United States
Equities weakened into the close Wednesday but remained mostly range bound as markets awaited US consumer price data due Thursday. The Dow Jones industrial average declined 0.4 percent, the S&P 500 eased 0.2 percent, and the NASDAQ declined 0.1 percent.
Best performers were defensive sectors -- health care, utilities, and real estate -– plus technology with support from another day of declining interest rates: the 10-year note yield slipped below 1.5 percent to extend its slide since last week's soft US employment report. The market appears to be accepting the view that the recent uptick in inflation pressure will prove transitory, as yields have fallen and 10-year break-even inflation measures have receded from recent highs.
Forecasters see moderation in the May CPI following April's enormous acceleration headlined by a 0.8 percent monthly rise overall and a 0.9 percent spike for the core. Econoday's consensus estimates for May are a 0.4 percent increase overall and a 0.4 percent increase for the core, the latter still very elevated.
Among stock sectors Wednesday, financials lagged the most on the interest rate decline, along with energy as oil prices slipped; industrials also slipped with weakness in trucking and machinery stocks. On the positive side, pharma and biotech lifted health care. Tech stocks were mostly better though chipmakers remained weak.
Among companies in the news, Campbell Soup dropped 6.5 percent after an earnings miss and weaker guidance on inflation and supply chain trouble. Similarly, Sherwin Williams, the paint company, fell 1.4 percent after warning that rising input prices are squeezing its profits. UIPath, the recent IPO robotics software firm, fell 10 percent despite topping earnings expectations as insiders are being released early from share sale restrictions. United Natural Foods dropped 16 percent after a revenues miss and disappointing guidance.
Meme stocks captured attention again with World Wrestling Entertainment, up 11 percent, the latest darling of Reddit social media posters. Other meme stocks, including Clover Health, down 24 percent, and AMC, off 10 percent, fell back.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil dipped 36 cents to US$72.00 while spot gold fell US$3.38 to US$1,889.87. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield fell 5 basis points at 2.17 percent and the 10-year note yield fell 6 basis points to 1.48 percent.
Europe
Equities were narrowly mixed Wednesday with risk-taking limited ahead of Thursday's ECB meeting and US consumer price report. The Europe-wide STOXX 600 firmed 0.1 percent, the German DAX fell 0.4 percent, the French CAC rose 0.2 percent, and the UK FTSE 100 declined 0.2 percent.
Sectors were split, with airlines and travel stocks getting a boost from news that the US Center for Disease Control was easing travel restrictions on 110 countries, including Japan ahead of the Olympics. On the downside, miners lagged after a bigger-than-expected rise in Chinese producer prices followed by additional Chinese measures to control prices for certain commodities. Anglo American fell 2.5 percent, BHP was off 2.1 percent, and Rio Tinto lost 2.0 percent.
For Thursday's ECB meeting, markets expect no policy change even as the Eurozone economy improves, but investors will be watching for clues on the outlook for a change in months ahead.
Among companies in focus, Aixtron, the German manufacturer, rose 7.6 percent after raising its guidance. Swedish Orphan Biovitrum, the biotech, rose 15 percent on an analyst upgrade. Leclanche, the Swiss battery maker, rose 4.6 percent on positive earnings news. Wizz Air, the budget airline, rose 3.3 percent after positive comments from its CEO. On the downside, Clinigen, the UK biotech, fell 27 percent after bleak guidance and an analyst downgrade. Inditex, the Spanish clothing maker, fell 2.2 percent on an earnings miss.
Asia Pacific
Asia/Pacific equities mostly drifted down Wednesday with China outperforming despite a higher-than-expected producer prices report, but activity was limited ahead of US consumer price figures due Thursday.
Chinese markets were mixed with the CSI up 0.1 percent and the Shanghai composite up 0.3 percent as the market appeared to look past news that China's PPI surged by 9.0 percent year-over-year in April, well above expectations. Hong Kong's Hang Seng index eased by 0.1 percent.
Investors also focused on stepped up efforts by the Chinese government to control rising commodities prices, as well as reports of trade disruptions at ports in Guangdong due to lockdowns in response to rising Covid-19 case counts. US Senate passage of a bill to step up technology competition with China was a negative for sentiment, with tech stocks lagging in Hong Kong.
Japanese equities drifted lower with the Nikkei and the broader Topix both down 0.3 percent. Sectors were divided with shipping, paper, and financials lagging while real estate and air transportation outperformed. Among companies in focus, Esai, the pharma, rallied the limit 16 percent after US regulators approved its Alzheimers treatment. Airtrip, the travel agent, rose 4.8 percent after expanding its travel promotions.
Australian markets gave up early gains to end weaker, with the All Ordinaries down 0.3 percent. Sentiment suffered after a second consecutive monthly drop in the Westpac Australia consumer sentiment index on worries over renewed lockdowns. The market also reacted poorly to the upside surprise in Chinese producer prices, which fed global inflation fears. Most sectors were weaker, with consumer staples lagging the most on a selloff in grocery stocks. Tech stocks lagged, along with banks. Materials held up better as iron ore miners rebounded, and utilities fared best.
Looking ahead*
On Thursday in Asia/Pacific, reports are due on Chinese new yuan loans and Japanese PPI. In Europe, the ECB policy announcement plus French and Italian industrial production figures are due. In North America, US CPI and US jobless claims reports are scheduled.
