Daily market review

United States

Equity markets paused to consolidate Monday after reaching record highs Friday, with cyclicals on the defensive as growth worries edged back into focus. The Dow Jones industrial average eased 0.3 percent, the S&P 500 declined 0.1 percent, and the NASDAQ firmed 0.2 percent.

Buyers took a step back amid negative headlines over the Delta variant and the prospect of new steps to limit its spread. Concerns about slowing Chinese growth added to the negative picture.

Cyclicals lagged, especially commodities-linked sectors, plus travel and leisure, but growth stocks didn't fare much better. Best performers included health care and consumer staples. Financials outperformed as bond yields actually edged up on the day, despite negative Covid headlines.

Among companies in focus, Chevron fell 1.7 percent as oil prices slipped. Air Products, the industrial gas supplier, fell 5.2 percent after an earnings miss. Darden Restaurants fell 4.5 percent and Wynn Resorts declined 2.8 percent after analyst downgrades. On the positive side, Moderna rose 17 percent on news its vaccines have been approved in Australia. Tesla rose 2.1 percent after an upgrade at Jefferies. Tyson Foods rose 8.7 percent on a big earnings beat.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil slipped US$1.24 to US$69.25 while spot gold fell US$31.56 to US$1,730.38. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield rose 2 basis points to 1.97 percent and the 10-year note yield rose 2 basis points at 1.32 percent.


Equities were narrowly mixed Monday with defensive sectors holding up best while cyclicals lagged. The Europe-wide STOXX 600 firmed 0.2 percent, the German DAX and the French CAC both eased 0.1 percent, and the UK FTSE 100 was up 0.1 percent.

Worst performers included commodities stocks, plus energy, autos & parts, and travel & leisure, as Friday's US jobs report spurred expectations for faster Federal Reserve tightening, alongside concerns over the pickup in Covid-19 cases in the US and China, and worries about the spreading Delta variant in Europe.

Defensive sectors including health care and utilities outperformed. SSE, the utility, rose 5 percent on speculation it may be acquired after Elliott Management raised its stake in the Scottish energy producer.

Markets noted comments from Bundesbank President Jens Weidmann, who warned of rising inflation and said the ECB should be prepared to cut back its asset purchases and raise rates as needed.

On the downside, airlines lagged on the impact of travel curbs to slow the spread of the Delta variant, and reports of discounting to lure travelers. Ryanair, the UK budget airline and Lufthansa both fell 1.1 percent.

Asia Pacific

Asian markets were mostly higher Monday with China leading on hopes for monetary policy support as investors see Chinese growth slowing. Japanese markets were on holiday, which reduced activity in the region.

Chinese markets gained with the CSI 300 up 1.3 percent and the Shanghai composite up 1.1 percent. Signs of slower growth fed hopes for renewed monetary policy easing from the People's Bank of China. Chinese export figures showed pronounced slowing, reflecting slower factory output and weaker external demand due to the global pandemic. News of rising Covid-19 cases in China and a Goldman Sachs downgrade to its growth forecast for China added to expectations for policy support.

Value stocks beat growth as consumer staples and financials outperformed. Chip stocks declined after a new warning from Chinese regulators over speculation in the semiconductor market.

Hong Kong lagged other Chinese markets as the Hang Seng rose 0.4 percent as Chinese regulatory worries limited gains. Alibaba fell 2.4 percent after it fired a manager over alleged improprieties.

Growth and tech stock weakness weighed on tech-heavy markets. South Korea's KOSPI eased 0.3 percent while the Taiwan benchmark Taiex was off 0.2 percent.

Australian markets were mixed with the All Ordinaries index unchanged. Weakness in commodity prices weighed on miners amid perceptions that strong US jobs data have accelerated Federal Reserve policy tightening. Lower oil prices hurt energy stocks. On the positive side, financials outperformed, led by insurers, along with utilities and real estate.

In economic data, China's trade surplus widened from $51.53 billion in June to $56.58 billion in July, its highest level since January. Exports rose 19.3 percent on the year in July, down from growth of 32.2 percent in June, while year-over-year growth in imports slowed from 36.7 percent to 28.1 percent.

Looking ahead*

In Asia/Pacific, no major data releases are due. In Europe, the German ZEW Survey is scheduled. In North America, US NFIB small business sentiment and US productivity and cost reports are on tap.

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