Daily market review

United States

A rotation out of growth stocks depressed major US averages Monday while commodity-linked value/cyclical stocks were back in favor on a return of the reopening trade. The Dow Jones industrial average eased 0.1 percent, the S&P 500 fell 1.0 percent, and the NASDAQ dropped 2.6 percent.

Markets keyed on renewed inflation worries, both rising commodity prices, led by copper and iron, and a heating up in high frequency indicators on consumer mobility, dining out, air travel, and falling Covid-19 cases in the US. Investors appeared inclined to look past last week's disappointing jobs report and to see the recovery coming, and interest rates ticked up.

Among cyclicals, materials, industrials, financials, and energy outperformed, while lagging were information technology, communications services, and consumer discretionary. The FANMAG complex suffered, with Alphabet down 2.4 percent, and Facebook down 4.1 percent to lead the internet complex lower after Citibank warned about online advertising growth. Amazon declined 3.1 percent to depress consumer discretionary.

Among companies reporting, Party City rose 11 percent on an earnings and revenues beat and guidance for a return to relatively normal business conditions. Live Nation, another reopening play, rose 3.9 percent on an upgrade at Jefferies, amid expectations for a return to live performances.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 15 cents to US$68.24 while spot gold rose US$6.25 to US$1,838.21. The US dollar was little changed vs. most major currencies. The US Treasury 30-year bond yield rose 4 basis points to 2.33 percent and the 10-year note yield rose 2 basis points at 1.59 percent.


European equities ended mixed Monday as strength in basic resources and banks offset losses in technology and travel & leisure. The Europe-wide STOXX 600 rose 0.1 percent, the German DAX and French CAC were flat, and the UK FTSE 100 was down 0.1 percent.

In macro news, sterling rallied after Prime Minister Boris Johnson and his Conservative party won a series of victories in weekend balloting. UK exporters were hurt by sterling's gains, but the weakness was largely offset by the positive impact of rising iron and copper prices on UK miners. Weekend comments from ECB officials were supportive, including governing council member Olli Rehn who called for the adoption of the Federal Reserve's overshooting inflation regime given the ECB's failure to reach its own decade-old inflation target.

Among sectors, best were basic resources, banks, real estate, retail insurance, autos, and chemicals, while lagging were tech, travel & leisure, construction, health care, and utilities.

Among companies in the news, Société Generale rose 2.9 percent after positive management comments on its earnings outlook. Greggs, the UK baker, rose 4.4 percent after raising its guidance. On the downside, PostNL, the Dutch postal service, fell 5.6 percent on an earnings miss. NatWest fell 1.6 percent on reports the UK government is planning to sell some its stake in the UK bank.

Asia Pacific

Asian equities were mixed Monday with tech shares boosting Japan and rising commodities prices supporting Australia; China was narrowly mixed with health care stocks faring best.

In China, the Shanghai composite rose 0.3 percent and the CSI 300 fell 0.1 percent. Strength in vaccine producers and energy shares offset weakness in technology as Chinese regulators continued their crackdown on tech firms. Vaccine makers rebounded after a US proposal to waive patents on vaccines faltered, while energy stocks rose with oil following a cyber attack on US pipelines.

Hong Kong's Hang Seng eased 0.1 percent with tech falling on the Chinese anti-trust crackdown while pharma stocks rose. Tech heavyweights Alibaba fell 2.1 percent and Meituan fell 7.1 percent. Shanghai Fosun, the vaccine maker, jumped 24 percent on the favorable vaccine patent news, and word that it would manufacture BioNTech's vaccine in China.

Japan's Nikkei rose 0.5 percent and the broader Topix 1.0 percent as Tokyo tracked US tech markets higher from Friday. Automakers saw good gains on the yen's weakness and rising commodities prices lifted materials stocks. Among automakers, Toyota rose 1.7 percent and Honda was up 2.1 percent. Nippon Steel rose 5.3 percent after raising its guidance.

Rising commodities prices pushed Australia higher with the All Ordinaries up 1.3 percent. Miners were the biggest winners but gains were across the board. The latest advance in iron ore and other metals prices, powered by Chinese demand, lifted Rio Tinto by 4.6 percent and BHP by 3.1 percent. An unexpectedly strong NAB reading added to risk appetite, as business confidence came in at 32 in April, up from 25 in March. Among companies in focus. Crown Resorts, the gaming and resort group, rose 7.3 percent on news it has been approached for acquisition by Star Entertainment, its competitor.

Looking ahead*

On Tuesday in Asia-Pacific, Japanese household spending and Chinese new yuan loans are scheduled. In Europe, Italian industrial production and German ZEW survey are due. North American reports are NFIB small business sentiment and US JOLTS job openings.

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