Daily market review

United States

Equities edged down Wednesday in quiet trading with megacap growth stocks depressing the major averages and value/cyclicals also soft on growth concerns. The Dow Jones industrial average eased 0.2 percent, the S&P 500 was off 0.1 percent, and the NASDAQ fell 0.6 percent. Trading took on a defensive tone, with utilities and consumer staples holding up best, but equities managed to recover from morning lows.

Somewhat hawkish-sounding comments from Federal Reserve officials attracted attention after last week's surprisingly soft US jobs report, which raised concern about the health of the recovery. In comments Wednesday, St. Louis Federal Reserve President James Bullard repeated his call for the Fed to start tapering soon, and New York Fed President John Williams, who is regarded as a dove, told reporters it "could be appropriate" to start tapering this year if the economy performs as well as he expects, though he made clear he is not satisfied with progress on employment. Later, the Fed's Beige Book report said growth had slowed, largely due to supply bottlenecks and labor shortages. Corporate updates this week confirmed pandemic-related disruptions are hurting many businesses.

Among Dow stocks Wednesday, Nike was down 1.2 percent, Caterpillar slipped by 0.7 percent, and American Express was off 0.5 percent. Among megacaps, Apple declined 1.0 percent, and Facebook was off 0.6 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.01 to US$72.65 while spot gold fell US$4.40 to US$1,789.53. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield fell 3 basis points at 1.96 percent and the 10-year note yield fell 3 basis points to 1.34 percent.


Risk aversion ahead of the European Central Bank policy meeting and growth worries over the Delta variant hurt equities Wednesday. The Europe-wide STOXX 600 fell 1.1 percent, the German DAX lost 1.5 percent, the French CAC slipped 0.9 percent, and the UK FTSE-100 was down 0.8 percent.

Markets generally expect some slowing in ECB asset purchases to be announced on Thursday, though uncertainty increased with unusual conflicting public comments just ahead of Thursday's meeting. On the hawkish side, Austrian central banker Robert Holzmann again warned that policy may need to be normalized sooner than expected. On the other hand, Bostjan Vasle, the Slovenian central banker, said policy needs to stay loose to counter new waves of Covid-19. Separately, Bank of England officials spoke of the need for tighter UK policy, and St. Louis Federal Reserve President James Bullard repeated his view that the Fed should taper soon, despite a surprising slowing in US job growth.

Among sectors, lagging were autos & parts, real estate, and industrials. Holding up best were utilities, retail, and telecom. Among companies in focus, Salvatore Ferragamo, the luxury clothing group, rose 5.9 percent after raising its guidance. Smiths Group gained 3.1 percent after divesting its Smiths Medical unit.

Asia Pacific

Growth fears weakened most Asian equities markets Wednesday with the exception of Japan, where recent gains continued after Prime Minister Yoshihide Suga's unexpected resignation amid sliding public support for his administration's response to the pandemic.

Worries about slowing global growth and domestic regulatory crackdowns undercut Chinese markets, with the CSI 300 off 0.4 percent and the Shanghai composite unchanged. Hong Kong's Hang Seng eased 0.1 percent. Cyclical/value stocks were hurt by growth worries while risk sentiment generally suffered from ongoing concern over regulatory moves, plus the latest plunge in cryptocurrencies.

Regulatory moves by South Korean authorities against Korean tech giants weakened Korean markets with the KOSPI down 0.8 percent. Regulators banned certain investment recommendations by Naver, which fell 8 percent, and by Kakao, which dropped 10 percent. Separately, Taiwan's benchmark Taiex slipped 0.9 percent on coronavirus worries and declining Chinese markets.

Hopes for new stimulus measures with new political leadership continued to lift Japanese markets. The Nikkei gained 0.9 percent and the broader Topix rose 0.8 percent. Stronger-than-expected Japanese GDP figures for the April-June quarter bolstered risk appetite, along with the view that new cases of Covid-19 may be peaking as vaccination rates improve.

Negative Covid-19 news and focus on lockdowns depressed Australian equities with the All Ordinaries down 0.2 percent. Most sectors weakened, led by materials, with precious metals off sharply. Real estate and consumer staples also lagged. Holding up best were financials and industrials. Among companies in focus, Macquarie, the big bank, rose 4.7 percent after raising its guidance.

In economic news, Japanese gross domestic product rose a real 0.5 percent on quarter, or an annualized 1.9 percent, in the second quarter, revised up from the initial estimate of 0.3 percent growth, or 1.3 percent on an annualized basis. Capital investment was stronger than initially estimated last month, offsetting a larger drawdown in private inventories and weaker public investment. The revised GDP figures came in firmer than the median economist forecast of a 0.4 percent increase, or an annualized 1.6 annualized.

Looking ahead*

In Asia/Pacific, figures are due on Chinese CPI and PPI. In Europe, the following are scheduled: ECB policy announcement and Germany merchandise trade figures. In North America, the US jobless claims report is on tap.

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