Daily market review

United States

Better buying in growth and defensive stocks helped major stock indexes recover from early declines to end narrowly mixed Thursday. Cyclicals lagged on growth and monetary policy fears. The Dow Jones industrial average closed down 0.2 percent, the S&P 500 rose 0.1 percent, and the NASDAQ was up 0.1 percent.

Weakness in commodity stocks and other cyclicals extended into the US hours after Asian and European markets fell on coronavirus concerns and after Federal Reserve meeting minutes suggested the Fed taper would start by year end. Energy fared worst as oil prices continued their weeklong selloff. Cooler Chinese demand for industrial metals weighed on materials, while airlines and machinery led industrials lower. Financials were hurt by declining interest rates.

On the positive side, technology outperformed to lead growth stocks higher, with chipmakers lifted by better-than-expected quarterly results from Nvidia, up 4.0 percent, plus Cisco, up 3.8 percent.

Communications services rose on gains in selected entertainment stocks. Consumer staples outperformed with help from Estee Lauder, up 2.6 percent after beautiful quarterly results. Defensives -- utilities, real estate, and health care -- also outperformed.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 83 cents to US$66.94 while spot gold fell US$5.72 to US$1,780.84. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield declined 2 basis points to 1.88 percent and the 10-year note yield fell 2 basis points at 1.25 percent.


Risk aversion and growth worries after the release of the Federal Reserve's policy meeting minutes rolled into European markets from Asia Thursday, with commodity-linked stocks leading the selloff. The Europe-wide STOXX 600 dropped 1.5 percent, the German DAX lost 1.3 percent, and the French CAC declined 2.4 percent. The UK FTSE 100 fell 1.5 percent.

Lower commodities prices on concern over slowing growth and faster withdrawal of Fed policy support weighed on energy and mining stocks. Notable losers included BP, down 4.9 percent, Royal Dutch Shell, down 3.9 percent, Antofagasta, down 4.5 percent, and Rio Tinto, down 2.7 percent.

Also sharply lower were retail, autos & parts, personal & household goods, travel & leisure, and banks. Holding up best were defensive sectors including utilities, health care, real estate, telecom, and technology.

News that China would seek to reduce domestic wealth disparities hit European luxury goods businesses with heavy exposure to the Chinese market. LVMH fell 6.2 percent and Kering dropped 9.5 percent. Swiss watchmakers Swatch fell 6.6 percent and Richemont lost 6.1 percent. Meanwhile, travel & leisure stocks suffered from the rise in coronavirus cases, which threatens demand for airline tickets and face-to-face entertainment services generally.

Automakers were hit after Toyota announced production cuts due to input shortages. Daimler declined 3.2 percent, Renault fell 2.4 percent and Volkswagen declined 2.0 percent.

Asia Pacific

Risk appetite took a hit Thursday after Federal Reserve meeting minutes suggested the Fed might taper asset purchases by year end. Rising Covid-19 case counts in Asia/Pacific and fallout from China's latest batch of proposed regulations added to the downbeat mood.

Technology and energy stocks led Chinese markets lower. The CSI 300 lost 0.7 percent and the Shanghai composite fell 0.6 percent. Declining energy stocks reflected lower oil prices.

Tech was hit after Chinese regulators said they were weighing more controls over the online streaming industry and new protections for workers at ride-sharing companies. Separately, China's Ministry of Industry and Information Technology issued new charges that Tencent and other tech giants misused private user information and engaged in unfair competition. A warning from Tencent (down 3.4 percent) that investors should expect more regulation added to the risk-off mood.

Hong Kong lagged mainland Chinese markets with the Hang Seng dropping 2.1 percent. Big tech led the selloff, with Alibaba down 5.5 percent, Meituan off 7.2 percent, and Kuaishou down 7.1 percent.

Taiwan's benchmark Taiex dropped 2.7 percent on Fed policy worries and as tech stocks were hurt after Cisco warned of rising input costs and supply disruptions. Taiwan's government called on state-owned banks to buy stocks to help stem the selloff.

South Korea resumed its recent downtrend after a one-day reprieve, with the KOSPI down 1.9 percent, as investors reacted to rising Covid case counts, the Fed's tapering plans and supply disruptions.

Separately, news that Toyota would slash output next month due to chip shortages hit Japanese markets late Thursday. Markets were already reacting badly to concern over Fed tapering after release of the FOMC meeting minutes. The Nikkei lost 1.1 percent and the broader Topix fell 1.4 percent, with Toyota down 4.4 percent. Most sectors fell, with shipping and iron & steel lagging the most, along with materials, banks, and transportation equipment.

Australian markets ended lower as falling iron ore prices hit miners, with the All Ordinaries index down 0.5 percent. Reopening stocks got a boost from news that the Pfizer vaccine will become more widely available in Australia in September, even as more states appeared likely to extend restrictions.

Australian energy stocks weakened as oil prices extended their slide. Banks and fund managers depressed financials. On the positive side, CSL, the biotech, rose 3.2 percent after an upbeat earnings report. Gaming operators bolstered consumer discretionary stocks, with Crown Resorts up 1.8 percent.

Looking ahead*

In Asia/Pacific, Japanese CPI figures are due. In Europe, UK public sector finances, German PPI, and UK retail sales are scheduled. In North America, the Canadian retail sales report is on tap.

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