Daily market review

US soft as economic worries return; Europe, Asia mixed

United States

Value/cyclical stocks led equities lower Tuesday as the reopening trade faltered amid concern over a Covid-19 outbreak in China's Fujian province, alongside worries over US tax increases proposed by Democrats. The Dow Jones industrial average fell 0.8 percent, the S&P 500 eased 0.6 percent and the NASDAQ declined 0.5 percent.

The weakness came after markets ticked up initially amid relief over US consumer price index figures suggesting inflation moderated in August. But traders took advantage of the move to trim long positions, and selling gathered steam through the day. Among cyclicals, energy, financials, and industrials were hit hardest to reverse Monday's gains, while technology and health care stocks, seen as less sensitive to the business cycle, held up best.

Among sectors, banks dragged down financials as bond yields dropped on recovery worries. Industrials reflected a selloff in transports and machinery. Media stocks weighed on communications services. Energy retreated after recent strength, and materials lagged on declines in metals and chemicals stocks. On the positive side, health care topped the market, along with tech, with support from software and chipmakers.

In US economic news, CPI for August rose 0.3 percent from July and was up 5.3 percent compared to August 2020, close to expectations. However, core CPI – excluding food and energy – rose a small 0.1 percent from the prior month and was 4.0 percent higher than a year ago, below most forecasts. The numbers suggested less pressure on the Federal Reserve to scale back its supportive monetary policies soon.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 3 cents to US$73.59 while spot gold rose US$12.16 to US$1,805.41. The US dollar gained vs. most major currencies but weakened vs. the yen. The US Treasury 30-year bond yield fell 6 basis points at 1.85 percent and the 10-year note yield declined 4 basis points to 1.29 percent.

Europe

Equities were mixed with reopening stocks lagging amid concern over the impact of the Delta variant. The Europe-wide STOXX 600 was flat, the German DAX rose 0.1 percent, the French CAC declined 0.4 percent, and the UK FTSE-100 was off 0.5 percent. UK equities lagged on weakness in heavily weighted commodities stocks.

Among sectors, best were technology and health care, plus autos & parts, retail, and construction & materials. On the downside, basic resources trailed, along with banks, insurance, telecom, personal & household goods, and food & beverages.

Basic resources fell after Barclays cut price targets for miners including BHP, down 2.7 percent, and Rio Tinto, down 2.0 percent. Luxury goods makers suffered from worries about Chinese demand on concern over the Covid outbreak in China's Fujian province. French luxury goods conglomerate LVMH fell 1.6 percent. On the positive side, rising oil prices lifted oil & gas stocks.

Asia Pacific

Asian equities markets were mixed Tuesday with China hit by fallout from the China Evergrande debacle and Covid worries, while Japan outperformed with value stocks leading on recovery hopes.

Chinese markets were hurt by a selloff in property and banking shares after beleaguered property developer China Evergrande (down 12 percent) warned its cash position was worsening. Evergrande's bonds were pricing in a likely default, which raised wider concerns about China's property market. Hong Kong's Hang Seng index declined 1.2 percent, the CSI 300 fell 1.5 percent, and the Shanghai composite lost 1.4 percent. Concern about Covid cases in the Fujian province weighed on risk appetite.

South Korean equities reflected a better showing Monday on Wall Street with the KOSPI up 0.7 percent. Taiwan's benchmark Taiex fell 0.1 percent.

Japanese markets were bolstered by the reopening trade with support from rising vaccination rates, and expectations for fiscal stimulus from the next government. The Nikkei rose 0.7 percent and the broader Topix gained 1.0 percent. Among sectors, shipping, insurance, automakers, oil & coal, and banks outperformed while miners, pharma, and utilities lagged.

Australian equities recovered early losses to end slightly better with the All Ordinaries up 0.2 percent. Risk appetite got a boost late from Reserve Bank of Australia Governor Philip Lowe, who repeated that the RBA is in no rush to raise rates until its inflation objectives are met. Energy, real estate, and materials outperformed while technology, consumer staples, and health care lagged.

Looking ahead*

In Asia/Pacific, Japanese machinery orders, Chinese house prices, Chinese industrial production, Chinese retail sales, and Chinese fixed asset investment figures are due for release. In Europe, UK CPI, UK PPI, French CPI, Italian CPI, and Eurozone industrial production reports are scheduled. In North America, US Empire State manufacturing, US import and export prices, US industrial production, and Canadian CPI reports are on tap.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise.

© 2021 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

Share: