Daily market review

United States

Equities recovered Thursday as markets appeared oversold after a steep three-day selloff. The Dow Jones industrial average rose 1.3 percent, the S&P 500 rose 1.2 percent, and the NASDAQ gained 0.7 percent.

Market interest rates declined despite another upside surprise in a US inflation report, this time US producer prices which rose a monthly 0.6 percent in April, double expectations. Federal Reserve officials continued to urge everyone to look through the scary inflation readings and anticipate much lower numbers starting in the fall.

Investors appeared relieved that the Colonial pipeline reopened to allow gasoline to flow to the US East Coast, and energy prices eased. And the market liked word from the Centers for Disease Control that vaccinated people in the US need not wear masks or maintain distance in most settings, as it supported the reopening theme.

Among sectors, value topped growth with industrials leading the way, followed by financials, consumer staples, tech, and materials. Lagging were health care and communications services, despite a rebound in Google (up 1 percent) and Facebook (up 0.9 percent). Consumer discretionary lagged, mostly because of the selloff in Tesla, down 3.1 percent. Energy stocks declined as oil prices slipped, with drillers lagging the most.

Among stocks in focus, Apple rose 1.8 percent after reclaiming its perch above its 200-day moving average, while the S&P 500 also bounced up from key support, analysts said. Tesla fell after founder Elon Musk announced he would not accept bitcoin as payment for cars after all, due to the cryptocurrency's huge carbon footprint. Tesla bought $1.5 billion in bitcoin earlier this year; bitcoin fell several thousand dollars on the day to hold just above $49,000.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.04 to US$66.98 while spot gold rose US$6.07 to US$1,827.56. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield fell 2 basis points to 2.40 percent and the 10-year note yield fell 4 basis points to 1.66 percent.


Equities recovered from early declines to end narrowly mixed Thursday as the market appeared oversold after recent declines, and lower commodities prices eased inflation fears. A rebound on Wall Street helped. The Europe-wide STOXX 600 eased 0.1 percent, the German DAX firmed 0.3 percent, the French CAC rose 0.1 percent, and the UK FTSE 100 slipped 0.6 percent.

The retreat in commodities prices hit basic resources stocks, which meant UK stocks lagged with BHP down 4.0 percent and Rio Tinto down 3.7 percent in London. Other lagging sectors included oil & gas, autos & parts, telecom, travel & leisure, and banks. Holding up best were utilities, health care, technology, chemicals, personal & household goods, and food & beverage.

Among companies in the news, UK luxury clothier Burberry fell 4.2 percent after cautious guidance and despite reinstating its dividend. Telecoms were in focus, with BT Group down 5.9 percent after the market disapproved of its investment plans and soft guidance. Rolls Royce, the aerospace and defense company, fell 0.5 percent after it maintained its guidance. On the positive side, EDP Portugal, the utility, rose 1.5 percent and Sabaf, the Italian materials company, rose 7.8 percent on earnings beats.

Asia Pacific

Wall Street's tech-led selloff carried over into Asian markets Thursday with Japan hit hardest, followed by Hong Kong, Korea, and Taiwan. Mainland China and Australia fared better but saw losses. Covid-19 fears hurt Japan and Taiwan where cases rose and new lockdowns are expected. A dramatic plunge in cryptocurrencies after Tesla suspended bitcoin transactions added to the risk-off sentiment.

China's Shanghai composite and the CSI 300 both declined 1.0 percent on the global risk-off move. News of lower-than-expected growth in Chinese lending was another negative as it added to concerns that Chinese stimulus efforts are fading. Most sectors declined, paced by a big drop in materials as commodity prices gave back some recent gains. Other decliners included consumer discretionary, energy, and financials, with health care the sole winner.

Hong Kong's Hang Seng fell 1.8 percent on risk aversion, with weakness centered in tech, energy, property, and finance. Among movers, China Evergrande New Energy Vehicle Group fell 7.5 percent after a share placement at a valuation down 20 percent from the day before.

Taiwan's markets fell with the benchmark Taiex stock index down 1.5 percent. Reuters reported Taiwan's finance ministry directed banks to help support the market, which has been under heavy pressure from the global flight from risk and expected shutdowns due to rising Covid case counts.

Japanese stocks dropped with the Nikkei down 2.5 percent and the Topix off 1.5 percent with growth/tech stocks lagging markedly. Softbank, the tech investor, fell 7.8 percent after declining to promise continued share buybacks amid the tech stock washout. Tokyo Electron, the chip equipment maker, fell 4.7 percent, and NEC, the consumer electronics maker, fell 14 percent after disappointing guidance.

Australia's markets tracked Wall Street and Asian markets lower with the All Ordinaries down 1.0 percent. A retreat in commodities prices added to selling pressure. Rotation out of growth stocks was evident as bond yields ticked higher, with buy-now-pay-later dropping sharply. Most sectors fell, paced by technology along with materials, as iron and industrial metals miners fell.

Looking ahead*

On Friday in Asia/Pacific, the following are due for release: Indian wholesale price index and Hong Kong GDP. In Europe, ECB minutes are scheduled. In North America, reports are scheduled on Canadian manufacturing sales, US retail sales, US import & export prices, US industrial production, US consumer sentiment, and US business inventories.

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