Daily market review

United States

Value/cyclicals outperformed Thursday on renewed attention to federal spending plans and recovery hopes paced by declining US jobless claims. The Dow Jones industrial average rose 0.4 percent, the S&P 500 firmed 0.1 percent, and the NASDAQ was flat.

Cyclicals got a boost from news that the Biden administration would propose a $6 trillion budget for the next fiscal year. Cyclicals also reacted well to news that congressional Republicans have offered a $1 trillion infrastructure spending plan, and from mostly favorable US economic data. Heavily-weighted tech stocks held back the major stock indexes with software makers Adobe down 1.7 percent and Microsoft off 0.9 percent.

Among sectors, industrials fared best, followed by materials on a rebound in industrial metals. Banks and asset managers led financials higher. Communications services and consumer discretionary matched the market. Tobacco dragged down consumer staples, while health care lagged on a selloff in pharma. Weakness in oil supermajors depressed energy, and tech lagged on the software decline. Utilities lagged the most in the modest risk-on move.

Among companies in focus, chipmaker Nvidia fell 1.4 percent despite blowout results as the market scrutinized its exposure to cryptocurrency mining. On the positive side, Boeing jumped 3.9 percent, and General Electric rallied 7.1 percent after Airbus, the aircraft maker, raised its guidance and production plans.

In economic news, US jobless claims fell 38,000 to 406,000 in the May 22 week to a new pandemic low, well below expectations. The four-week average fell nearly 50,000 to 458,750.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 58 cents to US$69.40 while spot gold rose US$1.39 to US$1,897.71. The US dollar weakened vs. most major currencies. The US Treasury 30-year bond yield rose 2 basis points at 2.28 percent and the 10-year note yield rose 2 basis points to 1.60 percent.


Equities were mixed Thursday with value/cyclicals leading winners and corporate news in focus. France outperformed on a rally in Airbus while Germany lagged on bad news for Bayer, the chemicals giant. The Europe-wide STOXX 600 edged up 0.3 percent, the German DAX eased 0.3 percent, the French CAC rose 0.7 percent, and the UK FTSE 100 slipped 0.1 percent.

Airbus gained 9.2 percent after ramping up aircraft production plans, while Bayer dropped 2 percent on an adverse legal ruling in a lawsuit involving Roundup, its weed killer.

Among sectors, best were basic resources, banks, autos, travel & leisure, industrials, and real estate. Rising copper prices lifted miners, with Rio Tinto up 2.7 percent. HSBC was up 0.8 percent after announcing it will sell its loss-making US retail banking business. Travel stocks outperformed as the market mostly likes reopening prospects in Europe, despite new restrictions placed on UK travelers by France, Germany, and others. Lagging were utilities, health care, food & beverage, oil & gas, media, and retail.

In economic data, Italian consumer and business confidence data surprised to the upside, to support the reopening narrative. Business confidence improved for a sixth straight month in May. From an upwardly revised 97.9 in April, the business sentiment gauge jumped nearly 9 points to 106.7, its steepest rise since last September.

Asia Pacific

Asia/Pacific equities were mixed Thursday with coronavirus worries weighing on Japan while hopes for better US-China relations helped Chinese markets.

An encouraging start to high-level US-Chinese trade talks bolstered sentiment in Chinese markets. The Shanghai composite rose 0.4 percent and the CSI 300 was up 0.3 percent, with growth stocks topping value. Among sectors, materials and financials lagged after doing better lately, while telecom services and technology outperformed.

Hong Kong's Hang Seng index fell 0.2 percent, led by a selloff in Meituan, down 2.8 percent, and Tencent, off 2 percent, as the Chinese government continued its crackdown on the tech giants. Taiwan's Taiex slipped by 0.3 percent on tech weakness, with United Microelectronics down 1.4. percent.

Japanese equities slipped, with most sectors weaker, and the Nikkei down 0.3 percent and the broader Topix off 0.5 percent. Expectations for extension of the anti-Covid state of emergency added to worries about Japan's economic recovery, with Tokyo and Osaka among cities calling for restrictions to last an additional month. Most sectors fell with banks, iron & steel, shipping, and mining among the worst performers.

A mixed showing among sectors left Australian markets flat to better with the All Ordinaries up 0.2 percent. Tech stocks led the winners, paced by buy-now-pay later stocks. Miners perked up on a recovery in iron ore prices. A selloff in banks hurt financials while infrastructure depressed industrials after news of a one-week Covid lockdown in Victoria. Transurban, the highway operator, fell 1 percent on the news.

Looking ahead*

On Friday in Asia/Pacific, the Japanese unemployment report is due for release. In Europe, the following reports are scheduled: French consumer manufactured goods spending, French CPI, French GDP, French PPI, Swiss KOF leading indicator, Italian PPI, and Eurozone EC economic sentiment. In North America, US international trade in goods, US personal income and spending, US retail inventories, US wholesale inventories, Chicago PMI, and US consumer sentiment figures are scheduled.

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