Daily market review

United States

Weakness in tech and momentum stocks held down equities Friday though cyclicals fared better. The Dow Jones industrial index edged up 0.1 percent, the S&P 500 was flat, and the NASDAQ eased 0.2 percent.

Mixed US retail sales figures contributed to the softer market tone along with softer than expected retail sales and industrial production figures from China.

Laggards included utilities, health care, and technology, with Amazon's 0.4 percent decline weighing on consumer discretionary. The FAANGs sagged, with Apple off 0.1 percent, Alphabet off 0.8 percent, and Facebook down 0.1 percent.

Among companies in focus, IQIYI, the Chinese video streaming company, fell 11 percent after US regulators accused it of inflating its user numbers and revenues. DraftKings, the fantasy sports company, fell 5.9 percent on an adverse tax ruling. Purple Innovation, the mattress company, fell 11 percent after an earnings and revenues miss. On the plus side, micro-chipmaker Applied Materials rose 3.9 percent after beating street expectations and raising its guidance.

In US economic data, July retail sales rose 1.2 percent and though this is toward the lower end of Econoday's consensus range, core readings in the month exceeded expectations. June's gain is revised 9 tenths higher to 8.4 percent with May's gain revised 1 tenth higher to 18.3 percent. Separately, industrial production rose an as-expected 3.0 percent in July. Manufacturing output rose 3.4 percent to moderately exceed Econoday's consensus and benefiting from the resumption of auto production.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 20 cents to US$44.88, while spot gold fell US$8.38 to US$1,943.42. The US dollar fell against most major currencies but gained vs. the Canadian dollar, the New Zealand dollar, the Chinese yuan, and Scandinavian currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.45 percent while the 10-year note yield fell 1 basis point to 0.71 percent.


Weakness in energy stocks and travel & leisure on Covid-19 news hurt equities Friday. The Europe-wide STOXX 600 fell 1.2 percent, the German DAX declined 0.7 percent, the French CAC declined 1.6 percent, and the UK FTSE-100 was off 1.6 percent.

Cyclicals were hurt by reports of rising Covid-19 cases in Spain, Germany, and Greece, and by lack of progress on US talks on fiscal stimulus, with energy, industrials and construction lagging. As oil prices dropped, BP fell 3.1 percent, and Royal Dutch Shell was off 2.6 percent.

Markets also reacted poorly to soft economic data from China, including weaker than expected industrial production and retail sales.

Travel stocks were hit by news that the UK will oblige visitors from more countries to quarantine, including France and the Netherlands. IAG, owner of British Airways, fell 4.8 percent, and Air France was off 5.7 percent. TUI, the German travel agency, dropped 8 percent on virus impact.

Asia Pacific

Major Asian markets posted mixed results Friday but in most cases closed higher on the week, with a busy Chinese data calendar and ongoing uncertainty about the near-term outlook for additional US fiscal stimulus among the key areas of focus for investors. The Shanghai Composite index outperformed on the day despite Chinese data providing mixed signals, closing up 1.2 percent, but was among the weaker performers in the region on the week with an increase of just 0.2 percent. Japan's Nikkei and Topix indices in contrast were little changed on the day, up 0.2 percent and flat respectively, but outperformed on the weeks with gains of 4.3 percent and 5.0 percent respectively. Australia's All Ordinaries index rose 0.6 percent on the day and 1.9 percent on the week, while Hong Kong's Hang Seng index fell 0.2 percent on the day and rose 2.7 percent on the week.

Chinese activity data published Friday suggest that recovery is uneven across the economy with key indicators falling short of expectations and their components diverging to some extent. Chinese industrial production fell 0.4 percent on the month in July after advancing 1.3 percent in June, with year-on-year growth steady at 4.8 percent, but falling short of the consensus forecast of 5.1 percent. Growth picked up in the manufacturing sector, offset by weaker growth in the utilities and mining sectors.

Chinese retail sales rose 0.85 percent on the month after increasing 1.34 percent previously, with year-on-year growth improving from a decline of 1.8 percent to a fall of 1.1 percent, again weaker than the consensus forecast for an increase of 0.3 percent. Spending on autos picked up but most other major categories recorded weaker growth. Fixed asset investment rose 4.85 percent on the month after increasing 5.06 percent previously, with year-to-date growth also improving from a drop of 3.1percent to a fall of 1.6 percent. Other data published Friday showed Chinese house price inflation eased from 4.9 percent in June to 4.8 percent in July.

India's wholesale price index fell 0.58 percent on the year in July after dropping 1.81 percent in June and rose 1.09 percent on the month after increasing 1.36 percent previously. The smaller year-on-year decline in the wholesale price index in July largely reflects a bigger increase in food prices and a smaller decline in fuel prices. Data published earlier this week showed the consumer price index rose 6.93 percent on the year in July after increasing 6.23 percent in June, well above the Reserve Bank of India's target range of 2.0 percent to 6.0 percent.

Revised Hong Kong GDP data showed headline growth rates for the three months to June were unchanged from initial estimates published late last month, confirming conditions remain weak but have stabilized from the initial impact of the Covid-19 pandemic. GDP contracted by 0.1 percent on the quarter and by 9.0 percent on the year, after dropping a record 5.3 percent on the quarter and 9.1 percent on the year in the three months to March. Officials also released updated growth forecasts, with the economy now expected to contract by between 6.0 percent to 8.0 percent in 2020, compared with the previous forecast for it to contract by between 4.0 percent and 7.0 percent.

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