Daily market review

United States

Equities moved in slim ranges Tuesday with sectors mixed as investors awaited answers on the inflation picture and monetary policy outlook. The Dow Jones industrial average eased 0.1 percent, the S&P 500 was flat, and the NASDAQ edged up 0.3 percent.

Energy stocks were the day's top performer as oil prices rose, with ExxonMobil up 1.8 percent. Strength in selected megacaps helped the NASDAQ and tech stocks outperform, with help from declining interest rates, but an early advance in growth stocks fizzled. Google gained 0.7 percent and Apple rose 0.7 percent. Amazon, up 2.1 percent, led consumer discretionary higher, along with restaurants on the reopening trade: Chipotle up 1.0 percent and McDonald's up 0.4 percent.

Utilities lagged the most on declining interest rates, along with financials. Health care stocks were relatively weak with biotech and medical technology lower. Communications sagged on weakness in media, while some big internet stocks slipped including Facebook, down 0.9 percent, and Netflix down 0.5 percent.

Adding to the day's mixed picture: cryptocurrencies dropped again, with major tokens down about 8 percent on fear that governments will act to curb the crypto market. Bitcoin's perceived independence took a hit from news the US Justice Department retrieved 64 bitcoins from hackers who extorted the money from an East Coast fuel pipeline in May. Finally, meme stocks remained an engaging sideshow, with more frenzied trading in AMC, GameStop, and others.

In economic data, markets are awaiting Thursday's US consumer price index report. Forecasters generally expect less severely inflated readings with the Econoday consensus forecast up 0.4 percent for May's overall CPI as well as core, after gains of 0.8 percent and 0.9 percent in April. Tuesday's data were led by US job openings in the JOLTS report which came in at a stunning record 9.3 million, far above expectations, which played into the narrative of disrupted labor supply as the economy reopens.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 92 cents to US$72.36 while spot gold fell US$6.60 to US$1,893.25. The US dollar rose vs. major currencies. The US Treasury 30-year bond yield fell 4 basis points at 2.22 percent and the 10-year note yield fell 4 basis points to 1.54 percent.


Equities ended flat to better Tuesday with the reopening trade providing support but markets were cautious before the US CPI and the ECB policy announcement, both on Thursday. The Europe-wide STOXX 600 rose 0.1 percent, the German DAX eased 0.2 percent, the French CAC rose 0.1 percent, and the UK FTSE 100 rose 0.3 percent.

Progress on vaccines, declining infections, and expectations for more reopenings and a revival in services supported sentiment. Travel & leisure was the day's top performer on positive air traffic data from the International Air Transport Association and from Finnair, up 1.6 percent. Health care stocks outperformed with BerGenBio up 20 percent after the FDA fast-tracked its cancer treatment.

Autos & parts lagged as German automakers retreated after rising on Monday, with Daimler down 1.0 percent. Banks sagged as the market reacted to declining interest rates.

Among companies in focus, EasyJet rose 1.5 percent after an upgrade at Goldman Sachs. Meanwhile, BFIT, the health club chain, rose 0.1 percent after announcing it will reopen its clubs in France and Belgium on Wednesday, which means all 905 of its clubs will be open in Europe.

In economic data, German industrial production surprised to the downside in April. A 1.0 percent decline followed a 2.2 percent increase in March but with base effects again very positive, annual growth still climbed from 4.6 percent to fully 26.6 percent. More significantly, production was 5.6 percent below its pre-pandemic level in February last year.

Asia Pacific

Asia/Pacific equities were mostly weaker Tuesday with China lagging and markets cautious headed into US consumer price data and the ECB policy announcement due on Thursday.

Weighing on Chinese markets is rising US-Chinese friction, with the US signaling a resumption of trade talks with Taiwan and China warning against it. Concerns over valuations as well as another liquidity squeeze in financial markets also weighed. The CSI lost 0.9 percent and the Shanghai composite fell 0.5 percent. Consumer staples were among the worst performers, along with liquor stocks, including Jinhui Liquor and Anhui Distillery, both limit-down 10 percent in Shanghai trading. Liquor stocks saw profit-taking after a long rally.

Hong Kong's Hang Seng index ended unchanged as rising property stocks were offset by weakness in tech and energy shares. Tech and telecom stocks were hurt by worries about US-China relations, with China Telecom down 1.2 percent and Alibaba down 0.9 percent. On the plus side, China Evergrande, the property company, rose 2.2 percent on reports it will buy back shares, at the same time that Chinese regulators have ordered banks to stress test their portfolios given exposure to the heavily-indebted company.

Japanese equities were narrowly mixed with the Nikkei down 0.2 percent and the broader Topix up 0.1 percent. Growth stocks mostly rose while value declined, in a continuation of the pattern since the US nonfarm payrolls miss. Japanese sentiment has improved as vaccine rollouts continue and many anti-Covid restrictions are scheduled to ease in late June. Still, the market has seen profit-taking whenever it makes a run at recent highs around 2000 on the Topix.

Australian markets edged up with the All Ordinaries up 0.1 percent, as rotation out of value into growth sectors continued and local bond yields declined. Reports that Melbourne is scheduled to go ahead with easing restrictions on Friday provided some support, with travel stocks improving. Tech and health care stocks did best, along with property and utilities. Lagging were materials, as iron ore weakened again.

Looking ahead*

On Wednesday in Asia/Pacific, reports are due on Korean GDP, Chinese CPI and Chinese PPI. In Europe, German merchandise trade figures are due. In North America, the Bank of Canada monetary policy announcement is scheduled, plus the US wholesale trade report is due.

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