 pandemic. Officials at the Reserve Bank of Australia expect weakness in the labour market to put further downward pressure on wage growth in coming months.

Looking ahead*

On Thursday in Asia/Pacific, the Japanese PPI and Indian CPI reports are due. In Europe, French ILO unemployment rate and German CPI reports are on tap. In North America, US jobless claims plus import and export price reports are scheduled.

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