Daily market review

United States

Global risk-off sentiment linked to inflation fears spurred a broad selloff Tuesday, but growth/momentum shares prices rebounded from morning lows on dip-buying. The Dow Jones industrial average lost 1.4 percent, the S&P 500 fell 0.9 percent, and the NASDAQ was almost flat at down 0.1 percent.

Investors focused on concerns about labor shortages as the US economy reopens, talk of supply chain disruptions post-pandemic, and high-frequency data pointing to rising strength in consumption. Coming into the US morning, markets were riveted by rising commodities prices and Chinese producer price figures overnight showing inflation ticking up.

US JOLTs figures reporting an unexpectedly big jump in job openings added to the inflation scare. On the positive side, Federal Reserve officials continued to portray the inflation uptick and supply disruptions as transitory, and Fed Governor Lael Brainard repeated that generous government payouts were not causing workers to stay out of the labor force.

Among sectors, energy lagged the most as the sector pulled back despite firmer crude prices. Financials saw weakness across categories. A selloff in airlines, trucking, and machinery hurt industrials. Consumer staples matched the market selloff, with drug stores and grocery stores suffering. Communications services weakened but still outperformed. Tech outperformed as chipmakers rebounded from their morning selloff, but the sector fell overall. Materials were best, paced by rising metals prices.

Notable losers included Novovax, the vaccine maker, down 14 percent on news it will delay seeking European approval for its Covid-19 vaccine. Hanesbrands fell 12 percent after the clothing maker issued disappointing guidance.

In US economic news, job openings rose well beyond expectations in March, to 8.123 million for the largest total on record. In further emphasis of strength, openings in February were revised more than 150,000 higher to 7.526 million which is now the second highest total on record.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 36 cents to US$68.60 while spot gold rose 4 cents to US$1,838.25. The US dollar fell vs. most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 2.35 percent and the 10-year note yield rose 1 basis point to 1.61 percent.


Risk-off momentum spilled over from Asia into Europe to drive equities lower Tuesday as inflation fears rose. The Europe-wide STOXX 600 lost 2.0 percent, the German DAX fell 1.8 percent, the French CAC dropped 1.9 percent, and the UK FTSE 100 plunged 2.5 percent.

An upside surprise in Chinese producer price figures and the ongoing rally in commodities prices fanned investor jitters over inflation and negative company news deepened the chill. On the positive side, ECB officials downplayed taper talk, including Executive Board member Isabel Schnabel who called the recent inflation spike transitory.

Stock sector losses were across the board, with worst performers including travel & leisure, media, oil & gas, retail, industrials, financial services, utilities, real estate, construction, autos, technology, and telecom.

Among companies in the news, Lufthansa dropped 3.6 percent after saying it will seek new financing, and British Airways owner IAG dropped 7.2 percent after selling a big convertible bond to help it weather an uncertain outlook. Alstom, the railway manufacturer, fell 2.8 percent and Thyssenkrupp fell 6.2 percent on earnings misses. NatWest fell 3.1 percent after the UK government sold 1.1 billion sterling in shares.

Asia Pacific

Renewed inflation worries and a selloff in growth and momentum stocks hurt most Asian equities markets Tuesday but mainland China managed gains after upbeat data reports. Commodity prices continued their rally to add to inflation concerns.

In China, the Shanghai composite rose 0.4 percent and the CSI 300 gained 0.6 percent. Consumer and health care outperformed while technology and other growth sectors lagged. News that Chinese producer prices rose 6.8 percent, above expectations, and the highest since 2017, bolstered cyclicals.

Hong Kong's Hang Seng dropped 2.0 percent with rising commodities prices and the upside surprise in Chinese PPI unnerving the market. Tech shares saw the worst of it, with Meituan off 5.3 percent after its CEO deleted a social media post criticizing Chinese President Xi Jinping. Alibaba fell 3.5 percent and Tencent was down 1.8 percent after Chinese authorities imposed new penalties on the online leaders.

Tech stock selling carried over from the US to hit Japanese markets hard with the Nikkei down 3.1 percent and the broader Topix 2.4 percent. The Japanese selloff extended to cyclicals on worries that more regional Japanese lockdowns are coming as the pandemic continues. Weakness was led by appliances, machinery, precision instruments, and glass & ceramics. Chipmakers paced the technology selloff, with Tokyo Electron down 4.1 percent. Among other companies in focus, Panasonic dropped 5.8 percent after an earnings miss. Markets ignored news of a much bigger-than-expected rise in Japanese household spending during March as it reflected a period when pandemic restrictions were relaxed briefly.

Australia joined the global selloff in growth stocks with the All Ordinaries off 1.2 percent. Tech shares led growth stocks down as rising commodities added to fear of rising interest rates. Most sectors fell, with buy-now-pay-later shares worst off among tech. Energy stocks were hit by losses in liquified natural gas producers on reports China would restrict Australian market access. Banks and fund managers weighed on financials. Strength in base metals offset weakness in iron ore producers.

Looking ahead*

On Wednesday in Asia-Pacific, the following data releases are scheduled: Chinese new yuan loans and both Indian industrial production and Indian consumer prices. In Europe, the following releases are due: German CPI, UK GDP, UK industrial production, UK merchandise trade, UK monthly GDP, French CPI, and Eurozone industrial production. In North America, reports are scheduled for US CPI and the US Treasury budget statement

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