Daily market review

United States

Value/cyclicals led major stock indexes slightly higher Friday while mega cap growth stocks lagged to restrain gains. The Dow Jones industrial average 0.7 percent, the S&P 500 firmed 0.3 percent, and the NASDAQ declined 0.1 percent.

Cyclicals remained better bid Friday after Thursday's US infrastructure deal. Growth stocks lost steam as the US 10-year yield rose above 1.5 percent after US personal consumption expenditure price figures came in hot, with a year-over-year rise of 3.9 percent in May, in line with expectations.

Meanwhile, financials outperformed after big banks passed Federal Reserve stress tests, which clears them to resume stock buybacks and dividends. Energy stocks rose with oil prices, and managed health and hospitals led health care higher. An earnings beat at Nike helped consumer discretionary, though Amazon declined 1.4 percent.

Megacap internet stocks declined to dampen communications services, with Google down 0.2 percent, and Facebook down 0.5 percent. Tech stocks fared worst, with software and chipmakers down. Microsoft was off 0.6 percent and Apple down 0.2 percent.

Among companies in focus, Nike, the sportswear leader, leaped 16 percent on upbeat quarterly results and better guidance. Virgin Galactic, the space company, rallied 39 percent after getting a full commercial launch license. Netflix rose 1.7 percent after an analyst upgrade. On the downside, Rite Aid fell 6 percent on an analyst downgrade. Fedex fell 3.9 percent as margins missed optimistic estimates. Blackberry, the software supplier, fell 4.3 percent after analyst downgrades.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 60 cents to US$76.12 while spot gold rose US$5.21 to US$1,779.65. The US dollar rose vs. most major currencies but declined vs. sterling. The US Treasury 30-year bond yield rose 5 basis points to 2.15 percent and the 10-year note yield was up 4 basis points at 1.53 percent.


A mixed showing among sectors left equity indexes flat to higher Friday with cyclicals mostly better on an upbeat view of European recovery prospects. The Europe-wide STOXX 600 and the German DAX both rose 0.1 percent, the French CAC eased 0.1 percent, and UK FTSE 100 rose 0.4 percent.

More dovish comments from European Central Bank officials and upbeat economic data provided support. ECB Governing Council member Isabel Schnabel repeated her warning that it would be a mistake to withdraw policy support too soon. And economic data included upside surprises in German consumer sentiment and Italian consumer and business sentiment reports.

Among sectors, best were basic resources, banks, retail, financial services, insurance, health care, and construction, while lagging were travel & leisure, autos & parts, utilities, chemicals, technology, and telecom.

Among companies in focus, German sportswear makers Puma, up 2.2 percent, and Adidas, up 5.8 percent, gained on strong trading results. Credit Suisse rose 1.9 percent on news it is considering another restructuring, and may consider being acquired by UBS, which rose 0.2 percent. Hornbach Holding, the Swiss store chain, rose 19 percent after strong results and raising its guidance.

In economic data, the German GfK survey was on the strong side of the market consensus. Following a small upward revision to this month's provisional reading, consumer climate is forecast to rise a surprisingly large 6.6 points to minus 0.3 in July. For Italy, business confidence improved for a seventh straight month in June. From an upwardly revised 107.3 in May, the headline sentiment gauge rose 5.5 points to 112.8, a multi-year high. Meantime, consumer confidence (115.1 after 110.6) also improved markedly and moved above its pre-pandemic level (110.8) for the first time since the virus struck.

Asia Pacific

Follow-through from Thursday's rally on Wall Street lifted most Asian markets Friday after news of a US infrastructure deal.

Hong Kong and mainland Chinese markets outperformed the region. China's benchmark CSI 300 rose 1.6 percent and the Shanghai composite gained 1.2 percent, with support from a liquidity injection from the People's Bank of China for a second straight day. Growth stocks topped value, with all sectors higher, paced by materials and consumer staples.

Hong Kong's Hang Seng index rose 1.4 percent as tech stocks rallied, along with energy and materials. Meituan, the online shopping giant, rose 4.8 percent.
Tech stocks led Korea and Taiwan higher with the KOSPI up 0.5 percent to a new closing record, and the Taiex up 0.6 percent.

Japanese markets tracked the US higher with the Nikkei up 0.7 percent and the broader Topix up 0.8 percent. Most sectors rose, with miners and iron & steel stocks leading. Banks and transportation equipment stocks also outperformed. Shippers lagged.

Miners and bank stocks led Australia higher on the US infrastructure deal, though virus news capped the gains. The All Ordinaries index rose 0.5 percent with most sectors higher. Precious metals led materials higher. Consumer discretionary outperformed on strength in Kogan.com, the online retailer, which rose 6.1 percent. Industrials advanced on strength in building materials, while banks and fund managers lifted financials. Stay-at-home stocks got a boost on news of weeklong lockdowns in parts of New South Wales, Australia's most populous state.

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