Daily market review

United States

US economic data and strength in Apple and technology stocks helped equities edge up Friday. The Dow Jones industrial index rose 0.7 percent, the S&P 500 gained 0.3 percent, and the NASDAQ gained 0.4 percent.

Sentiment was bolstered by hopeful news on the Covid-19 vaccine front, with Pfizer, up 0.4 percent, saying its vaccine may be ready for regulatory review as soon as October.

Apple rose 5.2 percent, while chipmaker Nvidia, a recent market darling, rose 4.5 percent to lead tech gains. Consumer discretionary shares outperformed, with help from homebuilders after buoyant US housing resales data, with Toll Brothers up 3.7 percent. Nike, the sportswear company, rose 1.6 percent. Consumer staples also beat the tape as discounters gained, with Walmart up 0.8 percent.

Laggards included financials, communications services, materials, and worst off were energy stocks as crude oil prices sagged.

Among companies in the news, Deere advanced 4.3 percent after topping expectations for earnings and revenues, and raising its guidance. Foot Locker rose 1.4 percent after an earnings bet, reinstating its dividend and saying customers are back in force.

In US economic news, existing home sales joined new home sales in posting the best results since the sub-prime collapse 12 years ago, at an annual rate of 5.860 million in July, to exceed Econoday's consensus range, with resales up 8.7 percent on the year. Separately, Markit's PMI flash purchasing managers reports, offering early indications on the ongoing month, moved from the low 50s toward the mid 50s, now at 54.8 for services and 53.6 for manufacturing, which suggested faster growth.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 65 cents to US$44.28, while spot gold fell US$13.25 to US$1939.28. The US dollar rose against most major currencies. The US Treasury 30-year bond yield declined 4 basis points to 1.34 percent while the 10-year note yield declined 1 basis point to 0.64 percent.


Worries about rising Covid-19 cases in parts of Europe and weak Eurozone purchasing managers data undercut equities Friday. The Europe-wide STOXX 600 eased 0.2 percent, the German DAX declined 0.5 percent, the French CAC fell 0.3 percent, and the UK FTSE-100 was off 0.2 percent.

Eurozone flash PMI results suggested a slowdown in the pace of economic recovery. At 51.6, the composite index was down from July's final 54.9, well short of expectations and, while still above the 50-expansion threshold, showing a loss of momentum. The deceleration was wholly all due to services where the flash sector PMI dropped from July's final 54.7 to a surprisingly low 50.1. IHS Markit, the source of the PMI data, said weakness in services reflected rising virus cases in parts of the Euro area.

On the positive side, UK data mostly topped expectations, as a much stronger than expected reading of 60.3 put the flash UK composite output index up more than 3 points versus July's final 57.0 and at its highest level in 82 months.

Among sectors, worst off were autos, energy, and banks, while construction, travel & leisure, and technology held up better. Among companies in the news, Danish shipping company Maersk fell 4.1 percent after a downgrade at JP Morgan. U-Blox Holding, the Swiss chipmaker, dropped 14 percent after an impairment charge and pulling its guidance. On the plus side, Bachem, the Swiss chemicals company, rose 18 percent after raising its sales guidance.

Asia Pacific

Most major Asian markets closed moderately higher on the day Friday, though moves on the week were mixed. Japan's Nikkei and Topix indices rose 0.2 percent and 0.3 percent respectively on the day but were among the weaker performers in the region on the week with declines of 1.6 percent and 1.2 percent respectively. Korea's Kospi index regained some ground on the day but still ended the week well down in response to sharp increases in Covid-19 cases. The Shanghai Composite index posted modest rises of 0.5 percent on the day and 0.6 percent on the week, while Australia's All Ordinaries index was unchanged on the day and up just 0.1 percent on the week. Hong Kong's Hang Seng index outperformed on the day with a 1.4 percent gain but closed down 0.2 percent on the week.

Japanese inflation data released today showed price pressures remained broadly steady and subdued in July. Headline inflation picked up from 0.1 percent in June to 0.3 percent in July, mainly reflecting a stronger increase in food prices and a smaller decline in transportation and communication prices. Core CPI, which excludes fresh food prices, was flat on the year in July, as it was in June, while the Bank of Japan's preferred measure of underlying inflation, CPI excluding fresh food and energy prices, increased 0.4 percent on the year in July, as it did in June. Today's data suggest that progress towards the BoJ's 2.0 percent inflation target remains stalled and may strengthen the case for additional policy measures. The BoJ's next policy meeting is scheduled to take place mid-September.

Flash PMI survey data for Japan published today indicate that the impact of the Covid-19 pandemic on the domestic economy has remained substantial during August, with aggregate activity still contracting at a significant pace. The flash estimate for the manufacturing survey's headline index for August is 46.6, up from the final estimate of 45.2 in July, while the flash estimate for the services sector activity index is 45.0, down from the final estimate of 45.4 in July. Together these resulted in a flash estimate for the composite output index of 44.9, unchanged from July. Respondents to both surveys reported further declines in output, new orders, new export orders, and employment, weak confidence about the outlook, and subdued price pressures.

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