Daily market review

United States

Risk aversion headed into the weekend undercut equities Friday as an early selloff picked up momentum and stocks sagged nearly across the board. The Dow Jones industrial average declined 0.5 percent, and the S&P 500 and the NASDAQ both lost 0.9 percent. The S&P ended at 4,433, below key support at 4,437, after testing that level through the afternoon.

Wall Street trading reflected the selloff in commodities prices that hit mining and materials prices overnight, along with worries over how China's government will manage the collapse of China Evergrande, the huge, highly-leveraged property developer.

US equities reacted badly to a weaker-than-expected reading in US consumer sentiment. Markets also reacted badly to reports suggesting US infrastructure package talks remain stalled and prospects are uncertain for more US fiscal support. A warning from the Biden administration over the US debt ceiling added to negative sentiment.

Among sectors, materials trailed on declines in industrial metals prices. A selloff in semiconductors hit technology shares, while weakness in big internet stocks weighed on communications services. A selloff in machinery stocks hit industrials.

On the positive side, consumer staples outperformed on gains in household products. Health care rose on strength in managed care. Consumer discretionary rose with retail stocks higher. Financials fared best as regional banks advanced.

Among companies in focus, vaccine makers retreated after a panel of expert advisers to the Food and Drug Administration voted against recommending a booster dose of Pfizer's Covid-19 vaccine. Pfizer declined 1.4 percent and Moderna was off 2.5 percent.

In US economic news, the University of Michigan consumer sentiment index posted another soft reading in the preliminary report for September. The index managed a meager 0.7 point rise to 71.0 after the nearly 11 point plunge to 70.3 in August. Most forecasters expected a rebound to 72.0. Although consumers were more optimistic about future conditions (67.1 in September vs. 65.1 in August), current conditions looked gloomier (77.1 vs. 78.5).

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 34 cents to US$75.34 while spot gold fell US$3.17 to US$1,751.95. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield rose 2 basis points at 1.88 percent and the 10-year note yield gained 4 basis points to 1.37 percent.


Losses in miners and basic materials stocks weighed on European equity indexes as commodity prices fell. The Europe-wide STOXX 600 fell 0.9 percent, the German DAX lost 1.0 percent, the French CAC declined 0.8 percent and the UK FTSE-100 was down 0.9 percent.

Among miners, Anglo American plunged 8.1 percent after analyst downgrades. Other miners dropped as concerns about soft Chinese demand depressed iron and other industrial metals prices. Rio Tinto declined 2.3 percent and BHP dipped 5.2 percent in London trading.

On the positive side, travel stocks bounced up on reports the UK is considering easing travel restrictions. Intercontinental Hotels rose 2.2 percent and Air France gained 1.7 percent.

Risk appetite has been hurt by concern about electricity costs and natural gas shortages in Europe. Industrial firms have warned that rising power costs and shortages may dent profits or force factory shutdowns. Yara, the Norwegian fertilizer maker, fell 3.7 percent after slashing ammonia production due to rising natural gas prices.

Among companies in focus, Renault, the French automaker, fell 1.3 percent after announcing layoffs and restructuring. Euronext fell 2.1 percent on news of that BNP Fortis sold its stake in the stock exchange operator.

In economic news, Eurozone inflation accelerated sharply in August. The final report confirmed the jump shown in the flash data and so leaves the annual rate at 3.0 percent, up from 2.2 percent in July and its highest mark since July 2012. Separately, UK retail sales fell 0.9 percent in August, in contrast with expectations for an increase of 0.5 percent, for a fourth consecutive monthly decline.

Asia Pacific

Asian equities were mixed Friday with Chinese markets recouping part of the week's heavy losses, and Japanese markets remaining better bid, while Australia lagged on commodities weakness.

Dip-buying in beaten-up Hong Kong equities lifted the Hang Seng index by 1.0 percent but the index still lost 3.7 percent over the last five days. Leading the uptick were tech and health care, with Meituan, the online retailer, up 3.5 percent. China Evergrande lost another 3.4 percent Friday but other property stocks perked up, including Hang Lung Properties, up 1.7 percent.

Among mainland Chinese indexes, the CSI 300 rose 1.0 percent and the Shanghai composite was up 0.2 percent. Risk appetite got a boost from a large injection of liquidity from the People's Bank of China amid concern over contagion effects from the China Evergrande affair. Consumer staples and health care outperformed while materials and energy lagged, with coal stocks a notable decliner. The CSI 300 remained down 3.0 percent over the last five days, and the government's ongoing regulatory crackdown in tech, health, gaming, and property markets remained a huge overhang for Chinese markets.

South Korean equities edged up with the KOSPI up 0.3 percent as big tech stocks rebounded. Separately, Taiwan's benchmark Taiex was flat.

Japanese markets edged up in quiet trading as asset managers continued to raise exposure to Japan ahead of upcoming elections. The Nikkei gained 0.6 percent and the broader Topix firmed 0.5 percent. Among sectors, semiconductors outperformed, along with marine and land transportation stocks. Lagging were iron & steel, and other metals, as commodity prices slipped.

A selloff in metals and miners on falling metals prices pushed Australia's All Ordinaries down 0.7 percent. Fortescue Metals lost 11 percent, and BHP was down 3.7 percent in Sydney trading. Energy also lagged on weakness in liquified natural gas producers. On the positive side, tech stocks fared best on gains in buy-now-pay-later stocks, including Afterpay, up 3.9 percent.

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