Daily market review

United States

Equities rebounded across the board Monday as investors saw last week's selloff on Federal Reserve tightening worries as overdone. The Dow Jones industrial average rose 1.8 percent, the S&P 500 rose 1.4 percent, and the NASDAQ was up 0.8 percent.

Value/reopening stocks outperformed growth after lagging last week. Among top performers were energy, with oil prices rising, and industrials, with support from machinery and multi-line firms. Materials rose on gains in chemicals and metals. Banks paced financials as the US Treasury yield curve re-steepened. Tech lagged, with some chipmakers hit by China's latest crackdown on crypto trading and mining. Communications services were better though megacaps lagged. Consumer discretionary lagged as Amazon slipped 0.9 percent as it started its Prime Day sales.

Among companies in the news, chipmakers Nvidia declined 1.1 percent and AMD fell 2.4 percent as crypto-currencies fell on China's latest regulatory moves to rein in the market. Chipmakers are exposed to crypto because they provide specialized semiconductors for mining bitcoin. Among value stocks in the Dow, best were Boeing, up 3.3 percent, Travelers, up 2.7 percent, and American Express, up 4.3 percent.

In the crypto world, Coinbase, the crypto exchange, fell 2.9 percent. Bitcoin and other cryptocurrencies were down about 8 percent, adding to recent losses, after China expanded its crackdown on crypto mining and financial transactions related to crypto.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 48 cents to US$73.93 while spot gold rose US$12.99 to US$1,783.04. The US dollar declined vs. most currencies. The US Treasury 30-year bond yield rose 9 basis points at 2.11 percent and the 10-year note yield rose 6 basis points at 1.50 percent.


Upbeat comments on the Eurozone economic outlook from ECB President Christine Lagarde helped equities bounce back Monday, with cyclicals among the best performers. Germany outperformed on strength in autos. The Europe-wide STOXX 600 rose 0.7 percent, the German DAX rose 1.0 percent, the French CAC firmed 0.5 percent, and UK FTSE 100 was up 0.6 percent.

After a weak start carried over from Asian markets, the major indexes rebounded on the Lagarde comments as investors bought the dip and some analysts said worries over Federal Reserve tightening have been overblown. Among sectors, best were autos & parts, chemicals, basic resources, industrials, oil & gas, retail, and media. Lagging but still better were health care, real estate, insurance, utilities, and technology.

Among companies in focus, Daimler rose 2.0 percent while VW gained 3.2 percent. UK supermarket chain WM Morrisons jumped 26 percent on reports it may be acquired. J Sainsbury, its competitor, rose 3.8 percent as the sector came into focus.

Asia Pacific

Worries about Federal Reserve tightening hit Asia/Pacific equities markets Monday with Japan lagging and Australia also off sharply after St. Louis Fed President James Bullard appeared to push forward the timeline for a US policy shift. The Fed comments undercut the reflation trade that has boosted cyclicals/value stocks, while growth held up better.

Japanese markets plunged across the board on Fed tightening worries with the Nikkei down 3.3 percent and the broader Topix down 2.4 percent. Selling included big tech, chipmakers, auto companies, and retailers. Among market heavyweights, chipmaker Tokyo Electron fell 4.0 percent and Fast Retailing dropped 4.4 percent.

Mainland Chinese markets fared better with the CSI up 0.1 percent and the Shanghai composite off 0.2 percent, as strength in growth stocks offset weakness in value. Tech stocks and health care held up best while consumer and energy led the decliners. A strong debut for China's REITs, which started trading in Shanghai Monday, supported Chinese equities. On bitcoin, reports are building of an increasing crackdown in China against crypto mining and trading.

Meanwhile, Hong Kong sold off on the Fed policy worry, with the Hang Seng down 1.1 percent. Financials, technology, energy, and property lagged the most. Among the day's scarce winners, China Telecom rose 11.2 percent after raising its dividend.

Hawkish comments from US and Australian monetary policy makers hit Australian markets with the All Ordinaries index down 1.8 percent. In addition to the comments from St. Louis Fed President James Bullard, markets were reacting to the taper talk from RBA Governor Philip Lowe last week. Lowe said rates could rise in 2024, which some analysts are taking to mean late 2022. Most sectors dropped, led by financials on big declines in banks, insurers, and fund managers. Another commodity price fall hit miners while airlines and infrastructure weakened industrials. Retailers, gaming, and travel companies hit consumer discretionary. On the positive side, buy-now-pay-later stocks helped technology shares gain.

Looking ahead*

On Tuesday in Asia/Pacific, the Hong Kong CPI report is due. In Europe, UK public sector borrowing, UK CBI Industrial Trends, and Eurozone EC consumer confidence reports are scheduled. US existing home sales and Richmond Fed manufacturing reports are on the calendar for North America.

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