Daily market review

United States

Equities were mostly flat to higher Wednesday with value/cyclicals leading and tech stocks weak, as several sectors reversed their recent trends at quarter end. Equities were finishing the first half very strong, with the S&P 500 up 14 percent year to date. On the day, the Dow Jones industrial average rose 0.6 percent, the S&P 500 was up 0.1 percent, and the NASDAQ eased by 0.2 percent.

US equities held up better on Wednesday than markets overseas amid perceptions the US will outperform as Europe and Asia are hit harder by the Delta variant. At the same time, expectations for US growth were tempered by comments from Federal Reserve Governor Christopher Waller, who suggested the Fed may taper its asset purchases as soon as this year.

Energy stocks outperformed after lagging earlier in the week. Strength in airlines and aerospace & defense boosted industrials. Tobacco and food supported consumer staples. On the downside, health care lagged on weakness in hospitals and medical technology. Tech stocks lagged as they gave back some recent gains, and communications services and utilities were weakest at quarter end.

Among companies in focus, Bed Bath & Beyond rallied 11 percent after topping revenues and same-store sales forecasts. Constellation Brands, the spirits importer, gained 1 percent after raising its guidance and boosting share buybacks.

In US economic news, ADP's June estimate for private payroll growth at 692,000 was higher than expected and compares with expectations for a 555,000 rise for private payrolls in Friday's report from the government.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 1 cent to US$75.13 while spot gold rose US$8.81 to US$1,770.57. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield fell 1 basis point to 2.08 percent and the 10-year note yield was down 1 basis point at 1.46 percent.


Month-end profit-taking weakened European markets Wednesday with negative Covid-19 headlines weighing on sentiment. The Europe-wide STOXX 600 declined 0.8 percent, the German DAX slipped 1.0 percent, the French CAC fell 0.9 percent, and UK FTSE 100 was off 0.7 percent.

Cyclicals/value sectors have lost steam because investors see a threat to the recovery as the more transmissible Delta variant accounts for a rising share of Covid-19 cases in France, Italy, and elsewhere in Europe, in addition to its dominant position in the UK. UK officials appear to be considering keeping some restrictions in place after their scheduled expiration on July 19.

Among sectors, auto stocks lagged the most as they slipped at quarter end after an adverse court ruling hit several automakers. Autos were susceptible to a quarter-end selloff given their strong showing this year, largely on the vogue for electric vehicles. Other laggards included utilities, construction, insurance, technology, personal & household, and banks. Holding up best were media, health care, travel & leisure, and telecom.

Among companies in the news, Volkswagen, down 2.1 percent, and Porsche, down 3.6 percent, fell after a US court said Ohio could proceed with its dieselgate lawsuit against automakers. Separately, Deutsche Bank fell 0.7 percent after a regulatory setback for its business in Hong Kong. Credit Suisse slipped 0.4 percent after Reuters said the bank may unify its regional wealth management businesses.

In economic data, Eurozone inflation decelerated in line with the market consensus in June. A flash 1.9 percent annual rate was down just a tick versus May's final 2.0 percent, its first fall since last August. Inflation is now bang in line with the ECB's target.

Asia Pacific

Worries about slower Chinese growth and rising Covid-19 cases left Asian equities markets mixed Wednesday with technology stocks holding up best.

Technology and telecom services helped Chinese equities edge up despite weaker-than-expected Chinese purchasing managers figures though virus concerns limited the gains. The benchmark CSI 300 rose 0.7 percent and the Shanghai composite gained 0.5 percent. Hong Kong's Hang Seng index slipped 0.6 percent. Growth stocks beat value.

Japanese stocks weakened on rising virus infections and slow vaccination rates in Japan and elsewhere in Asia; weaker-than-expected Japanese industrial production figures also weighed The Nikkei eased 0.1 percent and the broader Topix declined 0.3 percent, with value/cyclicals weakest. Most sectors declined, paced by food, airlines, utilities, and iron & steel. Communications services and tech stocks held up best.

A rebound in miners and a rally in Telstra, the telecom provider, buoyed Australian markets but quarter-end pressures trimmed the gains. The All Ordinaries index ended up 0.3 percent. Sectors were mixed with utilities lagging on a selloff in AGL Energy, down 10 percent, after it downgraded its profits guidance. CSL, the biotech, slipped 1.6 percent to depress health care while tech stocks were hurt by declines in buy-now-pay-later stocks. On the plus side, Telstra gained 4.4 percent after saying it will sell half of its mobile tower business. Separately, Iluka, the mineral sands explorer, jumped 12 percent on news its competitor, Rio Tinto, would suspend mining at its Richards Bay site in South Africa. Iron ore miners also boosted materials.

In economic news, Chinese PMI survey data suggest that growth was steady but subdued in the manufacturing sector in June while conditions moderated but remained solid in the non-manufacturing sector. The CFLP manufacturing PMI fell slightly from 51.0 in May to 50.9 in June, close to the consensus forecast of 50.8, while the non-manufacturing PMI fell from 55.2 to 53.5. Separately, Japanese industrial production dropped 5.9 percent on the month in May, a deeper than expected loss, after advancing 2.9 percent in April.

Looking ahead*

On Thursday in Asia/Pacific, Bank of Japan Tankan survey, Korea external trade, Korea PMI manufacturing, Japan PMI manufacturing final, Australia goods and services trade, India PMI manufacturing, and China's CFLP manufacturing reports are due. In Europe, the following are scheduled: German retail sales, Swiss CPI, Swiss retail sales, Swiss SVME PMI, Eurozone unemployment rate, plus PMI manufacturing final reports from the Eurozone, France, Germany, and the UK. For North America, US jobless claims, US PMI manufacturing final, US ISM manufacturing, and US construction spending reports are on the calendar.

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