Daily market review

United States

Rising bond yields kept equities under pressure Tuesday but the reflation trade continued. The Dow Jones industrial average and the S&P 500 both declined 0.3 percent, and the NASDAQ declined 0.1 percent.

Reopening stocks got a boost from a surprisingly strong US consumer confidence report, especially cruise stocks and airlines. American Airlines rose 5.3 percent, getting additional support from an optimistic update on the first quarter.

The reopening story was also bolstered by expectations for enormous new spending in President Biden's infrastructure plan due Wednesday, along with whisper numbers for the monthly US payrolls report approaching 1 million. Investors also focused on positive vaccine news and regional reopenings despite the uptick in US Covid-19 cases. Atlanta Fed President Raphael Bostic's comments restating the Fed's patient stance did nothing to alter the recent uptrend in yields. Finally, markets are not seeing systemic risks from the Archegos affair.

Long-term US Treasury yields rose early in the day on reports pointing to up to $4 trillion in infrastructure spending in the Biden package, but yields retreated from their highs amid quarter-end demand for low-risk assets to flatter balance sheets.

Tech stocks lagged, along with other growth stocks, while many cyclicals/value fared better. Heavily-weighted FANMAG stocks depressed the major averages, with Apple down 1.2 percent and Microsoft down 1.4 percent. Merck was a notable decliner, down 1.6 percent, along with Amgen, down 2.0 percent.

Among other sectors, financials bounced back from steep losses Monday as industrials and consumer discretionary outperformed too. Lagging were consumer staples, health care, and energy. Among financials, Goldman Sachs and Morgan Stanley were bright spots, up 2.0 percent and 1.6 percent respectively, as the two reportedly dodged big losses on their Archegos-related holdings by selling early.

In US economic data, consumer confidence surged nearly 14 points in March to a 109.7 level that far exceeded Econoday's high estimate.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.15 to US$63.90 while spot gold fell US$26.68 to US$1,682.78. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield fell 3 basis points to 2.39 percent and the 10-year note yield rose 1 basis point to 1.72 percent.


Hopes for global recovery fueled equities Tuesday, paced by cyclicals, while growth stocks lagged as yields ticked up. The Stoxx 600 pan-European index rose 0.7 percent, the German Dax was up 1.3 percent, the French CAC gained 1.2 percent, and the UK FTSE 100 rose 0.5 percent.

Better economic data contributed to the recovery narrative, with EU consumer and business confidence figures topping expectations, along with a separate French gauge of consumer confidence.

Among sectors, best were autos & parts, banks, retail, insurance, basic resources, industrials, travel & leisure, and construction, while lagging most were utilities, health care, telecom, technology, food & beverage, and media.

Among companies in the news, Credit Suisse fell 3.1 percent as the firm has not said how large its loss will be after liquidating positions of Archegos, its brokerage client. On the positive side, RyanAir rose 4.5 percent on an analyst upgrade. Volkswagen rose 4.5 percent after announcing a restructuring for its Man trucking unit.

In economic news, EU economic sentiment rose sharply for a second successive month in March. At 101.0, the headline index was up 7.6 points versus February, its steepest gain since June 2020.

Asia Pacific

Asia/Pacific equities markets were mixed Tuesday with tech and other growth stocks helping Korea and China outperform, while Australia lagged on a pullback in commodities prices. Rising bond yields remained an overhang along with lingering concerns over stock liquidations by Archegos Capital Management.

Among major markets, Korea fared best, with big tech stocks leading and chipmaker SK Hynix up 1.9 percent. Strong overseas demand for Korean equities helped the KOSPI rise 1.1 percent.

Chinese markets rose with the Shanghai composite up 0.6 percent and the CSI300 up 1.0 percent, and the Hong Kong Hang Seng index up 0.8 percent. Growth stocks beat value. Among sectors, internet, consumer staples, and health care stocks outperformed, while utilities lagged.

Japanese shares were mixed with the Nikkei 225 index up 0.2 percent but the broader Topix off 0.8 percent. Value stocks led decliners, with utilities, insurance, and materials worst off, and banks and brokerages weakening too. Marine/air transportation stocks were winners, reflecting the resumption of trade in the Suez Canal after a lengthy blockage. Bank of Japan Governor Haruhiko Kuroda's comment that the BOJ would continue to buy ETFs as needed was a positive.

Australian shares lagged, with the All Ordinaries index down 1.0 percent. Declines were nearly across the board, with technology the only rising sector. Reopening plays were hurt by the Brisbane lockdown, and miners suffered from falling iron ore prices. Energy stocks followed oil prices lower. Financials suffered from worries over the Archegos affair.

In economic news, Japanese retail sales came in stronger than expected with a jump of 3.1 percent on the month in February after dropping 1.7 percent in January, with year-over-year growth improving from a fall of 2.4 percent to a smaller drop of 1.5 percent. Meanwhile, Japanese labour market data for February showed ongoing weakness. The unemployment rate was unchanged at 2.9 percent, holding below the recent peak of 3.1 percent but above pre-pandemic levels below 2.5 percent. The number of unemployed rose by 350,000 on the year after increasing 380,000 previously, while the number of employed fell by 450,000 persons after dropping by 500,000 previously.

Looking ahead*

On Wednesday in Asia/Pacific, Korean industrial production, Korean retail sales, Japanese industrial production, and Chinese CFLP manufacturing PMI are scheduled. In Europe, reports are due on UK GDP, French consumer manufactured goods production, French CPI, French PPI, the German unemployment rate, Eurozone HICP flash, and Italian CPI. In North America, releases for US ADP employment, US Chicago PMI, US pending home sales, Canadian monthly GDP, and Canadian industrial product prices are on tap.

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