Daily market review

United States

Equities ended flat to weaker Wednesday with risk appetite fading as investors focused on weak economic data and the prospect of a more dramatic slowdown in the second half.

Megacaps were better bid to help the NASDAQ outperform while value/cyclicals lagged, but even the FANMAG stocks faded into the close. The Dow Jones industrial average eased 0.1 percent, the S&P 500 was flat, and the NASDAQ rose 0.3 percent.

The market focused on a big miss in the US ADP employment figures, on top of Tuesday's weak US consumer confidence figures -- despite a beat in the US ISM manufacturing index -- which raised concerns that US jobs figures due Friday will show a slowdown taking hold in response to the Delta variant. Weak Chinese economic data overnight added to the negatives, with energy and other commodity-linked stocks trailing the market.

Along with big tech-oriented stocks, which are viewed as less sensitive to the business cycle, best performers Wednesday were defensives -- utilities and real estate. Lagging were energy, financials, materials, and industrials.

Among the FANMAG stocks, Microsoft gave up early gains to end flat, while Apple closed up 0.5 percent, and Amazon rose a modest 0.2 percent. On the downside, Chevron fell 1.1 percent, and General Electric was off 1.7 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.71 to US$71.28 while spot gold fell 64 cents to US$1,814.08. The US dollar was mostly down vs. major currencies. The US Treasury 30-year bond yield declined 2 basis points at 1.91 percent and the 10-year note yield fell 1 basis point to 1.29 percent.

In US economic news, at 374,000, ADP's August estimate for private payroll growth fell short of Econoday's consensus for 500,000 and even farther short of expectations for a 693,000 rise in Friday's private payrolls report from the government. On the positive side, ISM's manufacturing index, at 59.9 in August, beat Econoday's consensus by nearly a point.


A mixed batch of economic data and company news left European equities flat to slightly better. The Europe-wide STOXX 600 firmed by 0.5 percent, the German DAX eased 0.1 percent, the French CAC jumped 1.2 percent with help from earnings news, and the UK FTSE-100 was up 0.4 percent.

Weak Chinese economic data and European purchasing managers reports supported the prevailing view that the Federal Reserve and the European Central Bank will be in no rush to remove economic stimulus, even as they start to consider the timing of possible tapering of emergency asset purchases.

ECB comments have been in focus as the market awaits the ECB policy council meeting on Sept. 9. ECB Vice President Luis de Guindos said Tuesday the Eurozone recovery has picked up steam in recent months, and policy-makers will be obliged next week to discuss the size of asset purchases for the fourth quarter

Among sectors, travel and leisure outperformed, with a boost from SAS, the airline, up 2.4 percent, after reporting better than expected third-quarter results. Airlines were hit Monday after the European Union announced curbs on nonessential travel from the US. On the downside, miners lagged, with iron ore and other metals prices off sharply after another weaker than expected Chinese purchasing managers' report.

Among companies in the news, BioMerieux, the French biotech, rose 4 percent after raising its guidance. Pernod Ricard, the French drinks leader, rose 3.7 percent after revenues and earnings beats.

In economic news, the Markit manufacturing PMI for the Eurozone fell to 61.4 in August, slightly below the flash estimate of 61.5 and confirming a decrease from 62.8 in July. The decline in the headline index reflected similar declines in the index for Germany, France and the Netherlands, partly offset by increases in Spain and Italy.

Asia Pacific

Asian equities markets were mixed with Japan outperforming on political news while China was mixed but mostly higher despite more weak economic data.

Chinese equities saw growth stocks lag for a second day while value/cyclicals outperformed on hopes for policy stimulus after more weak economic indicators, with financials and consumer staples leading. The CSI 300 rose 1.3 percent and the Shanghai composite gained 0.7 percent.

Chinese growth stocks lagged amid uncertainty over the impact of Chinese President Xi Jinping's regulatory crackdown on the country's most dynamic sectors. Hong Kong's Hang Seng gained 0.6 percent with real estate lagging while most other sectors improved slightly, with tech and finance shares outperforming.

South Korea markets improved on news of a big jump in Korean exports, with tech stocks leading, but coronavirus worries limited the advance. The KOSPI ended up 0.2 percent. Separately, Taiwan's benchmark Taiex eased by 0.1 percent.

Japanese markets reacted favorably to news that Prime Minister Yoshihide Suga may call snap elections and reshuffle his party's leadership. Some investors see Japan undervalued relative to other developed markets and look for a runup in equities ahead of possible elections in coming weeks. The Nikkei gained 1.3 percent and the broader Topix rose 1.0 percent with value stocks outperforming.

Australia recovered early declines to end flat to weaker, with support from better than expected GDP figures. The All Ordinaries declined by 0.1 percent with sectors mixed. Energy, financials, and telecom managed gains while miners, health care, and consumer stocks lagged.

In economic data, the Markit China manufacturing PMI fell from 50.3 in July to 49.2 in August, indicating that the sector has contracted for the first time since April 2020. This is in line with the official CFLP manufacturing PMI survey which showed a fall in its headline index from 50.4 in July to 50.1 in August. Separately, Australia's GDP rose 9.6 percent on the year in the second quarter, well above the consensus forecast of 9.2 percent. This is the strongest year-over-year growth on record and largely reflects the impact of the sharp contraction in Australia's economy 12 months earlier during the early stages of the Covid-19 pandemic.

Looking ahead*

In Asia/Pacific, figures are due on the following: South Korean CPI, South Korean GDP, and Australian goods and services trade. In Europe, the following are scheduled: Swiss CPI, Swiss retail sales, Swiss GDP, and Eurozone PPI. In North America, US international trade in goods and services, US jobless claims, US productivity and costs, US factory orders, and Canadian merchandise trade reports are on tap.

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