Daily market review

United States

Equities rebounded from a morning selloff Wednesday afternoon on a positive reaction to comments from Federal Reserve Chair Jay Powell. The Dow Jones industrial average rose 0.6 percent, the S&P 500 gained 0.3 percent, and the NASDAQ rose 0.4 percent.

A risk-off morning gave way to an afternoon of risk-on trades after Powell repeated that policy makers want to see more data confirming progress on the Fed's inflation and employment objectives before they consider raising rates or tapering asset purchases. Powell repeated that the Fed expects a near-term and only "transitory" rise in inflation, and sees employment far below its pre-pandemic levels.

Best performing stock sectors included materials, financials, industrials, consumer discretionary and energy, while lagging were utilities, real estate, health care, and technology. US interest rates retreated from the day's highs after Powell's comments to help growth stocks recover, with Tesla ending up 3.7 percent.

Homebuilders and hotels outperformed to lift consumer discretionary, while hotels and airlines boosted industrials. Among companies in the news, homebuilder Lennar surged by 13.8 percent after crushing earnings and revenue expectations. Meanwhile, Disney reversed early losses to end up 0.5 percent on news it will reopen its California amusement parks. McDonalds rose 1.9 percent after an upgrade at Deutsche Bank. Microsoft ended down 0.3 percent, but well up from midday lows.

In US economic news, housing starts and permits both fell very steeply in February, down 10.3 percent and 10.8 percent on the month to lower-than-expected respective annual rates of 1.421 million and 1.682 million in the latest data showing a cooling underway in US housing.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 25 cents to US$68.07 while spot gold rose US$12.39 to US$1,745.14. The US dollar declined sharply vs. major currencies. The US Treasury 30-year bond yield rose 4 basis points at 2.42 percent while the 10-year note yield rose 2 basis points to 1.63 percent.


Equities were mostly weaker Wednesday though an uptick in auto stocks helped German markets outperform while declines in miners depressed UK stocks. The Europe-wide STOXX 600 declined 0.5 percent, the German DAX rose 0.3 percent, the French CAC was unchanged, and the FTSE-100 fell 0.6 percent.

Outperformers included autos & parts, banks, media, telecom, personal & household goods, chemicals, and food & beverage. Lagging were basic resources, utilities, real estate, health care, insurance, and travel & leisure.

Among German automakers in the news, BMW jumped 6.9 percent after raising its profits guidance and Volkswagen rose 13 percent a day after raising its guidance. VW appears to be rising on hopes for its electric vehicles. UK auto and aircraft engine maker Rolls-Royce gained 3.5 percent on an upgrade at JP Morgan.

On the downside, Verbund, the Austrian power company, fell 7.7 percent on an earnings miss. Finnish property business Citycon fell 7.8 percent on news of a large sale by the Canadian Pension Plan. Aeroports de Paris declined 1.7 percent on disappointing February traffic data.

UK mining stocks lagged as commodities prices declined, with Anglo-American down 3.9 percent, BHP down 2.4 percent, and Glencore down 1.5 percent.

Asia Pacific

Caution before upcoming US and Japanese monetary policy announcements kept most Asian equities markets nearly flat Wednesday, with a mixed showing across sectors.

China's Shanghai composite ended unchanged while the CSI300 firmed 0.4 percent. Sectors were split, with financials and real estate down while health care, technology, and consumer staples rose. Agriculture shares outperformed after the government announced steps to support Taiwan-based agriculture firms in mainland China.

Hong Kong stocks seesawed with the Hang Seng ending unchanged as investor awaited the Fed's policy decision. Energy shares lagged as oil prices slipped. Information technology and financials also lagged, while property stocks held up better.

Losses in tech stocks offset advances in health care to leave Japan's Nikkei unchanged and the Topix up 0.1 percent. Investors were cautious ahead of the Bank of Japan's policy decision on Thursday and whether the central bank maintains its existing target for purchases of exchange-traded funds.

Australian markets edged down, with the All Ordinaries index off 0.4 percent as the market corrected following three straight days of gains. Miners and energy stocks were off on weaker commodities prices.

Among companies in the region, Korean chipmaker Samsung Electronics eased 0.6 percent after warning that chip shortages that have affected the auto industry could spill over to other sectors. Honda Motor declined 1.4 percent after announcing production suspensions due to supply shortages.

In Australia, Commonwealth Bank eased 0.1 percent after unveiling its own buy now pay later product for account holders, posing a challenge to Afterpay, which gained 1.2 percent.

In economic news, Japanese merchandise exports fell 4.5 percent on the year in February after increasing 6.4 percent in January, below the consensus forecast for a drop of 0.8 percent and largely driven by weaker export growth to China, Taiwan, and Korea, and by contraction to the US, Hong Kong, and the European Union. Japanese imports rose 11.8 percent on the year, rebounding from a decline of 9.5 percent previously.

Looking ahead*

On Thursday in Asia/Pacific, New Zealand GDP and Australian labour force reports are due, plus the Bank of Japan policy announcement. In Europe, the Bank of England policy announcement and minutes, plus reports are scheduled for Swiss merchandise trade, Swiss producer and import prices, Italian merchandise trade, and Eurozone merchandise trade figures. In North America, US jobless claims, Philadelphia Fed manufacturing, and US leading indicators figures are on tap.

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