Daily market review

United States

Weakness in Europe tied to disappointing economic data spilled over into the US where the Institute For Supply Management's services index failed to meet expectations. The Dow Jones industrial average fell 0.6 percent, the NASDAQ rose 0.2 percent while US Treasury yields moved lower following ISM's results.

ISM's services index slowed by nearly 4 points to 60.1 to miss Econoday's lowest estimate. Still, the results are down only slightly from the mid-to-low 60s of the prior three reports outside of which June's score is the highest since November 2018. A big negative in the report was contraction in the sample's employment index, at a sub-50 score of 49.3 to underscore, not the need to hire candidates, but the unavailability of candidates.

Boosted by an upgrade from KeyBanc, specialty chip maker Nvidia rose 1.0 percent for yet another new high as the stock looks to post an eighth consecutive week of gains. Beyond Meat fell 3.5 percent on a downgrade by CFRA Research citing high costs for the maker of substitute meats.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell $2.28 cents to US$74.82 while spot gold rose US$4.97 to US$1,796.74. The US dollar rose sharply vs. most major currencies. The US Treasury 30-year bond yield fell 8 basis points to 1.99 percent and the 10-year note yield was down 9 basis points at 1.36 percent.


Unexpected weakness in German manufacturers orders cast a chill on the reopening trade and with that, Tuesday's markets in Europe: the DAX fell 1.0 percent and both the CAC and FTSE lost 0.9 percent.

German orders dropped 3.7 percent on the month in May, pulled lower by a 6.7 percent slump in overseas demand which now stands 7.4 percent below its pre-pandemic level in February last year. Separate data on German analyst assessments in the latest ZEW survey showed less optimism about the economic outlook but rising strength in current conditions.

Oil swung wildly, first rising then falling following Monday's breakdown between the United Arab Emirates and Saudi Arabia and whether OPEC+ will or will not
agree to an extensions on production curbs. Oil stocks swung likewise with BP ending 4.3 percent lower and Royal Dutch Shell down 2.0 percent.

Alstom fell 7.2 percent after the French rolling stock manufacturer cut cash-flow guidance, and Ocado, the UK maker of automation systems for online retailers, fell 4.2 percent despite positive news on revenue growth and after a announcing deal with privately-held Alcampo to develop the supermarket's business in Spain.

In contrast to disappointment over German manufacturing data, Eurozone retail sales jumped a monthly 4.6 percent in May. The result was tied wholly to discretionary demand and puts the retail sector on course to provide a boost to Eurozone second-quarter GDP.

Asia Pacific

The Reserve Bank of Australia left its main policy rate unchanged at 0.10 percent but, with officials now more confident about the outlook, the central bank said it will scale back purchases of government bonds after September from A$5 billion per week to A$4 billion per week.

And in a move suggesting that the first expected rate hike may have been moved up from late 2024, the RBA kept its target for the 3-year government bond yield tied to the April 2024 bond, making no change to target the November 2024 bond. The All Ordinaries fell 0.8 percent.

Government scrutiny into Didi Global and how it handles customer data is raising uncertainty over regulatory restrictions in China which ordered the company's app removed from online stores. Shares of the vehicle-for-hire company fell 5 percent in volatile trading. The Shanghai Composite slipped 0.1 percent on the day.

India's Tata Motors, down 10.8 percent on Tuesday, is the latest auto producer to warn of production cuts tied to chip shortages. The Bombay Sensex was unchanged.

Economic data included a smaller-than-expected monthly decline of 2.1 percent in Japanese household spending during the Covid restrictions of May; the Nikkei rose 0.2 percent and the Topix 0.3 percent on the day. The Hang Seng fell 0.3 percent; Hong Kong's PMI slowed by nearly a full point to 51.4 as respondents to respondents reported Covid-related weakness among regional trading partners.

Looking ahead*

Wednesday's economic calendar in Asia/Pacific is empty; Europe includes German industrial production, the UK Halifax house price index, French merchandise trade, and Italian retail sales. North America's calendar includes Canada's Ivey PMI, US JOLTS (job openings), and FOMC minutes.

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