Daily market review

US, Europe off on tech selloff, Yellen comments; Asia mixed

United States

A selloff in technology and other growth shares accelerated Tuesday after Treasury Secretary Janet Yellen said rates may need to rise to stem inflation. The Dow Jones industrial average rose 0.1 percent, the S&P 500 slipped 0.7 percent, and the NASDAQ lost 1.9 percent.

"It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat, even though the additional spending is relatively small relative to the size of the economy," she said, referring to new planned spending, in a pre recorded interview. The heated reaction to Yellen's comment occasioned some puzzlement, as it did not appear the Treasury secretary was doing more than stating a truism, that with faster growth, interest rates may need to rise.

Rotation from growth into value/cyclicals helped the latter outperform, with Caterpillar, the heavy equipment maker, up 2.3 percent. In contrast, top mega-caps sold off on corrective pressures following April's rally, with Apple down 3.5 percent, Google down 1.7 percent, Facebook down 1.3 percent, and Amazon off 2.2 percent.

On a busy earnings day, materials fared best, with Vulcan Materials up 5.3 percent after an earnings and revenues beat on strong sales of aggregates and asphalt. Other leaders included industrials on strength in machinery, and financials, led by banks. On the downside, Maxar, the space technology company, was the day's featured loser, down 26 percent on an earnings miss.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.37 to US$68.88 while spot gold fell US$13.01 to US$1,779.08 The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield was down 3 basis points at 2.26 percent and the 10-year note yield was down 2 basis points at 1.59 percent.


The US tech stock selloff hit European equities Tuesday, along with fallout from the Yellen comments on the prospect of higher interest rates. The Europe-wide STOXX 600 fell 1.4 percent, the German DAX dropped 2.5 percent, the French CAC lost 0.9 percent, and the UK FTSE 100 fell 0.7 percent.

German markets lagged, on weakness in tech and auto stocks, after Infineon, the big microchip maker, which fell 5.1 percent, warned that chip shortages would continue to limit automobile output through the first half of the year. Volkswagen fell 2.4 percent and Daimler fell 2.6 percent.

Holding up best were basic resources, construction, materials, and oil and gas. Heavily-weighted BP, up 2.4 percent, and Royal Dutch Shell, up 2.2 percent, tracked oil prices higher to cushion the declines.

Companies in the news included HelloFresh, the meal-kit company, down 6.6 percent, after the market was disappointed in its guidance. On the positive side, Frasers Group, the retailer, rose 6.4 percent after announcing buybacks, and Pandora, the jeweler, rose 6.6 percent on an earnings beat.

Asia Pacific

Asian equities markets were mixed Tuesday amid holidays in mainland China and Japan. Miners boosted Australia while energy lifted Hong Kong, and Taiwan slipped on a selloff in semiconductors after similar declines on Wall Street.

Markets remained focused on the disastrous Covid-19 situation in India, and separately, on heated rhetoric between China and its rivals including Australia, the Philippines, and G7 members over a range of issues, including tensions in the South China Sea.

In macro news, the Reserve Bank of Australia left policy unchanged but pointed to its July meeting for possible changes in its asset purchase/yield curve control program. Separately, comments from Fed officials Monday supported market sentiment in Asia, as New York Fed President John Williams underlined the Fed's patient stance and willingness to look through a near-term uptick in inflation measures.

In Tuesday's trading, Australia's All Ordinaries rose 0.5 percent. Most sectors advanced, led by materials on strength in iron ore and industrial and precious metals. Energy stocks advanced on rising liquefied natural gas prices. Tech stocks lagged as buy-now-pay-later stocks dropped.

Energy stocks led Hong Kong higher with the Hang Seng up 0.7 percent, led by Sinopec, the Chinese oil and chemicals giant, up 4.1 percent. Zijin Mining rose 12.6 percent on rising Chinese demand for gold ETFs in the first quarter.

Korean markets rebounded on dip-buying after several days of losses, with the KOSPI up 0.6 percent. Banks led the recovery but the market continued to struggle on the second day after regulators allowed the resumption of short-selling. A bigger than expected rise in Korean consumer price index was another negative, up 2.3 percent on the year in April and up sharply from 1.5 percent in March. This is the strongest inflation since 2017 and is now above the Bank of Korea's 2.0 percent inflation target for the first time since 2018.

India's markets dropped on pandemic concerns, with the Sensex down 1.0 percent and the Nifty down 0.9 percent. Reliance Industries, the conglomerate, fell 2.2 percent to pace the decliners as India's leaders debated imposing a nationwide lockdown to address the Covid-19 situation.

Looking ahead*

On Wednesday in Asia-Pacific, the following data releases are scheduled: New Zealand labour market conditions, Hong Kong PMI, Singapore PMI, and India's Composite PMI. In Europe, the following releases are due: Swiss CPI, Eurozone PPI, and PMI composite final reports from France, Germany, and Eurozone. In North America, reports are scheduled on US ADP employment, US PMI composite final, and US ISM services.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets.

This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise. 

© 2021 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.