United States
A retreat in technology and other growth stocks dampened equities Tuesday amid caution headed into the Federal Reserve's policy announcement on Wednesday. The Dow Jones industrial average eased 0.3 percent, the S&P 500 declined 0.2 percent, and the NASDAQ was off 0.7 percent.
Energy and communications services managed gains: consumer staples were up slightly with strength in drug stores and health and personal care stocks. Lagging most were materials on declining industrial and precious metals prices. Consumer discretionary suffered from declines in retail stocks. A selloff in chipmakers, software, and networking equipment undercut tech shares. Real estate lagged the most.
Among tech shares, Apple declined 0.6 percent, Nvidia declined 1.3 percent, Qualcomm fell 1.3 percent, and Microsoft fell 0.6 percent. Among Dow stocks, Disney fell 1.3 percent, Home Depot declined 0.9 percent, and Nike fell 0.8 percent.
Reaction was limited to a mixed batch of US economic indicators. Producer prices rose 0.8 percent in May, topping Econoday's consensus expectation for a 0.5 percent increase and posing the latest indication of substantial inflationary pressures underway ahead of the FOMC meeting. Separately, retail sales in May fell 1.3 percent in a disappointment offset by an upward revision to April, now at a 0.9 percent rise versus no change initially. And a better-than-expected 0.8 percent rise in May industrial production was also offset by a revision, this one a sharp downward revision to April which now stands at only a 0.1 percent rise.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.17 to US$74.16 while spot gold fell US$6.99 to US$1,859.08. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield rose 1 basis points at 2.19 percent and the 10-year note yield was unchanged at 1.50 percent.
Europe
News that the US and EU settled their long-running dispute over subsidies for aircraft makers boosted equities Tuesday but risk-taking was limited by caution before the Federal Reserve policy announcement. The Europe-wide STOXX 600 firmed 0.1 percent while the German DAX, the French CAC, and UK FTSE 100 all rose 0.4 percent.
On the negative side, risk appetite took a hit after UK Prime Minister Boris Johnson delayed lifting anti-Covid restrictions. Among sectors, best were insurance, chemicals, food & beverage, personal & household goods, industrials, and health care. Lagging were basic resources, travel & leisure, real estate, retail, and autos & parts.
Among companies in focus, Scandic Hotels fell 4.9 percent after its update on bookings. Lufthansa fell 3.2 percent on disappointing guidance. Windeln, the German baby products retailer, fell 7.1 percent after raising new capital. Anglo American, the big miner, dropped 3.7 percent as copper and other metals prices fell.
On the positive side, International Personal Finance, the UK financial services business, rose 12.6 percent after raising its guidance. Hawesko, the German wine merchant, rose 10 percent on an earnings beat. Airbus, the European aircraft manufacturer, rose 0.7 percent on the trade deal news.
In economic news, the UK claimant jobless count fell by 92,600 to 2.496 million in May. Following a sharper revised 55,800 decline in April, this means that joblessness has decreased in five of the last six months with May seeing the steepest of the sequence. The unemployment rate dropped 0.2 percentage points to 6.2 percent equaling its lowest reading since April 2020.
Asia Pacific
Asia/Pacific equities mostly gained but China lagged as leaders of the US and its allies stepped up their anti-China rhetoric.
Nasdaq's better showing Monday helped Japanese equities rise with the Nikkei up 1.0 percent and the broader Topix up 0.8 percent. Technology and growth stocks outperformed on a rotation out of value as yields have declined. Most sectors rose, paced by financials, electrical appliances, food, pharma, metals products.
Chinese markets weakened with the CSI down 1.1 percent and the Shanghai composite off 0.9 percent as investors reacted to G7 and NATO leaders labeling China a global menace. Declines were nearly across the board with health care and financials lagging the most while technology and telecom were the only sectors higher. Risk appetite also suffered from a liquidity drain by the People's Bank of China and reaction to a report of a radiation leak at a nuclear power facility near Hong Kong. The Hang Seng followed mainland China markets lower, down 0.7 percent with energy, property, and financials the worst performers.
Japanese equities were mixed with the Nikkei flat and the broader Topix down 0.1 percent as growth stocks topped value, in line with Thursday's showing on Wall Street. Most sectors weakened, with financials, machinery, and transportation equipment lagging. Pharma and shipping stocks held up best.
A supportive statement from the Reserve Bank of Australia lifted Australian markets, with the All Ordinaries index up 0.7 percent. Minutes from the June RBA minutes suggested policy-makers plan to maintain their dovish posture, including asset purchases at current levels for a good while longer. Most sectors rose with materials and financials leading. Among companies in focus, Commonwealth Bank of Australia rose 2.1 percent and Mineral Resources rose 3.1 percent. Japara Healthcare, a nursing home operator, rose 8.1 percent after receiving a takeover offer from RSL Care, a competitor.
Looking ahead*
On Wednesday in Asia/Pacific, Japanese machinery orders, Japanese merchandise trade, Chinese fixed asset investment, Chinese industrial production, Chinese retail sales reports are due. In Europe, UK CPI and UK PPI reports are due. In North America, the FOMC announcement and Fed chair press conference are scheduled, plus Canadian CPI, and US import & export price reports are scheduled.
