Daily market review

United States

Equities gained Friday with support from mega-caps and as recovery plays ticked up headed into the close. The Dow Jones industrial average rose 0.9 percent while the S&P 500 gained 0.8 percent, and the NASDAQ was up 0.5 percent.

Sentiment remains supported by confidence the recovery is unfolding and that the Federal Reserve and other central banks are in no rush to pull back on stimulus even as economic readings top expectations. Central bankers have repeated they expect a transitory spike in inflation as the economy reopens. Markets also focused on reports that White House talks with Republican leaders on infrastructure plans are not going well.

Risk appetite was hemmed in much of Friday by inflation worries and an associated uptick in bond yields after an upside surprise in Chinese producer prices overnight followed by another surprisingly big increase in US producer price figures.

Among sectors, retailers helped consumer discretionary stocks outperform, with Amazon up 2.2 percent. Tech stocks rose, with Apple up 2.0 percent and Microsoft up 1.0 percent. Rail stocks and building products helped industrials beat the market. Lagging were materials, communications, consumer staples, and energy.

Cruise lines rose on the reopening trade, with Carnival up 2.6 percent. and General Electric up 1.1 percent after analyst upgrades.

Among companies in the news, Johnson & Johnson declined 1.0 percent after some mass vaccination sites suspended use of its Covid-19 vaccine after some adverse reactions.

In US economic news, producer prices surged 1.0 percent in March to exceed Econoday's consensus range and double Econoday's consensus. The year-over-year rate rose 1.4 percentage points to 4.2 percent for a nearly 10-year high. Core readings likewise exceeded all expectations: up 0.7 percent on the month and 3.1 percent on the year when excluding food and energy.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 27 cents to US$63.06 while spot gold fell US$16.92 to US$1,742.99. The US dollar rose vs. most major currencies but declined vs. the Swiss franc and Canadian dollar. The US Treasury 30-year bond yield rose 1 basis point to 2.33 percent and the 10-year note yield rose 2 basis points to 1.66 percent.


Equities were nearly unchanged Friday in subdued trading as markets held onto recent gains, reflecting supportive Fed and ECB policy and expectations for recovery. The Europe-wide STOXX 600 firmed 0.1 percent, the German DAX rose 0.2 percent, the French CAC firmed 0.1 percent, and the FTSE-100 eased 0.4 percent.

In macro news, ECB officials downplayed inflation risks Friday while warning against delays in the EU recovery fund. Meanwhile, Italian Premier Mario Draghi said his government would introduce additional stimulus. Corona virus news was mixed, as Italy and the UK appeared ready to ease more restrictions while Germany prepared to step up its federal control, and France reported faster progress on vaccinations.

Among sectors, best were health care, construction, retail, industrials, and financial services, while lagging were telecom, oil & gas, basic resources, real estate, autos, travel & leisure, banks, and insurance.

In economic data, German industrial production continued to surprise on the downside in February. The 1.6 percent mid-quarter fall was made for the first back-to-back decline since March/April last year, and annual growth dropped from minus 3.9 percent to minus 6.1 percent. Separately, French industrial production was also much weaker than expected in February. A monthly slump of some 4.7 percent easily more than reversed January's marginally smaller revised 3.2 percent spurt and left output at its lowest level since August last year.

Among stocks in the news, British American Tobacco fell 2.5 percent after a downgrade at JP Morgan. Norwegian Air Shuttle fell 5.7 percent on disappointing March air traffic. Pandora, the Danish jeweler, fell 3.1 percent on an earnings miss. On the positive side, Catena Media rallied 20 percent on blowout earnings. Hilton Food Group rose 3.2 percent on an analyst upgrade, and Deutsche Post rose 1.8 percent after raising its guidance.

Asia Pacific

Major Asian equities markets were mixed Friday with Chinese markets off on inflation and tightening worries, while Japanese markets edged up on a better showing for growth stocks, and Australia was flat.

Bond yields rose during the Asian hours after Chinese inflation figures surprised to the upside. This renewed concerns about rising inflation as more countries bounce back from pandemic weakness.

Chinese equities declined nearly across the board with the Shanghai composite off 0.9 percent and the CSI composite down 1.5 percent. Markets reacted poorly to news that Chinese producer prices jumped 1.6 percent on the month in March. Year-over-year the PPI was up 4.4 percent in March to more than double February's 1.7 percent showing. Risk appetite also suffered from news that Chinese authorities were telling banks to limit debt growth, and to clamp down on shady practices. Finally, US-China discord remained in focus after the US added Chinese supercomputer companies to its restricted list, and US Senate leaders pressed legislation targeting China over human rights and other concerns.

Hong Kong tracked other Chinese markets lower, with the Hang Seng off 1.1 percent on inflation worries. Tech stocks led the selloff as interest rates ticked up. Wuxi Biologics, the biotech, fell 4.9 percent. Beigene, the pharma, fell 4.0 percent on disappointing results in its trials of its Covid-19 drug.

Japanese markets managed modest gains as growth stocks beat value. The Nikkei firmed 0.2 percent and the Topix rose 0.4 percent. Analysts noted the Nikkei faced profit-taking whenever it approaches 30,000, and worries about the impact of new anti-Covid lockdowns limited the market's upside too. Best performing sectors included marine transportation, machinery, and finance, while lagging were mining and metals.

Australia's All Ordinaries index was unchanged as it held at record highs. Markets have been bolstered by US stimulus that supports global recovery hopes, signs the Reserve Bank of Australia is joining the Fed in maintaining a dovish stance, and signs of the pandemic easing its grip.

Australian sectors were divided on the day with consumer staples and health care lagging and miners and travel retreating from recent highs. Retailers outperformed with Kogan.com up 5.9 percent, and buy now pay later stocks boosting tech.

Among other Asian companies in focus, Aluminum Corp. of China rose 3.6 percent on positive guidance, and Sony, the Japanese conglomerate, rose 2.8 percent on a distribution deal with Netflix. On the downside, heavily-weighted Japanese retailer Fast Retailing fell 3.4 percent after its better guidance still disappointed the market.

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