Daily market review

United States

US equities put in a mixed performance Monday with momentum and consumer discretionary stocks outperforming while weakness in financials, industrials, and energy limited gains. The Dow Jones industrial index fell 0.3 percent, the S&P 500 rose 0.3 percent, and the NASDAQ gained 1.0 percent as tech stocks outperformed.

Consumer discretionary shares advanced on strength in homebuilders and autos, plus another strong showing for Amazon, up 1.1 percent. Homebuilders outperformed on an unexpectedly positive report from the National Association of Home Builders showing business sentiment surging to tie its record high. Beazer, the builder, rose 9 percent and D.R. Horton gained 2.7 percent.

Autos rose on an analyst upgrade for General Motors, which climbed 7.7 percent. Health care gained with support from biotech. Tech and momentum stocks outperformed, with Nvidia up 6.7 percent and Tesla rising 11.2 percent to add to its recent outsized gains.

On the downside, industrials were weighed down by airlines and aerospace and defense. Energy was off on weakness in supermajors and exploration and production stocks despite rising oil prices. Financials fared worst after weekend news that Berkshire Hathaway pared its bank stock holdings. Wells Fargo was down 3.3 percent and JP Morgan down 2.6 percent.

In US economic data, homebuilders reported exceptional growth, reinforcing the strength of new home sales and pointing to momentum ahead, virus issues aside, for residential construction as well. The NAHB housing market index rose 6 points in August to 78, well above expectations. Separately, US Empire State disappointed and raised concerns about a W-shaped recovery for manufacturing.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 43 cents to US$45.31, while spot gold rose US$41.21 to US$1,984.63. The US dollar fell against most major currencies. The US Treasury 30-year bond yield declined 1 basis point to 1.44 percent while the 10-year note yield fell 2 basis points to 0.69 percent.


An uptick in mining stocks offset weakness elsewhere to help equities edge higher Monday. The Europe-wide STOXX 600 firmed 0.3 percent, the German DAX and the French CAC both edged up 0.2 percent, and the UK FTSE-100 rose 0.6 percent as miners helped the UK outperform.

Mining stocks reacted favorably to China's central bank adding liquidity to the banking system in a signal of policy accommodation. Markets appeared to ignore news that US and Chinese officials canceled Saturday's planned review of the phase one trade deal, with no new date scheduled. Rio Tinto was up 1.7 percent, BHP up 1.4 percent, and Anglo American up 2.8 percent.

On the downside, travel & leisure stocks extended their recent selloff on an array of negatives on the coronavirus front. That included the UK extending its quarantine include visitors from France and other countries last week. Bloomberg reported high-frequency indicators suggest fresh slowing in Europe's economic recovery as virus cases rebounded in Italy and Spain. Airlines were among the worst performers, with RyanAir off 5.9 percent and IAG, owner of British Airways down 5.3 percent.

Among companies in the news, Costain, the UK engineering company, fell 6.1 percent as the market reacted badly to its updated first-half guidance. Unibail-Rodamco, the French property business fell 4 percent amid rumors that it will raise capital or liquidate holdings.

Asia Pacific

Major Asian markets posted mixed results Monday, with very weak Japanese GDP data in line with expectations and US-China relations still a major focus for investors. President Trump ordered Friday that Chinese tech firm ByteDance must divest its US assets within 90 days, while reports over the weekend indicated that a review of Phase 1 of the US-China trade deal had been postponed. Despite these developments, the Shanghai Composite index opened the week with a strong 2.3 percent gain, while Hong Kong's Hang Seng index advanced 0.7 percent. Japan's Nikkei and Topix indices both closed down 0.8 percent while Australia's All Ordinaries index fell 0.7 percent on the day.

Preliminary estimates show Japan's economy contracted at a record rate in the second quarter, falling 7.8 percent on the quarter following a drop of 0.6 percent in the first quarter. This gives an annual decline of 27.8 percent. The decline was largely driven by a big drop in household consumption and weaker external demand, with non-residential investment also down on the quarter.

Singapore's non-oil domestic exports rose 6.0 percent on the year in July after increasing 13.9 percent in June. Electronics exports rose 2.8 percent after increasing 22.2 percent previously, while non-electronics exports posted an increase of 6.9 percent after advancing 11.7 percent.

Looking ahead*

On Tuesday in Asia/Pacific, Reserve Bank of Australia meeting minutes are due. In North America, the US housing starts report is scheduled.

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