Daily market review

United States

Equities slipped to the day's lows late Tuesday after US interest rates popped up following lukewarm bidding in the monthly US 30-year bond auction. The Dow Jones industrial average eased 0.3 percent, the S&P 500 declined 0.4 percent, and the NASDAQ also eased 0.4 percent.

US interest rate markets managed to shrug off another unexpectedly high US consumer price index reading, as buyers came in on the initial dip after the CPI release. Equities were flat to better with tech/growth stocks leading most of the day. But the poor afternoon auction undercut the market, and the NASDAQ joined the other major indexes in slightly negative territory.

Demand was weak in the bond auction, where the bid-cover ratio, at 2.19, was the lowest in 10 months and real investor demand was the weakest of the year. Analysts noted that yields remain down sharply from a month earlier, a factor contributing to weaker bidding.

Among equity sectors, information technology and communications services held up best, paced by the megacaps, while value/cyclicals fared worst, including financials, energy, materials, industrials, and consumer discretionary.

Investors were not impressed with quarterly results from big banks, as JP Morgan (down 1.5 percent) and Goldman Sachs (down 1.2 percent) sold off despite topping market expectations, as analysts carped about elements of the results and warned the strong showings would not be sustained.

Among companies in focus, Boeing fell 4.2 percent after warning its Dreamliner production would slow. Home builders had a bad day with Lennar and KB Home both down 2.9 percent. On the positive side, PepsiCo, up 2.3 percent, led consumer staples higher after sparkling earnings and improved guidance.

In the inflation data, consumer prices soared 0.9 percent in June following a 0.6 percent gain in May, surpassing the 0.5 percent Econoday's consensus expectation. The 12-month rate picked up to 5.4 percent from 5.0 percent the previous month, also above expectations. The highest forecasts were 0.6 percent for the monthly change and 5.3 percent on a 12-month basis.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil jumped US$1.23 to US$76.50 while spot gold rose US$2.17 to US$1,808.35. The US dollar rose sharply vs. most major currencies. The US Treasury 30-year bond yield rose 4 basis points to 2.04 percent and the 10-year note yield rose 5 basis points to 1.42 percent.


A mixed showing among sectors left European equity indexes unchanged Tuesday after markets gave up initial modest gains after unfriendly US CPI figures. The Europe-wide STOXX 600, the German DAX, the French CAC, and the UK FTSE 100 all ended flat.

Among sectors, telecoms got a boost from Nokia, up 8.5 percent as it expects to raise its guidance. Media and tech stocks also outperformed, with semiconductors leading.

On the downside, banks across Europe lagged on a comment from an ECB bank supervisor suggesting dividend payments will be limited and banks may be subject to tighter controls. Meanwhile, UK banks got a boost from news the Bank of England would allow reinstatement of dividends, but gains proved short-lived and Barclays ended down 1.6 percent and Lloyds off 0.9 percent.

Among companies in the news, Nordic Semiconductor rose 6 percent on an earnings beat. Swatch Group, the Swiss watch maker, rose 1.1 percent after topping earnings expectations. On the downside, Fraport, the German airport operator, fell 2.9 percent on fallout from declining air traffic. DNB Bank declined 2 percent despite beating earnings expectations.

Asia Pacific

Follow-on from gains on Wall Street and upbeat Chinese trade figures helped most Asian equities markets improve Tuesday.

Hong Kong outperformed with tech giants bouncing back, with the Hang Seng up 1.6 percent. Tencent led the winners as it rose 3.9 percent after Chinese authorities allowed it to proceed with a big acquisition, in a rare bit of good regulatory news for the Chinese internet sector.

Chinese equities were better after upbeat Chinese trade figures. The benchmark CSI 300 edged up 0.2 percent and the Shanghai composite gained 0.5 percent. Gains were constrained by concern over rising Covid case counts globally, and caution ahead of US CPI figures. Among sectors, telecom and consumer staples fared best while IT and materials lagged.

Japanese stocks ended, higher tracking US markets. The Nikkei firmed 0.5 percent and the broader Topix rose 0.7 percent. Mining led most sectors higher, with banks and financial services also strong. Most sectors advanced, led by a mining rally, followed by other finance and insurance. Lagging were land/air transportation, services, and other products.

Korea and Taiwan got a boost from strong Chinese trade data as the KOSPI gained 0.8 percent and the Taiex firmed by 0.2 percent.

Australian markets lagged the region to end nearly flat with sentiment dampened by virus worries and expectations the recovery will be slowed significantly. The All Ordinaries index edged up 0.1 percent. Best were industrials, consumer staples, and materials. Lagging were real estate, and banks.

In economic news, China's trade surplus in US dollar terms widened from $45.53 billion in May to $51.53 billion in June, above the consensus forecast for a surplus of $44.9 billion. Exports rose 32.2 percent on the year in June, up from growth of 27.9 percent in May while year-over-year growth in imports slowed from 51.1 percent to 36.7 percent.

Looking ahead*

In Asia/Pacific, the RBNZ policy announcement, Indian WPI, and Singapore GDP data are due. In Europe, UK CPI, UK PPI, and Eurozone industrial production reports are scheduled. In North America, the Bank of Canada policy announcement and monetary policy report, Canadian manufacturing sales, and US PPI figures are due.

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