Daily market review

United States

Value stocks outperformed to help equities firm Thursday with energy stocks leading on a rebound in oil prices. The Dow Jones industrial average rose 0.4 percent, the S&P 500 gained 0.5 percent for its sixth straight record high close, and the NASDAQ firmed 0.1 percent.

Supported by Wednesday's draw in US crude inventories, oil perked up on reports suggesting OPEC+ oil ministers will call for lower output to offset weaker demand because of virus effects. Activity was light as investors await monthly US jobs data due Friday, but it has been a busy week of IPOs, with LegalZoom and Krispy Kreme coming to market.

A better showing on US jobless claims and another robust ISM manufacturing report supported the reopening trade and bolstered cyclicals/value stocks while growth lagged on the first day of the quarter. Among other sectors, materials beat the market as chemical stocks advanced. Media and big internet stocks led communications higher. Banks rose to lead financials while homebuilders and travel & leisure were stronger in consumer discretionary.

Technology stocks lagged as chipmakers retreated from last week's rally. Consumer staples fell on losses in Walgreen's, down 7.4 percent despite an earnings beat, as investors worried about its post-pandemic prospects.

Among other companies in focus, Micron, the chipmaker, slipped 5.7 percent after warning it is having trouble meeting demand for its products. McCormick & Co., the spice leader, eased 0.4 percent as higher input costs cut into its margins.

In US economic news, initial jobless claims fell more than expected in the latest week, down 51,000 to 364,000 and below Econoday's consensus of 395,000, and even below the lowest estimate of 370,000. Separately, the ISM's June index, at 60.6, came in on the slow side of expectations but there was nothing slow about the level, indicating a substantial rate of composite growth for the sample.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 32 cents to US$75.59 while spot gold rose US$5.02 to US$1,775.59. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield fell 2 basis points to 2.07 percent and the 10-year note yield was down 1 basis point at 1.46 percent.


Rising oil prices and better regional economic readings gave equities a boost Thursday. The Europe-wide STOXX 600 rose 0.6 percent, the German DAX gained 0.5 percent, the French CAC was up 0.7 percent, and UK FTSE 100 advanced 1.2 percent.

A better-than-expected Eurozone manufacturing PMI for June supported risk appetite and recovery hopes after days of worries focused on rising virus case counts and the spread of the Delta variant. Energy stocks led the winners on a rebound in oil prices to help UK markets outperform. Travel & leisure rebounded from several days of losses on the virus effect.

Among other sectors, best were media, banks, construction, utilities, insurance, and chemicals. Laggards included technology, basic resources, personal & household goods, financials services, health care, and telecom.

Among companies in the news, Sodexho, the French food services giant, rose 2.3 percent, and UK food retailer rose 4.4 percent after raising their guidance. Villeroy & Boch, the German ceramics manufacturer, rose 7.0 percent after raising its forecast too. On the downside, Swedish retailer H&M fell 1.1 percent on an earnings miss.

In economic data, Eurozone manufacturing ended the second quarter on a particularly bright note. The mid-month flash was revised slightly higher to 63.4 and now stands 0.3 points above May's final 63.1 and at a new all-time high. Separately, June was another month of buoyant business activity in UK manufacturing. Although the 64.2 flash sector PMI was trimmed to a final 63.9, this was still only 1.7 points short of May's 65.6 record high.

Asia Pacific

Softer economic data from China and Japan and regional virus worries undercut Asian equities markets Thursday with Australia lagging in quiet trading.

Chinese equities were flat to weaker as the benchmark CSI 300 rose 0.1 percent and the Shanghai composite eased 0.1 percent. Value topped growth. Sectors were mixed as industrials and telecom lagged while healthcare and consumer staples held up best. A soft Caixin PMI reading for June weighed on mainland stocks during the day. Hong Kong markets were on holiday.

Rising Covid-19 cases and weakness in tech stocks weighed on Japanese stocks. The Nikkei slipped 0.3 percent and the broader Topix declined 0.2 percent, with growth stocks lagging. Shipping stocks were worst, along with information and communications, metals, and electrical appliances. Airlines held up best.

Economic data suggesting slower growth in China and Japan weakened Australian markets, along with more negative headlines on the Delta variant. The All Ordinaries index dipped 0.6 percent. Most sectors fell, with gaming stocks hitting consumer discretionary on the virus effect. Consumer staples fell on a retreat in grocery stocks after their recent run. Banks depressed financials while industrials suffered from declines in mining contractors and building materials producers. Only materials showed gains as gold miners advanced.

In economic news, the Markit China manufacturing PMI slowed from 52.0 in May to 51.3 in June, still suggesting that activity is moderately positive in the Chinese manufacturing sector. Conditions are stronger than they were during the initial impact of the Covid-19 pandemic in early 2020 but not as strong as they were during the initial months of recovery in late 2020.

Separately, the Markit manufacturing PMI for Japan fell to 52.4 in June, stronger than the flash estimate of 51.5 but confirming some slowing from 53.0 in May. The survey suggests that activity has been hurt by public health restrictions put in place in response to a recent surge in Covid-19 cases.

Looking ahead*

On Friday in Asia/Pacific, the Korean CPI report is due, and in Europe, the Eurozone PPI report is scheduled. For North America, US motor vehicle sales, US employment, US international trade in goods & services, US factory orders, and Canadian merchandise trade reports are on the calendar.

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