Daily market review

United States

Strength in growth and mega-cap momentum stocks kept US equities in positive territory Tuesday. The Dow Jones industrial index and the S&P 500 both rose 0.8 percent, and the NASDAQ gained 1.4 percent.

Zoom Video Communications, the ubiquitous online meeting tool, surged 41 percent and underlined investor interest in growth stocks that typify the post-Covid economy. Mega-caps Apple, up 4.0 percent, Amazon, up 1.4 percent, Netflix, up 5.1 percent, and Facebook, up 0.8 percent, gave the market a boost. Apple led technology shares higher on a report it told its suppliers to boost iPhone production this year.

Materials, tech, and communications outperformed, with industrials in line. Lagging were consumer staples, led down by drug stores, with Walgreen's off 3.3 percent and CVS off 3.0 percent.

Among companies in the news, Walmart rose 1.3 percent after announcing Walmart+ a membership program akin to Amazon Prime.

On the downside, Tesla declined 4.7 percent after announcing an agreement to sell up to $5 billion in its shares through several global banks. ScanSource, the barcode company, dropped 13 percent on disappointing quarterly results. Voya Financial declined 1.6 percent on news it will divest its individual life insurance businesses.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 17 cents to US$45.72, while spot gold rose 10 cents to US$1,968.99. The US dollar was little changed against most major currencies. The US Treasury 30-year bond yield was down 5 basis points at 1.43 percent while the 10-year note yield declined 3 basis points to 0.68 percent.


European equities were mixed to lower Tuesday with UK equities underperforming on sterling's rise in a catch-up trade following Monday's UK bank holiday. The Europe-wide STOXX 600 declined 0.4 percent, the German DAX gained 0.2 percent, the French CAC eased 0.2 percent, and the UK FTSE-100 dropped 1.7 percent.

Among sectors, travel & leisure lagged the most, along with banks/financials, media, telecom, food & beverage, oil & gas, health care, and utilities. Holding up best were technology, basic resources, real estate, retail, personal & household goods, and chemicals. Tech shares were bolstered by more strength in Apple after a report it was asking its suppliers to step up iPhone production.

Notable decliners included IAG, the owner of British Airways, fell 6.4 percent on a downgrade at JP Morgan. Dalata Hotel fell 4.4 percent on disappointing first-half results. Wizz Air declined 3.8 percent on a bleak trading update. Banco de Sabadell fell 2.3 percent on a downgrade at Jefferies. Continental, the German auto parts maker, fell 2.4 percent on a weak business forecast.

Eurozone inflation decelerated much more quickly than expected in August. At a flash minus 0.2 percent, the annual rate was down fully 0.6 percentage points versus July and below zero for the first time since May 2016.

Asia Pacific

Major Asian markets again posted mixed results Tuesday as investors digested a busy regional data calendar, though moves were generally moderate. The Shanghai Composite index advanced 0.4 percent after PMI survey data showed further improvement in manufacturing conditions, while Hong Kong's Hang Seng index closed flat on the day. Japan's Nikkei and Topix indices were little changed; Australia's All Ordinaries index was the regional outlier, closing down 1.7 percent.

The Markit Manufacturing PMI for China rose from 52.8 in July to 53.1 in August, its highest level since 2011, indicating that the sector is continuing to recover from the initial impact of the pandemic at a strong rate, albeit from a very weak base. Respondents reported stronger increases in output and new orders, the first increase in new export orders since the start of the year, and only a slight cut in payrolls. The equivalent surveys for Japan's and India also showed improved manufacturing conditions. The headline index for both surveys increased to their highest level since February, picking up from 45.2 in July to 47.2 in August and from 46.0 to 52.0 for India.

The Reserve Bank of Australia left its main policy rate on hold at a record low of 0.25 percent on hold at its regular monthly meeting Tuesday, in line with the consensus forecast. Officials also announced that they will expand in size and extend in duration the Term Funding Facility established earlier in the year to help keep domestic interest rates low. In the statement accompanying Tuesday's decision, officials again noted that the Australian economy is going though "a very difficult period" and that recovery from the impact of the Covid-19 pandemic will be "uneven and bumpy".

Japanese labor market data for July show conditions remained weak as the economic impact of the Covid-19 pandemic continued. The unemployment rate rose from 2.8 percent in June to 2.9 percent in July, matching the rate seen in May which had been the highest level since May 2017. Meanwhile, the number of unemployed persons rose by 410,000 on the year in July, up from an increase of 330,000 in June, while the number of employed persons fell by 760,000 on the year after dropping 770,000 previously. The timing and strength of any improvement in labor market conditions remain highly uncertain, with an increase new virus cases in recent weeks resulting in some re-tightening of restrictions on households and businesses.

Looking ahead*

On Wednesday in Asia/Pacific, the Australian GDP report is due. In Europe, UK Nationwide House Price index, German retail sales, and Eurozone PPI reports are scheduled for release. In North America, US ADP employment, US factory orders, and the Fed Beige Book reports are on tap.

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