Daily market review

United States

Investors turned back to cyclicals/value stocks Friday after pouring into growth stocks Thursday, with an assist from positive company news, but the morning gains faded in the afternoon as the market consolidated again. Another wave of selling in the crypto market added to caution headed into the weekend. The Dow Jones industrial average rose 0.4 percent, the S&P 500 eased 0.1 percent, and the NASDAQ declined 0.5 percent.

Markets that had been spooked by inflation worries and fears the Federal Reserve was out of touch focused on comments from Fed officials, which suggested they were at least ready to consider talking about tapering asset purchases. The latest batch of global purchasing managers data bolstered the reopening narrative as it pointed to an ongoing rebound in business activity across major economies. Investors reacted cautiously to news that the Biden administration is offering a smaller compromise infrastructure proposal in talks with Republicans.

Among companies in focus, John Deere rose 1.3 percent after raising its outlook, and Deckers, the footwear company, jumped 8 percent after a big earnings beat. Ross Stories rose 0.6 percent on a mix of strong results and cautious guidance. Nvidia, the chipmaker, rose 2.6 percent after announcing a 4-1 split. On the downside, chipmaker Applied Materials fell 1.3 percent despite a big beat, as investors were quick to cut back on risk.

In US economic news, the reopening of the US economy is having a dramatic effect on the services sector where the PMI posted an extremely robust and record reading of 70.1 to far surpass Econoday's consensus range. May's manufacturing PMI rose a point to a very substantial 61.5 to come in on the high end of the consensus range. Separately, existing home sales slipped 2.7 percent in the month of April to a 5.850 million annual rate, below expectations, but still robust.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.38 to US$66.68 while spot gold rose US$2.77 to US$1,880.45. The US dollar rose vs. most major currencies but weakened vs. the Swiss franc and Canadian dollar. The US Treasury 30-year bond yield was down 1 basis point at 2.33 percent and the 10-year note yield eased 1 basis point to 1.62 percent.


Equities edged up Friday on company news and upbeat economic data. The Europe-wide STOXX 600 rose 0.6 percent, the German DAX rose 0.4 percent, the French CAC gained 0.7 percent, and the UK FTSE 100 was unchanged.

Eurozone composite purchasing managers figures showed services rebounded in May, with manufacturing remaining robust. UK purchasers figures showed broad strength, paced by manufacturing. In central banking news, European Central Bank and Bank of England officials echoed their Fed colleagues in predicting inflation pressures would dissipate as the economic reopening continues.

Among sectors, autos and construction outperformed, while basic resources, tech and real estate lagged the most.

In company news, Richemont, the Swiss luxury goods business, rose 5.3 percent on an earnings and revenues beat. Compagnie de Saint Gobain, the French construction materials giant, rose 1.1 percent after agreeing to but Chryso, a smaller competitor. BMW, the carmaker, rose 0.5 percent after saying it would set aside less than the market expected to pay an antitrust fine. On the downside, Lufthansa fell 1.8 percent on a report of a large stock sale by a major investor.

In economic news, Eurozone business activity had a surprisingly good May. A 56.9 flash composite output index was more than 3 points stronger than its 53.8 final April print, well above the market consensus and a 39-month high. May's unexpectedly sharp gain was attributable to services where demand was boosted by easier Covid restrictions. Here the flash sector PMI rose from April's final 50.5 to 55.1, a 35-month peak. At 62.8, manufacturing was barely changed from the previous period's final 62.9. In the UK, private sector business activity expanded at the fastest rate on record in May. At 62.0, the flash composite output index was up from April's final 60.7 and, again, well above the market consensus.

Asia Pacific

Asia/Pacific markets were mixed Friday with Japan and Australia tracking US tech stocks higher while China was hurt by Covid worries and more tensions with the US and Europe.

Chinese markets slipped with the Shanghai composite off 0.6 percent and the CSI 300 down 1.0 percent, with financials and health care lagging and only energy and utilities higher. Investors reacted poorly to an escalation in trade tensions between China and the EU, and as China criticized the US over the presence of a US warship in contested waters in the South China Sea.

Taiwan's Taiex was the region's best performer, up 1.6 percent on the tech stock rally. Hong Kong's Hang Seng was unchanged, as a selloff in Tencent, down 3.4 percent on news of big investment plans, offset other tech stock gains.

The Wall Street rebound in growth/tech lifted Japanese equities, with the Nikkei up 0.8 percent and the broader Topix up 0.5 percent. The market faded into the close on worries over delays in vaccinations and the prospect of more lockdowns to cope with rising Covid counts, including news of a new lockdown in Okinawa. Japanese data, including a sharp decline in services activity in May, helped JGB yields decline, which supported growth stocks.

In Japanese data, flash PMI survey data for Japan showed another month of strong activity in the manufacturing sector but a sharper contraction in the services sector. This suggests that public health restrictions imposed in response to a recent surge in Covid-19 cases have had a bigger impact on the services sector, though the survey indicates that conditions have also slowed to some extent in the manufacturing sector as well.

Australia's All Ordinaries ended up 0.2 percent as strength in tech was largely offset by weakness in energy and commodities, with iron ore prices down again. Health care outperformed, with CSL, the biotech, up 2.2 percent. An unexpectedly strong Australian retail sales report gave retailers a boost.

Australian retail sales rose 1.1 percent on the month in April after advancing a revised 1.3 percent in March. Public health restrictions were relatively light across most of the country during April, with the exception of a three-day lockdown in Western Australia. In year-over-year terms, growth accelerated sharply from a revised 2.2 percent in March to 25.1 percent in April.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

Looking forward