Daily market review

United States

Equities mostly weakened Tuesday with value stocks lagging growth stocks on worries about Covid-19 and slowing growth. The Dow Jones industrial average slipped 0.8 percent and the S&P 500 fell 0.3 percent but the NASDAQ firmed 0.1 percent. Investors preferred megacap growth stocks as sentiment took on a defensive tone.

Concern about the Delta variant and vaccine efficacy weighed on cyclical/value stocks, along with perceptions that US fiscal spending plans are in jeopardy. News that Goldman Sachs downgraded its US growth forecast added to worries about the pace of recovery.

Among sectors, energy stocks trailed as oil prices slipped. Industrials lagged, led by names including Boeing, down 1.8 percent, and Deere, down 4.5 percent. Other lagging sectors included health care, materials, real estate, and consumer staples. On the positive side, rising interest rates lifted financials. Other winners included consumer discretionary, with Amazon up 0.9 percent. The FANMAG group boosted communications services and tech, with Apple up 1.6 percent, and Facebook up 1.6 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 95 cents to US$71.64 while spot gold fell US$34.88 to US$1,793.93. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield rose 4 basis points at 1.99 percent and the 10-year note yield rose 5 basis points to 1.37 percent.


Weakness in utilities and risk aversion ahead of this week's European Central Bank policy committee meeting left equities weaker Tuesday. The Europe-wide STOXX 600 fell 0.5 percent, the German DAX declined 0.6 percent, the French CAC eased 0.3 percent, and the UK FTSE-100 was off 0.5 percent.

UK stocks were depressed after Prime Minister Boris Johnson unveiled plans for a tax increase to address health and social services costs.

German utilities suffered from expectations upcoming German elections will yield more aggressive action to address climate change. RWE, the big utility, was off 2.0 percent, and E.on was off 1.0 percent.

Among companies in focus, DS Smith, the UK paper packaging business, rose 2.6 percent after a strong trading update. On the downside, Tele2 fell 0.6 percent after the Swedish telecom operator and Deutsche Telekom sold T-Mobile Netherlands to a consortium of investors. Allianz, the German financial services giant, slipped 0.5 percent on news of an investigation into its US investment funds.

In economic news, ZEW's September survey again found analysts more positive about Germany's current economic situation but also less upbeat about the outlook for the coming six months. Compared with the market consensus, the results were disappointingly soft.

Current conditions rose a further 2.6 points to 31.9, their seventh straight gain and their highest level since December 2018. However, at the same time, economic sentiment (expectations) declined for a fifth time in the last six months. At 26.5, September was the lowest since March 2020.

Asia Pacific

Asian equities markets were mixed Tuesday with China and Japan outperforming and South Korea and Taiwan lagging on weakness in their big tech stocks.

Better Chinese international trade data and stimulus hopes bolstered Chinese markets, with the CSI 300 up 1.2 percent and the Shanghai composite rising 1.5 percent. China's exports grew by 26 percent and imports by 33 percent, both well above expectations and helping to allay concerns about Covid-related disruptions. Meanwhile expectations remain for more stimulus from the People's Bank of China in the fall. Among sectors, energy and financials outperformed while health care and telecom services lagged.

Separately, Hong Kong's Hang Seng rose 0.7 percent with a boost from Tencent and its tech/online rivals after Tencent (up 2.1 percent) announced a share buyback.

Losses in tech heavyweight stocks depressed South Korea and Taiwan with the Korean KOSPI down 0.5 percent and Taiwan's benchmark Taiex off 0.4 percent. South Korea's Naver, the internet giant, fell 2.1 percent, and Samsung, the chipmaker, lost 1.6 percent., while Taiwan Semiconductor lost 1.3 percent.

Japanese markets got a lift from hopes for active measures to cope with the pandemic and boost the economy when a new government takes over, and perceptions that Japan remains undervalued relative to other markets. The Nikkei gained 0.9 percent and the broader Topix gained 1.1 percent. Most sectors rose, led by airlines, information & communications, and land transportation stocks.

A divided showing among sectors left the Australian All Ordinaries flat. Materials lagged on a selloff in iron ore producers while grocery stores weighed on consumer staples. On the positive side, energy stocks rose as oil rebounded while travel and gaming stocks boosted consumer discretionary.

Looking ahead*

In Asia/Pacific, figures are due on Japan's revised GDP. In Europe, the following are scheduled: French merchandise trade and Italian retail sales. In North America, the Bank of Canada policy announcement is due, plus Canadian Ivey PMI, US consumer credit, Fed beige book, and US JOLTS job openings reports are on tap.

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