Daily market review

United States

Hopes for Covid-19 treatments and vaccines gave equities a boost Monday, with gains across the board but cyclical stocks tied to the economic recovery trade leading. The Dow Jones industrial index gained 1.4 percent, the S&P 500 rose 1.0 percent, and the NASDAQ was up 0.6 percent.

Sentiment improved on a Financial Times report that the Trump administration will push the FDA to approve the Oxford University/AstraZeneca vaccine for emergency use if an initial trial is successful. A Health and Human Services official said no such emergency authorization would be granted. Separately, on Sunday, President Trump publicized a virus treatment relying on convalescent plasma.

Among sectors, energy led the market higher, along with financials, materials, and industrials. All benefited from recovery optimism. Within industrials, airlines led gainers, with American Airlines up 10.5 percent. Boeing rose 6.4 percent, and Dow Chemical rose 1.2 percent. Consumer staples were strong, with tobacco and beverages beating the market. Tech was a laggard, but still gained, with Apple up 1.2 percent as investors awaited its stock split after the close. Health care was another laggard, though higher.

Among companies in the news, Synaptics, the computer touchpad maker, rose 6.5 percent after a favorable mention in Barron's. Deere, the heavy equipment maker, rose 3 percent on an upgrade at BankAmerica. Estee Lauder, the cosmetics giant, gained 2.7 percent on an upgrade at RBC Capital Markets.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 73 cents to US$45.01, while spot gold fell US$13.12 to US$1,925.16. The US dollar rose slightly against most major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.36 percent while the 10-year note yield rose 2 basis points to 0.66 percent.


Risk assets rallied Monday on a report the Trump administration will seek to fast-track a proposed UK Covid-19 vaccine for use before the November US election. The Europe-wide STOXX 600 rose 1.6 percent, the German DAX rose 2.4 percent, the French CAC gained 2.3 percent, and the UK FTSE-100 rose 1.7 percent.

The Financial Times reported sources saying Trump will push the Food and Drug Administration to award emergency use authorization for the Oxford University-AstraZeneca vaccine if a relatively small trial is successful, even if professionals at the FDA resist. Markets also noted that Moderna, the US vaccine maker, said it will provide the EU with millions of doses of its vaccine. Separately, markets did not react well to news of spiking virus infections in many European countries.

Among sectors, best performers were utilities, chemicals, and energy, while laggards were real estate, travel & leisure, and banks.

Among companies, BT Group, the UK telecom, rose 7.1 percent on speculation it may be acquired. AstraZeneca, the UK pharma, rose 2.1 percent on the vaccine news. Bunzl, the UK distribution business, rose 3.2 percent after reinstating its dividend. Ryanair rose 3.5 percent on a report it will cut fewer jobs after its staff agreed to pay cuts.

Asia Pacific

Major Asian markets closed higher Monday, with sharp gains for firms listed on China's tech-focused ChiNext exchange after it introduced new IPO rules. Shares of newly-listed companies can now trade with no limits on daily gains or losses for the first five days and may then move 20 percent per day rather than the previous limit of 10 percent. Shares of companies that listed Monday surged under the new rules, with ChiNext rising 2.5 percent on the day. Hong Kong's Hang Seng index also posted a strong gain of 1.7 percent Monday, though moves elsewhere in the region were moderate. The Shanghai Composite index advanced 0.1 percent, Japan's Nikkei and Topix indices closed up 0.3 percent and 0.2 percent respectively, and Australia's All Ordinaries index gained 0.5 percent.

Singapore's headline consumer price index fell 0.4 on the year in July after dropping 0.5 percent in June and fell 0.3 percent on the month after no change previously. The Monetary Authority of Singapore's preferred measure of core inflation, which excludes the cost of accommodation and private road transport, showed a bigger drop in underlying price pressures, with this index falling 0.4 percent on the year after dropping 0.2 percent in June and falling 0.2 percent on the month after no change previously. MAS officials forecast both headline and core inflation to average between minus 1.0 percent and zero over 2020.

New Zealand retail trade sales volumes fell 14.6 percent in the second quarter after dropping 1.2 percent in the third quarter. This was by far the biggest quarterly fall in sales volumes on record and reflects the impact of a strict national lockdown put in place to curb the domestic spread of Covid-19, with businesses designated as "non-essential" closed for much of the quarter. Year-on-year growth in sales volumes also slumped from an increase of 2.3 percent to a record drop of 14.2 percent. Weaker growth was broad-based across most major categories with particularly large decline in spending on dining out, hotels and other accommodation, clothing, motor vehicles, and fuel.

Looking ahead*

On Tuesday in Europe, German GDP, Swiss employment, German Ifo, and UK CBI Distributive Trades reports are scheduled for release. In North America, US Case Shiller HPI, FHFA HPI, US consumer confidence, US new home sales, and Richmond Fed manufacturing reports are on tap.

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