Daily market review

US narrowly mixed; Europe better, Asia steadies after Monday selloff

United States

Dip-buying helped equities recover early Tuesday but the rally faltered in the face of the unresolved China Evergrande situation and caution before the Federal Reserve policy announcement due Wednesday. The Dow Jones industrial average and S&P 500 both eased 0.1 percent, but the NASDAQ firmed 0.2 percent, all well down from midday highs.

Buying was limited before the Fed announcement Wednesday, along with lack of visibility over proposed US infrastructure spending and the approaching US debt ceiling. Growth stocks outperformed, paced by technology and health care, while a rebound in oil prices after Monday's flight from risk helped energy stocks outperform. Health care advanced with biotechs leading, including vaccine maker Moderna, up 2.5 percent.

Uncertainty flowing from China's slowdown and the China Evergrande situation weighed most on cyclical/value shares, including industrials and materials. General Electric slipped 3.0 percent and Alcoa dropped 5.9 percent. US casino operators Wynn, down 4.1 percent, and Las Vegas Sands, off 5.6 percent, were hit by their exposure to China.

Among companies in focus, Disney fell 4.2 percent after warning that the Delta variant is causing production delays and after making cautious comments on subscriptions to its online streaming service. Lennar, the builder, ended down 0.5 percent after warning on supply constraints. On the positive side, Uber jumped 11 percent after boosting its earnings guidance. Meanwhile, Autozone, the parts retailer, rose 3.7 percent after better than expected sales.

In US economic news, housing starts rose 3.9 percent to a higher-than-expected annual rate of 1.615 million and permits advanced 6.0 percent on the month to 1.728 million, beating Econoday's consensus expectation of 1.610 million.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 19 cents to US$74.54 while spot gold rose US$10.92 to US$1,1775.17. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield was flat at 1.85 percent and the 10-year note yield rose 1 basis point to 1.32 percent.

Europe

Equities rebounded Tuesday after Monday's flight from risk as investors appeared to doubt the China Evergrande affair would be as bad as feared. The Europe-wide STOXX 600 rose 1.0 percent, the German DAX gained 1.4 percent, the French CAC rose 1.5 percent, and the UK FTSE-100 gained 1.1 percent.

Among sectors, travel & leisure led the winners, with travel stocks rallying on news the US would relax restrictions on vaccinated visitors from many European and Asian countries. Sports betting company Entain jumped 18 percent on a takeover offer from DraftKings, the US fantasy sports betting operator.

Other outperformers included oil & gas, plus miners, with oil and other commodity prices rebounding after Monday's rout. Semiconductors led technology higher with Canadian chipmaker Alphawave up 19 percent after raising its earnings guidance.

On the downside, media lagged on weakness in Vivendi, down 19 percent while its spinoff Universal Music Group rallied 36 percent on its first day of trading. Other lagging sectors included retail, telecom, autos & parts, utilities, and industrials.

Among companies in focus, Royal Dutch Shell rose 3.4 percent after agreeing to sell its rights in the US Permian Basin to ConocoPhilips, which gained 3.5 percent. On the downside, Kingfisher, the UK DIY home products retailer, slipped 4.9 percent despite blowout sales results.

Asia Pacific

Asian equities recovered a bit Tuesday but uncertainty over the fate of China Evergrande remained high, and trading was limited as mainland China remained on holiday, along with Taiwan and Korea. Those markets return Wednesday while Hong Kong will be on holiday.

Bargain-hunting in beaten-up property shares helped the Hong Kong market recover Tuesday while tech giants weakened again. The Hang Seng rose 0.5 percent, but many investors were sidelined waiting to see what would happen with China Evergrande's large dollar debt payment due Thursday, and how Chinese authorities will manage the unfolding financial crisis. China Evergrande was off a modest 0.4 percent after days of steep declines.

Japan's markets caught up on the region's sharp losses after being on holiday Monday. The Nikkei 225 lost 2.2 percent and the wider Topix index fell 1.7 percent on flight from risk triggered by the China Evergrande affair, though bargain-hunters came in late to limit losses. Most sectors ended lower, paced by a big drop in iron & steel and in machinery stocks, along with shipping, warehousing, information & communications, and banks. Airlines and trains managed gains on reopening hopes propelled by lower Covid-19 case counts in Tokyo and news the US will allow entry to fully vaccinated Japanese travelers.

Australian markets recovered with support from a rebound in commodities prices. Australia's All Ordinaries rose 0.3 percent. Most sectors gained, led by energy stocks on a recovery in oil prices. Consumer discretionary gained on a better showing for travel and gaming stocks. Financials lagged as banks and fund managers sold off.

Indian markets bounced back late on bargain-hunting in hard-hit commodities and banking stocks. The BSE Sensex rose 0.9 percent and the Nifty was up 1.0 percent. Bajaj Finance, the financial services firm, rose 5.1 percent, and Tata Steel, up 3.5 percent, were among the day's top performers.

Looking ahead*

In Asia/Pacific, no major releases are due. In Europe, the EC consumer confidence flash report is scheduled. In North America, US existing home sales are on tap. The big event will be the Federal Reserve policy announcement and press conference.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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