Daily market review

United States

Reopening plays rebounded Monday while growth stocks recovered too as last week's rise in bond yields ebbed. The Dow Jones industrial average rose 2.0 percent, the S&P 500 gained 2.4 percent and the NASDAQ composite rallied 3 percent.

Value/cyclicals rose on dip-buying after last week's selloff, with a boost from news that the U.S. House approved the Biden administration's fiscal stimulus measure, and news that a third vaccine had been approved for US use.

All sectors rose with recovery plays leading – energy, industrials, materials, and financials. Tech stocks outperformed with support from steadier bond yields, as investors evidently bought the dip in US Treasuries. Lagging but still higher were consumer discretionary, health care, consumer staples, and real estate.

Among companies in focus, airlines gave industrials a lift, with American Airlines up 1.2 percent. Boeing was a notable winner, up 5.8 percent on news of a large order from United Airlines, up 1.2 percent.

Apple, up 5.4 percent, said all its stores were open for the first time since March 2020. Exxon Mobil gained 3.7 percent after agreeing to add activist investors to its board. Brokers and asset managers gave financials a boost; Interactive Brokers gained 6.1 percent and Invesco rose 10.4 percent.

In US economic news, the Institute for Supply Management's February manufacturing index, at 60.8, exceeded Econoday's high estimate. Orders were very strong while supplier deliveries slowed substantially, leading to a colossally inflationary score of 86.0 for prices paid.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined US$2.90 to US$63.23 while spot gold fell US$8.90 to US$1,723.61. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield rose 5 basis points at 2.20 percent while the 10-year note yield rose 1 basis point to 1.44 percent.


Retreating bond yields gave equities a boost Monday after ECB officials downplayed inflation worries and appeared to threaten to step up asset purchases. The Europe-wide STOXX 600 rose 1.8 percent, while the German DAX, the French CAC, and the FTSE 100 all rose 1.6 percent.

Yields declined on ECB Governing Council member Francois Villeroy de Galhau's comment that the bank "can and must react against" any unwarranted rise in bond yields that threaten to undermine the Eurozone economy. The comments echoed similar remarks over the last week from other ECB officials.

Among sectors, outperformers included basic resources, travel & leisure, construction, materials, food & beverages, chemicals, and retail. Lagging were utilities, banks, media, autos, health care, and telecom.

Among companies in focus, Global Fashion Group, the eCommerce retailer, rallied 16 percent on a big earnings beat. International Airlines Group, owner of British Airways, rose 7 percent and Carnival, the cruise line, rose 4.7 percent on analyst upgrades.

Asia Pacific

Equities rebounded Monday after Wall Street's rebound in technology and growth shares on Friday, plus optimism linked to progress on US fiscal stimulus and the rollout of vaccines.

Signs that central banks were pushing back on rising bond yields helped risk appetite recover and helped bond markets steady after yields spiked last week.

China's Shanghai Composite Index gained 1.2 percent and the CSI300 index rose 1.5 percent with technology and growth stocks leading after dramatic losses last week. Utilities and financials lagged.

In economic news, the Markit China Manufacturing PMI fell from 51.5 in January to 50.9 in January, still above break-even 50 but its lowest level since May 2020. The official CFLP manufacturing PMI survey, published over the weekend, also showed similar slowing, from 51.3 in January to 50.6 in February.

The tech stock recovery in US trading gave Japanese stocks a boost with the Nikkei up 2.4 percent and the broader Topix up 2.0 percent and with Japanese chipmakers leading. Gains were nearly across the board: materials, technology, and communications services led the way.

In economic news, Japan's Markit manufacturing PMI increased to 51.4 in February, little changed from the flash estimate of 51.3 and confirming an increase from 49.8 in January. The survey indicates that activity in the sector expanded for the first time since early 2019 and at the fastest pace since late 2018.

Steadier bond markets and bargain-hunting helped Hong Kong equities recover Monday; the Hang Seng index was up 1.6 percent to recoup part of Friday's steep losses. Tech shares led the winners, with Tencent up 5.2 percent.

Among other companies in focus, Alibaba Health Information Technology, up 9.4 percent, and Haidilao International, up 8.2 percent, rose on news they will join the Hang Seng index.

Australian shares advanced Monday after the Reserve Bank of Australia once again stepped up asset purchases and on upbeat economic data. The All Ordinaries index rose 1.5 percent, with technology, health care, travel, and financials leading. CoreLogic's report that housing prices rose in February at the fastest pace in 20 years gave property stocks a boost.

Looking ahead*

On Tuesday in Asia/Pacific, Korean industrial production, Korean retail sales, Japanese unemployment, Korean PMI manufacturing, and the Australian RBA policy announcement are due. In Europe, German retail sales, German unemployment, and Eurozone HICP flash reports are scheduled. In North America, Canadian monthly GDP and Canadian quarterly GDP reports are on tap.

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