Daily market review

United States

Equities slipped into the close in quiet trading Wednesday with some blaming the decline on Federal Open Market Committee meeting minutes confirming policy-makers edging toward tapering asset purchases. The Dow Jones industrial average and the S&P 500 both declined 1.1 percent, and the NASDAQ was off 0.9 percent.

In macro news, minutes of the latest Federal Open Market Committee meeting, as expected, showed policy-makers agreed the economy has progressed toward the Fed's goals; most saw tapering of asset purchases likely to start later this year, but some preferred to wait until 2022.

Among stock sectors, most weakened, but consumer discretionary stocks outperformed on positive earnings. Among retailers, Lowe's, the home improvement chain, surged 9.6 percent on an earnings beat and better than expected same-store sales results. TJX, the budget retailer, gained 5.5 percent on a big revenues beat. Target, the retail chain, fell 2.7 percent after it topped analyst expectations but missed the whisper numbers.

Communications outperformed, with ViacomCBS up 3.7 percent. Banks held up relatively well as the yield curve steepened. On the downside, energy stocks trailed as oil prices dipped, with supermajors weak, and ExxonMobil down 2.1 percent. Consumer staples, real estate, and utilities also lagged.

In economic data, housing starts missed expectations but not permits which, lifted by a jump for multi-family units, rose 2.6 percent in July to a 1.635 million annual rate that exceeds Econoday's consensus for 1.620 million. Starts on the other hand slumped 7.0 percent on the month to a 1.534 million rate that misses Econoday's consensus range.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.43 to US$67.77 while spot gold rose US$2.03 to US$1,786.56. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield eased 1 basis point to 1.91 percent and the 10-year note yield rose 1 basis point at 1.27 percent.


Equities were mixed Wednesday with defensive sectors in favor and cyclicals lagging as investors focused on global growth worries. The Europe-wide STOXX 600 firmed 0.1 percent, the German DAX edged up 0.3 percent, and the French CAC declined 0.7 percent. The UK FTSE 100 declined 0.2 percent, with miner BHP, down 5.9 percent, weighing on the UK average. UK stocks got a boost from surprisingly low UK consumer price figures.

Within the STOXX 600, health care, utilities, and real estate outperformed while lagging were basic resources, retail, autos & parts, financial services, and personal & household goods.

Among companies in focus, Persimmon, the UK builder, rose 1.3 percent on a strong earnings report and news its projected sales have topped pre-pandemic levels. Tecan, the Swiss lab equipment firm, rose 1.3 percent, and Rockwool, the Danish woolen materials maker, rose 0.8 percent on earnings beats. On the downside, Balfour Beatty, the UK construction firm, fell 7.0 percent, and Zur Rose, the Swiss pharmacy fell 5.6 percent, on disappointing trading updates.

In economic news, UK data showed an unexpected slowing in consumer price inflation, while revised Eurozone figures confirmed the HICP topped the ECB's 2 percent target. UK CPI was flat in July, 0.3 percentage points short of the market consensus and soft enough to reduce the annual inflation rate from 2.5 percent to 2.0 percent. Meanwhile, Eurozone inflation accelerated sharply in July. A final 2.2 percent annual rate was in line with the flash estimate, up from June's final 1.9 percent and a couple of ticks above the ECB's new 2.0 percent target.

Asia Pacific

Asian equities rebounded Wednesday as investors saw value in selected stocks after days of declines. Despite the uptick, the coronavirus situation weighed on risk appetite and the Reserve Bank of New Zealand cited Tuesday's lockdown in New Zealand as it delayed an expected rate hike. Investors eyed widening disruptions in trade flows due to the partial closure of a Chinese sea terminal after a port employee tested positive for Covid-19.

Chinese markets recovered a bit with financial and defense shares leading. Financials gained after top Chinese leaders promised to limit financial risks, and defense stocks advanced after China carried out military drills near Taiwan. The CSI 300 rose 1.2 percent and the Shanghai composite gained 1.1 percent.

Hong Kong tracked mainland Chinese markets higher with the Hang Seng up 0.5 percent. Beaten-up tech stocks saw better buying, with Tencent up 0.3 percent, and Meituan up 2.2 percent.

South Korea rose on bargain-hunting after eight straight declines, with the KOSPI up 0.5 percent. Separately, Taiwan's benchmark Taiex was up 1.0 percent as semiconductor stocks have been in demand as investors have cooled on Chinese internet stocks.

Japanese markets ended higher on short-covering after days of declines, with support from the recovery in regional markets. The Nikkei gained 0.6 percent and the broader Topix gained 0.4 percent. The market remained on the defensive after news that the Japanese government extended its anti-Covid restrictions and expanded the measures to more regions. Among companies in focus, Fujifilm Holdings extended its recent run with a gain of 3.3 percent.

The worsening Covid-19 situation and a mixed bag of corporate earnings left Australian markets mixed, with the All Ordinaries index unchanged on the day. Most sectors managed gains, paced by real estate, big banks, industrials, and utilities. On the downside, miners and energy lagged as iron ore prices dropped and BHP fell 7.1 percent after its oil merger deal with Woodside Petroleum, which declined 2.1 percent. Reopening plays lagged, including retailers, and travel operators, on Covid concerns.

Looking ahead*

In Asia/Pacific, Hong Kong CPI, Australian Labour Force Survey, and the Chinese loan prime rate announcement are due. In Europe, the ECB monetary policy meeting minutes are scheduled. In North America, US jobless claims, Philadelphia Fed manufacturing index, and US leading indicators reports are on tap.

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