Daily market review

United States

Equities recovered from early lows Thursday on a report the Biden administration may soften its stance on corporate taxes but sectors were split and markets cautious ahead of US employment data due Friday. The Dow Jones industrial average eased 0.1 percent, the S&P 500 lost 0.4 percent, and the NASDAQ dipped 1.0 percent.

Weakness in technology and other growth stocks weighed on the major averages, with the FANMAG complex lower. Cyclicals generally outperformed as new economic data came in strong.

A selloff in Amazon, down 1.5 percent, depressed consumer discretionary stocks, along with weakness in restaurants and homebuilders. A selloff in metals hurt materials. Financials were distinct winners as banks rebounded with rising interest rates from Wednesday's declines. Energy outperformed the most as oil prices rose again, paced by oilfield servicers.

Among financials, Goldman Sachs rose 1.4 percent as the firm is expected to benefit from ongoing strength in M&A activity and from rising interest rates. Citizens Financial rose 0.7 percent as the market likes its plan to take over HSBC's US business.

In US fiscal news, the market keyed on reports that President Biden told Republicans he would accept a 15 percent floor on corporate taxes rather than raising the tax rate to 28 percent from 21 percent, and that Biden outlined a $1 trillion infrastructure plan, down from $1.7 trillion originally.

Economic news included a higher-than-expected private payrolls estimate from ADP, at 978,000, and a lower-than-expected jobless claims total of 385,000.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose eight cents to US$71.33 while spot gold fell US$37.58 to US$1,871.55. The US dollar rose vs. major currencies. The US Treasury 30-year bond yield rose 3 basis points at 2.31 percent and the 10-year note yield rose 4 basis points to 1.63 percent.


Strong economic data helped equity indexes recover from early lows to end mixed to weaker Thursday in dull trading. The Europe-wide STOXX 600 eased 0.1 percent, the German DAX firmed 0.2 percent, the French CAC slipped 0.2 percent, and the UK FTSE 100 fell 0.6 percent.

Upbeat US ADP employment figures, declining US jobless claims, and strong Eurozone purchasers data provided support. UK markets lagged on weakness in miners, with BHP down 1.9 percent and Rio Tinto down 2.1 percent.

Among sectors, best were autos & parts, oil & gas, health care, banks, and construction & materials. Lagging were basic materials, travel & leisure, utilities, retail, technology, insurance, and chemicals.

Among companies in the news, Remy Cointreau, the drinks maker, fell 3.3 percent despite an earnings beat and dividend boost. Foxtons, the UK real estate firm, fell 0.8 percent on disappointing trading results. On the positive side, materials maker Compagnie Saint-Gobain rose 4.2 percent on strong earnings guidance, and telecom equipment maker Nokia rose 2.9 percent on an upgrade at Liberum.

In economic data, Eurozone private sector business activity was a little stronger than originally thought in May. The 56.9 flash composite output index was revised up to 57.1, its third reading above the 50-expansion threshold and its highest mark since February 2018; expectations for a vaccine-led bounce boosted the sample's optimism to new peak.

Asia Pacific

Asia/Pacific equities were mixed Thursday with Chinese markets lagging on disappointing economic data while Japan improved as recovery hopes were bolstered by progress on Covid vaccines. Trading was cautious ahead of US employment figures due Friday.

A weaker-than-expected reading on service sector business dampened Chinese markets with the CSI down 0.7 percent and the Shanghai composite off 0.4 percent. Investors reacted badly to rising order backlogs and rising input prices evident in the report in addition to the miss in the overall PMI index.

Among stock sectors, consumer stocks, banks, industrials, and health care lagged while telecom and energy held up best. Risk appetite was somewhat hemmed in by Chinese government warnings against betting on the rising yuan, which had been attracting foreign capital.

Hong Kong tracked mainland Chinese markets lower with the Hang Seng index down 1.1 percent, with energy, financials, property, and technology leading the decline. Among companies in focus, China Evergrande, the property developer, fell 5.3 percent after its bond issue due in 2023 plunged. Shandong Molong Machinery fell 22 percent after regulators probed the company's financial disclosure practices.

Japanese equities improved with cyclicals leading on recovery hopes as vaccines rolled out faster. The Nikkei rose 0.4 percent and the broader Topix gained 0.8 percent. The reopening trade gave a lift to railways, food, and beer makers along with rubber products. Among companies in focus, Fast Retailing fell 4.1 percent on disappointing same-store sales. On the positive side, DDS, the information technology company, rose 3.5 percent on news of a new patent. Toyota Motor rose 1.7 percent after asking its suppliers to cut carbon emissions. Oriental Land, the resort operator, rose 1.4 percent on the reopening trade.

Australian markets gained with the All Ordinaries up 0.6 percent, as nearly all sectors improved. Energy extended its recent gains as oil prices rose again. Utilities rose with support from AGL, up 3.7 percent. Big banks underpinned financials, and airlines and infrastructure boosted industrials, as cyclicals continued to get support from Wednesday's upbeat GDP report. On the downside, consumer discretionary lagged on a selloff in gaming companies.

In economic data, Caixan's China PMI for the services sector fell from 56.3 in April to 55.1 in May, indicating that activity in the sector expanded at a slightly slower but still strong pace.

Looking ahead*

On Friday in Asia/Pacific, Japanese household spending figures are due for release, along with the Reserve Bank of India's policy announcement. In Europe, UK PMI construction and Eurozone retail sales figures are due. In North America, US employment situation, US factory orders, Canadian labour force survey and the Canadian Ivey PMI are scheduled.

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