Daily market review

United States

Equities fell for a third consecutive day Tuesday with technology and mega-cap growth shares and energy stocks leading the declines. Analysts noted there has been no convincing rotation into value stocks, presumably as skepticism over the economic recovery persists. The Dow Jones industrial index fell 2.3 percent, the S&P 500 fell 2.8 percent, and the NASDAQ dropped 4.1 percent.

Tech shares and mega-cap growth stocks have been dropping on the view that they are over-extended and overdue for correction. Apple, the bellwether tech, dropped 6.7 percent, Microsoft fell 5.4 percent, Amazon was off 4.4 percent, Alphabet was off 3.7 percent.

Energy stocks tracked oil prices lower after Saudi Aramco cut oil prices and on weakening oil demand in China and elsewhere. Lack of progress on US fiscal stimulus and focus on rising Covid-19 cases over the summer added to worries that the recovery may falter. Financials were another notable loser, with news of Berkshire Hathaway further scaling back its holdings in Wells Fargo, down 3.3 percent, adding to the negatives.

Chevron was a notable decliner, down 3.6 percent, along with Exxon Mobil, down 2.3 percent. Among financials, Goldman Sachs fell 4.1 percent and BankAmerica lost 4.0 percent.

Among companies in focus, Tesla dropped 21 percent after the electric car company was passed over for inclusion in the S&P 500, contrary to market expectations. On the positive side, McDonalds rose 0.9 percent to recover some of its recent declines. Nikola, the electric truck-maker, surged 41 percent on news of a tie-up with General Motors, which rose 7.9 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.56 to US$39.94, while spot gold fell US$5.47 to US$1,931.18. The US dollar rallied against major currencies. The US Treasury 30-year bond yield fell 5 basis points to 1.42 percent while the 10-year note yield fell 4 basis points to 0.68 percent.


Concerns about a no-deal Brexit and falling US technology stocks depressed equities Tuesday, along with negative news on Covid-19 cases in France, Germany and the UK. The Europe-wide STOXX 600 fell 1.2 percent, the German DAX declined 1.0 percent, the French CAC lost 1.6 percent, and the UK FTSE-100 eased 0.1 percent.

Worst off sectors included oil, banks, technology, utilities, travel & leisure, construction, telecom, and basic resources. Holding up better were autos & parts, real estate, retail, health care, and media.

Notable decliners on first-half earnings misses included French biotech Innate Pharma, off 32 percent, UK lender International Personal Finance, down 18 percent, and UAE logistics company RA International, off 8 percent. On the positive side, Royal Mail, the UK postal carrier, rallied 25 percent after parcel deliveries surged.

In economic data, the final report on the Eurozone economy in April-June confirmed a record drop in real GDP. However, the quarterly decline was trimmed from the previously estimated 12.1 percent to 11.8 percent, which cut the yearly slump from a flash 15.0 percent to 14.7 percent. Even so, GDP was still at its lowest level since the first quarter of 2005.

Asia Pacific

Major Asian markets closed higher Tuesday on upbeat reports for Covid-19 treatments and gains in European markets Monday. Australia's All Ordinaries index was the strongest performer in the region, closing up 1.0 percent, while Japan's Nikkei and Topix indices advanced 0.8 percent and 0.7 percent respectively. The Shanghai Composite index rose 0.7 percent on the day, while Hong Kong's Hang Seng index closed up 0.1 percent.

Revised second-quarter GDP confirmed that the Japanese economy contracted at a record rate as the full impact of the Covid-19 pandemic hit activity. GDP fell 7.9 percent on the quarter, little changed from the preliminary estimate of a decline of 7.8 percent published last month, and much weaker than the decline of 0.6 percent in the three months to March. In annualized terms, the quarter-on-quarter decline amounted to 28.1 percent. Household spending in Japan fell 6.5 percent on the month in July, weakening again after it increasing 13.0 percent in June. Year-on-year growth deteriorated from a decline of 1.2 percent to a fall of 7.6 percent, weaker than the consensus forecast for a decline of 3.7 percent. New Covid-19 cases in Japan picked up appreciably in July, resulting in a re-tightening of restrictions in parts of the country.

Looking ahead*

On Tuesday in Asia/Pacific, Chinese PPI and CPI reports are due. In Europe, the Swiss unemployment report is scheduled for release. In North America, the Bank of Canada policy announcement and Canadian housing starts report are on tap with job openings in the JOLTS report to be posted in the US.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies