Daily market review

United States

Despite hawkish Fedspeak and lack of improvement in jobless claims, US shares firmed Thursday ahead of Friday's monthly employment report. The Dow and NASDAQ both rose 0.8 percent while the S&P 500 rose 0.6 percent.

Federal Reserve Governor Christopher Waller joined St. Louis Fed President James Bullard earlier in the week, saying policy accommodation may be pulled back "sooner" than many expect given solid recovery in the US economy.

Yet improvement in jobless claims, as it has since late May, remains marginal. Initial claims in the July 31 week fell 14,000 to a 385,000 level that shows a little less improvement than Econoday's consensus for 381,000. The 4-week average is virtually still, down only 250 to 394,000 from 394,250 in the prior week. Separately, the US trade deficit, reflecting pent-up demand for imports, deepened by nearly US$5 billion in June to an unexpectedly steep US$75.7 billion.

Boosted by an additional C$2.4 billion in exports to the US, Canada posted a surprise trade surplus in June of C$3.2 billion that is sparking market chatter of additional QE tapering by the Bank of Canada. Canadian exports jumped 8.7 percent on the month, lifted by energy products and also motor vehicles as assembly disruptions eased in the month. The S&P/TSX rose 0.2 percent.

In company news, breakfast-cereal icon Kellogg, up 0.8 percent, beat expectations, while Parker Hannifin, maker of motion and control products, also beat expectations but issued cautious guidance; its shares fell 1.0 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.00 to US$71.26 while spot gold fell US$7.43 to US$1,804.85. The US dollar was steady vs. major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.86 percent while the 10-year note yield rose 5 basis points to 1.21 percent.


The Bank of England did modify its tightening conditions but kept policy unchanged. Market reaction was limited: the UK's FTSE was unchanged, Germany's DAX 0.3 percent higher, while France's CAC gained 0.5 percent.

Though there was no change to its 0.10 percent Bank Rate nor to the ceiling on overall asset purchases at £895 billion, the BoE now expects to begin selling gilts when the policy rate reaches 1.0 percent. This is down from 1.5 percent previously which means that stimulus withdrawal is now set for an earlier start.

A heavy slate of economic data was headlined by German manufacturers' orders which easily beat expectations with a 4.1 percent monthly rise that was led by domestic demand which now stands 18 percent above its pre-pandemic level. Overseas orders were up just 0.4 percent for only a 6.5 percent rise from February last year.

Orders for global goods may be rising but production, due to supply constraints, has been lagging, a trend evident in France where industrial production, which did rise an as-expected 0.5 percent in June, was still 5.3 percent short of its pre-pandemic level.

Shortages of raw materials and skilled labor also capped the UK's construction PMI which, at 58.7 in July, missed expectations by more than 5 points to signal the first slowdown in the sector since the UK's last lockdown at the beginning of the year.

Helping Thursday's session were strong earnings, this time from Denmark's pharmaceutical conglomerate Novo Nordisk, whose shares more than 5 percent, and German industrial giant Siemens which gained nearly 3 percent.

Asia Pacific

With China's Shanghai down 0.3 percent and Japan's Nikkei up 0.5 percent, stock markets in Asia were narrowly mixed Thursday.

Shares in China continued to be contained by regulatory risks, signaled by a rush of media warnings now extended to growth hormones, e-cigarettes, and chemical fertilizers.

In Japan, rising Covid cases is turning investor attention to shippers: Nippon Yusen rose 12.7 percent with gains of more than 6 percent each for Kawasaki Kisen and Mitsui OSK Lines.

Some indexes in Asia barely moved at all including India's Sensex (up 0.2 percent), Taiwan's Taiex (down 0.1 percent), and Australia's all ordinaries which posted a fractional gain (0.01 percent).

Australia's monthly trade surplus rose by A$1.2 billion to a record A$10.5 billion in June. Exports climbed 3.6 percent on the month in June after increasing 4.5 percent in May, while imports rose 0.8 percent, slowing from May's increase of 2.9 percent. Imports of consumption goods and services both weakened.

Looking ahead*

Friday's Asian schedule opens with household spending from Japan followed by the Reserve Bank of Australia's quarterly statement on monetary policy and its assessment of economic conditions, then a policy announcement from the Reserve Bank of India, and merchandise trade from China. European data include German industrial production, the UK Halifax house price index, French merchandise trade, and Italian industrial production. North America will be headlined by both the US employment situation and the Canadian labour force survey. Canada will also see the Ivey PMI with other US data to include consumer credit.

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