Daily market review

United States

Mega-caps extended their recovery Tuesday to lift US equities though a late selloff in Apple shares forced the Dow industrials to give up its early gains. Value stocks outperformed to boost the other major averages on recovery hopes. The Dow Jones industrial index ended flat, the S&P 500 rose 0.5 percent, and the NASDAQ was up 1.2 percent.

Cyclicals benefited from Monday's positive vaccine headlines and better-than-expected Chinese and German data Tuesday. Among mega-caps, Apple gave up good morning gains to close up 0.2 percent after investors were underwhelmed by its latest product offerings.

Among other momentum favorites, Nvidia rose 0.9 percent as analysts mostly liked the chipmaker's plan to buy ARM Holdings. Tesla rose 7.2 percent and Netflix rose 4.1 percent. Amazon rose 1.7 percent to lead consumer discretionary higher, Oracle rose 2.5 percent, and Microsoft was up 1.6 percent.

Among sectors, best performers were real estate and utilities, with NextEra Energy up 4.9 percent after raising its 2021 guidance and announcing a stock split. Financials were a notable laggard, with Citibank down 7 percent amid reports the company is facing criticism for its risk management practices. JP Morgan was off 3.1 percent after cutting its 2020 net interest income guidance.

In US economic data, Empire State's manufacturing index for September, at 17.0, returned to its July rate of growth of 17.2 and easily exceeded August's 3.7. Separately US industrial production figures were not so good as headline growth slowed to a monthly 0.4 percent that was on the lower end of Econoday's consensus range. Mining output, which has been hit hard during the crisis, fell 2.5 percent which didn't help the headline, and neither did a 0.4 percent decline in utilities output.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 92 cents to US$40.56, while spot gold fell US$4.55 to US$1,953.25. The US dollar was little changed on net against major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.44 percent while the 10-year note yield was flat at 0.68 percent.


Equities were mostly higher Tuesday with support from positive economic reports from China and Germany. The Europe-wide STOXX 600 rose 0.7 percent, the German DAX percent gained 0.2 percent, the French CAC was up 0.3 percent, and the UK FTSE-100 advanced 1.3 percent.

UK markets outperformed on upbeat company news and expectations that Prime Minister Boris Johnson will back down on his threat to upend the Brexit agreement.

Among sectors, surprisingly strong Chinese industrial and retail sales figures lifted mining and luxury goods stocks, with UK miners Glencore up 2.4 percent and Anglo American up 1.5 percent. French luxury goods makers LVMH and Hermes rose 0.9 percent and 1.5 percent, respectively.

Among companies in focus, Swedish retailer H&M rose 11 percent on strong quarterly results to lift the retail sector. Other winners included health care, personal & household goods, oil & gas, and construction. Lagging were banks, financial services, autos, telecom, food & beverage, and technology.

In economic data, the German ZEW August survey was surprisingly upbeat. The current conditions index jumped 15.1 points to minus 66.2, easily more than reversing July's modest 0.4 point decline and making for the strongest reading since March. The ZEW sentiment indicator rose a further 5.9 points to 77.4. This was its fifth increase in the last six months and its highest mark in two decades.

Asia Pacific

Major Asian markets posted mixed but generally moderate moves Tuesday, with solid Chinese data providing some support to regional investor sentiment. The Shanghai Composite index was one of the stronger performers in the region, closing up 0.5 percent while Hong Kong's Hang Seng index advanced 0.4 percent. Japan's Nikkei and Topix indices, however, closed down 0.5 percent and 0.6 percent respectively; on Monday the ruling Liberal Democratic Party chose Yoshihide Suga as successor to Prime Minister Shinzo Abe. Australia's All Ordinaries index was unchanged on the day.

Data published Tuesday suggest that China's recovery gained momentum in August, with all three indicators showing year-on-year increases. Industrial production rose 5.6 percent on the year in August, up from 3.8 percent in July and above the consensus forecast of 5.1 percent. Manufacturing output expanded at a steady pace, but output growth strengthened in both the utilities sector and the mining sector. Retail sales rose a better-than-expected 0.5 percent on the year after falling 1.1 percent previously. This is the first year-on-year increase in sales this year and reflected stronger spending on several key categories, including home appliances, household non-durables, clothing, and communications equipment. Fixed asset investment rose 4.18 percent year-to-date after advancing 4.41 percent previously.

Looking ahead*

On Wednesday in Asia/Pacific, the Bank of Japan policy announcement and Japanese merchandise trade figures are due. In Europe, UK CPI, UK PPI, and Eurozone merchandise trade reports are scheduled. In North America, the Fed policy announcement and press conference is the main event, and US retail sales, business inventories, housing market index, Treasury TICS, and Canadian CPI reports are on tap.

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