Daily market review

United States

Equities were mostly weaker Thursday amid talk of slowing growth while Federal Reserve officials continued to discuss tapering asset purchases this year. The Dow Jones industrial average declined 0.4 percent, the S&P 500 was off 0.5 percent, and the NASDAQ eased 0.3 percent. Financials, energy, and materials prices managed gains while real estate, health care, and consumer staples lagged.

Markets contended with mixed signals. On the positive side, there was another better-than-expected showing from US jobless claims data. On the negative side, focus remained on the impact of the Delta variant on the global growth outlook, more Chinese regulatory steps that hurt big tech stocks, and continuing comments from Fed officials promoting the staying power of the US economy.

Fed Governor Michelle Bowman echoed other officials Thursday when she said she remained encouraged by the recovery. She said it was important "not to take too much signal" from last week's big miss on non-farm payrolls. She said if data come in as expected, it will be appropriate to begin scaling back asset purchases this year.

In US economic data, jobless claims declined more than expected in the Sept. 4 week, when they fell 35,000 to a new pandemic low of 310,000, far below Econoday's lowest forecast of 335,000. The weekly decrease was the largest since the June 26 week.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.36 to US$71.29 while spot gold rose US$5.09 to US$1,794.62. The US dollar declined vs. most major currencies. The US Treasury 30-year bond yield fell 7 basis points at 1.89 percent and the 10-year note yield fell 4 basis points to 1.30 percent.


Equities recovered from initial weakness to end narrowly mixed after the European Central Bank signaled a patient stance on policy, generally in line with expectations. Risk assets saw moderate downward pressure the last few days on worries the ECB might be more hawkish. The Europe-wide STOXX 600 eased 0.1 percent, the German DAX rose 0.1 percent, the French CAC gained 0.2 percent, and the UK FTSE-100 dropped 1.0 percent.

UK equities lagged as exporters were hurt by the rising pound. An overnight selloff in commodities prices hit heavily weighted UK basic resources and energy stocks on concern over slowing growth and weaker Chinese demand.

Among sectors, best were real estate, industrials, financial services, chemicals, and construction. Lagging were health care, basic resources, oil & gas, telecom, and technology.

In macroeconomic policy news, the ECB said it will slow the pace of asset purchases in the third quarter, as it presented upgraded forecasts for the next year, but the bank did not say what will replace its emergency purchase program which is due to end next year. The slowdown comes as the bank upgraded its forecasts for both output and inflation this year. GDP is projected to grow by 5.0% in 2021, up from the 4.6% pace predicted in June, while the economy is expected to expand by 4.6% next year, revised down from previous forecast of 4.7%.

Asia Pacific

Worries about the global recovery, Wednesday's weak showing on Wall Street and new Chinese regulatory moves hurt Asian equities markets Thursday.

Chinese markets were mixed, with the CSI 300 flat and the Shanghai composite up 0.5 percent. Hong Kong's Hang Seng dropped 2.3 percent with the internet and tech sector off sharply after Chinese authorities reportedly summoned executives from Tencent (down 8.5 percent) and Netease (down 11 percent) in connection with new limits on online gaming and other curbs on their businesses.

Regulatory worries hit South Korean tech giants for a second day along with rising Covid-19 cases to send the KOSPI down 1.5 percent. Kakao, the internet giant, fell 7.2 percent, and Naver, the messaging leader, lost 2.6 percent as Korea authorities appeared ready to rein in the internet companies in an echo of China's crackdown. Separately, Taiwan's benchmark Taiex firmed 0.2 percent.

US and Hong Kong tech stock weakness carried over to Japanese markets with profit-taking pressure after recent advances. The Nikkei declined 0.6 percent and the broader Topix fell 0.7 percent. Sentiment remains favorable on hopes for progress on the coronavirus and the prospect of more fiscal stimulus.

The risk-off trade on growth worries drove across the board losses in Australian equities with the All Ordinaries off a steep 1.9 percent. Tech stocks lagged the most on a selloff in buy-now-pay-later stocks. Concern about Chinese demand for commodities drove down metals prices to hurt miners and materials stocks. Financials were hit, along with consumer discretionary stocks on worries about the strength of the recovery, even as Federal Reserve officials continue to discuss tapering.

Looking ahead*

In Asia/Pacific, Indian industrial production figures are due for release. In Europe, the following are scheduled: German CPI, UK industrial production, UK merchandise trade, UK monthly GDP, French industrial production, Italian industrial production. In North America, the US PPI, US wholesale inventories, and Canadian labour force survey reports are on tap.

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