Daily market review

United States

Equities retreated for a second day Tuesday with recovery/reopening names selling off after weeks of gains, and risky momentum plays down too on de-risking. The Dow Jones industrial average fell 0.8 percent while the S&P 500 declined 0.7 percent, and the NASDAQ was down 0.9 percent.

Worst off were banks, energy, and travel stocks, while defensive sectors including consumer staples, real estate, and utilities, outperformed. Lack of buying suggested that much good news for stocks has been priced in, even as an array of bearish factors loom: rising global virus case counts, US-China disputes, the prospect of higher US corporate tax rates, and inflation worries.

Travel stocks were hit by negative news on the virus front, including the US State Department warning against travel to most countries, and renewed lockdowns in Canada, Japan, and elsewhere.

Among companies in focus, Procter & Gamble rose 0.8 percent on its quarterly results and said it will raise prices for consumer goods in the fall. Johnson & Johnson rose 2.3 percent after the European regulator said use of its Covid-19 vaccine will resume. IBM rose 3.8 percent on an earnings and revenues beat.

On the downside, United Airlines dropped 8.5 percent on an earnings miss. Zions Bancorporation fell 6.7 percent on unimpressive guidance. Canadian National Railway fell 6.8 percent after announcing it will buy rival Kansas City Southern, which rose 15 percent. Xerox Holdings fell 6.4 percent on an earnings miss.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 62 cents to US$66.49 while spot gold rose US$7.04 to US$1,777.69. The US dollar rose vs. major currencies. The US Treasury 30-year bond yield declined 4 basis points to 2.26 percent and the 10-year note yield fell 4 basis points to 1.55 percent.


Equities retreated nearly across the board Tuesday as investors pared risk positions after a long period of gains, with cyclicals/value stocks leading the selloff. The Europe-wide STOXX 600 fell 1.9 percent, the German DAX 1.6 percent, the French CAC dropped 2.1 percent, and the FTSE-100 was down 2.0 percent.

Weakness in Asian markets on virus/lockdown worries contributed to the European move down. Stocks that have rallied on the reopening/recovery trade and good earnings suffered the most as the bar for news to boost equities appears higher. Worst off were banks, travel & leisure, oil & gas, basic resources, retail, autos & parts, and insurance. Holding up best were real estate, health care, chemicals, food & beverage, and utilities.

UK tobacco stocks fell sharply after a report in The Wall Street Journal said the Biden administration is considering forcing tobacco companies to cut the amount of nicotine in cigarettes so they will be less addictive, and other restrictions. British American Tobacco fell 7.6 percent and Imperial Brands fell 5.6 percent.

Among companies in focus, Atos, the French IT firm, fell 5.5 percent on its latest trading update. Hammerson, the UK real estate company, declined 4.3 percent after reporting gloomy rental revenues. Zur Rose, the Swiss drug store chain, fell 2.4 percent on disappointing quarterly results.

In economic news, the February/March UK update pointed to a less subdued labour market than expected. According to the claimant count, the number of people out of work rose only 10,100 to 2.674 million. This followed a smaller revised 67,200 increase in February and left this version of the jobless rate unchanged at that month's downwardly revised, and much lower than expected, 7.3 percent.

Asia Pacific

Asian equities mostly weakened Tuesday with Japan hurt most by concerns about renewed lockdowns as Covid-19 cases rise and vaccinations lag.

Japanese markets dropped on risk-off sentiment linked to pandemic worries, with the Nikkei down 2.0 percent and the broader Topix index off 1.6 percent. Reports said Osaka and Tokyo were likely to impose wide lockdowns. Losses were nearly across the board, with air transportation, real estate, warehousing and machinery lagging the most. Among companies in focus, automakers were hit by bad news about chip shortages, with Toyota down 1.2 percent, and Subaru down 2.8 percent.

Chinese markets held up better, with the Shanghai composite and the CSI 300 both down 0.1 percent. Markets started off in positive territory in the morning but came off on Covid worries and the anti-US rhetoric in Xi Jinping's speech in which he called for rejection of hegemonic power structures. Sectors were mixed with materials and consumer staples outperforming while telecommunications services and consumer discretionary lagged.

Hong Kong's Hang Seng firmed 0.1 percent, with a mixed showing across sectors. Best performing were financials, offset by declines in other sectors, including tech and energy stocks. Alibaba fell 1.6 percent as regulators opened a new front in their crackdown on the e-commerce leader, while Meituan, another e-commerce giant, rose 1.5 percent as it pressed into the grocery store business.

Australian shares slipped with the All Ordinaries index down 0.6 percent. Weakness in tech during the US session weighed on the sector, with biotechs dampening health care, banks holding down financials, and industrials hurt by a selloff in airlines, infrastructure, and building materials. Rising industrial metals prices gave miners a boost.

Looking ahead*

On Wednesday in Asia/Pacific, Australian retail sales and New Zealand CPI reports are due. In Europe, UK CPI and PPI are scheduled. In North America, the Bank of Canada Monetary Policy Report and policy announcement are on tap, along with Canadian CPI.

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