Daily market review

United States

Value stocks outperformed Tuesday on the reopening trade with energy, metals, and financials leading after more upbeat purchasers data and with rising commodities prices. Growth stocks saw selling interest to hold back the major stock indexes. The Dow Jones industrial average rose 0.1 percent and the S&P 500 and the NASDAQ eased 0.1 percent.

Energy stocks outperformed the most on a big jump in crude oil prices, paced by oil services, including Haliburton, up 4 percent. Materials advanced on strength in industrial metals miners, with US Steel up 2.9 percent. Financials rose after upbeat economic data and as rising commodities boosted market interest rates. Industrials gained, with Boeing up on an analyst upgrade.

Lagging were communications services, with media stocks down. Consumer discretionary lagged on softness in restaurants and retail. Tech lagged as chipmakers retreated from last week's rally and software slipped, with Microsoft down 0.9 percent. Health care lagged the most with Abbott Labs down 9.3 percent on weaker guidance as demand for Covid testing equipment declines, and Johnson & Johnson down 2.2 percent on an adverse legal ruling.

In US economic news, ISM's manufacturing index came in at 61.2 in May, just above expectations in a report led spectacularly by a 67.0 reading for new orders. Both the index and new orders are near all-time highs but are still below March's scores that benefited especially from initial reopenings for the US economy. Separately, construction spending managed only a 0.2 percent gain in April, masking a 1.0 percent monthly rise on the residential side and a second straight 0.5 percent decline for non-residential spending.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.23 to US$70.55 while spot gold fell US$7.06 to US$1,899.81. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield rose 3 basis points at 2.29 percent and the 10-year note yield rose 3 basis points to 1.61 percent.


Upbeat economic data and rising commodities prices lifted equities Tuesday, with miners and energy stocks leading. The Europe-wide STOXX 600 rose 0.8 percent, the German DAX gained 1.0 percent, the French CAC rose 0.7 percent, and the UK FTSE 100 was up 0.8 percent.

An uptick in Chinese iron ore prices overnight kicked off the commodities rally on reports of some relaxing in curbs on the Chinese metals market. Miners Glencore, up 3 percent, and BHP, up 2.4 percent, oil supermajors Royal Dutch Shell, up 1 percent, and BP, up 2.8 percent, were among the top performers.

Automakers also outperformed, with Volkswagen up 3.0 percent after reports it may list its electric battery unit. Daimler rose 2.6 percent after reaching a pact with Nokia, which rose 0.9 percent, to license the latter's telecom technology. On the downside, telecom lagged, with Spain's Telefonica down 3.8 percent after a series of asset sales.

In economic data, Eurozone manufacturing enjoyed a very good May with the final sector PMI clocking in at 63.1, up from its flash 62.8 and April's final 62.9 and a new record high. In the UK, at 65.6 the final sector PMI was still a record high and indicative of another very good month for UK manufacturing activity.

Asia Pacific

Asia/Pacific equities were mostly higher Tuesday with Hong Kong stocks leading on a rebound in tech stocks. Investors focused on the People's Bank of China's action in currency markets to limit the rise in the yuan.

Strength in health care and materials stocks helped Chinese markets edge up with the CSI up 0.2 percent and the Shanghai composite up 0.3 percent. Health care stocks were bolstered by the Chinese government announcement that couples would now be allowed to have three children, up from two. Materials got a lift from rising industrial metals prices. Utilities and financials lagged.

In the currency market, the PBOC raised bank reserve requirements for foreign exchange deposits, effectively reducing the domestic supply of foreign currency as a means to limit the yuan's rise. Markets saw the PBOC step as a sign that more measures may be forthcoming to prevent further appreciation in the currency.

Hong Kong's Hang Seng index rose 1.1 percent, with tech stocks seeing bargain hunting after recent weakness, and health care rising after news of China's new three-child policy. Alibaba rose 3.4 percent, Meituan rose 6.5 percent, and Tencent gained 1.5 percent.

Japanese equities were mixed, with value stocks outperforming growth. The Nikkei eased 0.2 percent and the broader Topix rose 0.2 percent. Profit-taking in growth stocks after recent gains kept gains capped while rising optimism over the rollout of vaccines limited declines. Iron and steel, plus pharma stocks lagged the most while mining, transportation equipment, and banks held up best. South Korean markets rose on economic data pointing to strong export growth, with the KOSPI up 0.6%, led by chip giant SK Hynix, up 1.2 percent.

Australian markets edged lower with the All Ordinaries down 0.2 percent. Bank stocks were the main laggard, offset by strength in energy stocks as oil prices rose. The Reserve Bank of Australia left rates on hold and repeated that rates were unlikely to rise until 2024. Some observers looked for somewhat more hawkish policy guidance from the RBA. Markets also focused on the spread of Covid-19 cases in Victoria, which suggested the current lockdown was likely to be extended, a negative for the reopening trade.

In economic data, South Korea's trade surplus widened from $0.43 billion in April to $2.93 billion in May. Exports rose 45.6 percent on the year after increasing 41.1 percent previously, while import growth picked up from 33.9 percent on the year to 37.9 percent, with these large increases again mainly reflecting severe weakness 12 months earlier.

Looking ahead*

On Wednesday in Asia/Pacific, Korean CPI and Australian GDP figures are due for release. In Europe, the following reports are scheduled: German retail sales, UK M4 money supply, Eurozone PPI. In North America, US ADP and Fed beige book releases are scheduled.

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