Daily market review

United States

A selloff in the FANMAG complex and tech/growth stocks led equities down Monday as yields ticked up again. The Dow Jones industrial average slipped by 0.9 percent, the S&P 500 lost 1.3 percent, and the NASDAQ lost 2.1 percent.

Another move up in crude oil and other fuel prices lifted energy stocks but added to inflation fears. Facebook, down 4.9 percent, led the heavily weighted FANMAG group down as it faced regulatory worries and negative publicity after a whistleblower complaint. Tech stocks hit hardest included chipmakers and software. Tough-sounding comments on US-China trade from US Trade Representative Katherine Tai attracted attention too.

Other laggards included biotech, with vaccine makers under pressure, plus cruise lines and gaming stocks. Holding up best were energy, precious metals, steel, airlines, banks, and apparel.

Among companies in focus, Southwest Airlines rose 1.3 percent on an analyst upgrade. General Motors gained 1.6 percent on news an activist investor had taken a stake to endorse the automaker's EV plans.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil jumped US$2.17 to US$81.26 while spot gold rose US$8.28 to US$1,768.44. The US dollar fell vs. most major currencies. The US Treasury 30-year bond yield rose 2 basis points to 2.05 percent and the 10-year note yield rose by 2 basis points to 1.49 percent.


Equities edged down with sentiment dampened by rising bond yields and worries over slowing Chinese growth and rising inflation. The Europe-wide STOXX 600 fell 0.5 percent, the German DAX lost 0.8 percent, the French CAC was down 0.6 percent, and the UK FTSE 100 was down 0.2 percent.

Technology shares were depressed by another uptick in bond yields spurred by inflation concerns, with high European natural gas and electricity prices in focus. China Evergrande worries and the prospect of a further slowing in Chinese growth spurred contagion worries, and hurt luxury goods retailers as they have heavy China exposure. Bank stocks also lagged, along with travel & leisure, industrials, banks, media, real estate, and autos & parts. Holding up best were oil & gas, basic resources, telecom, and health care.

Among companies in focus, HSBC declined 1.1 percent on fallout from its exposure to China Evergrande and other developers. Deutsche Bank slipped 1.0 percent on compliance concerns. Among automakers, VW declined 1.8 percent on fallout from chip shortages and its warning that supply-chain trouble will hurt second half earnings. William Morrison, the retailer, fell 3.7 percent as the market reacted to its acquisition by private equity. On the positive side, another UK retailer, Tesco, rose 1.3 percent on a report it will announce share buybacks.

Asia Pacific

Asian markets were mixed with Hong Kong and Japan off on worries over China Evergrande while Australia rebounded on the reopening trade. Holiday closures in mainland China and South Korea limited regional activity.

Hong Kong's Hang Seng index fell 2.2 percent after China Evergrande shares were suspended pending news, reportedly in connection with a possible transaction involving the company's property unit. Uncertainty continued over an array of debt payments from the beleaguered property developer. Taiwan's Taiex index lost 1.0 percent in sympathy with weakness in Hong Kong.

Risk-off sentiment flowing from Evergrande and the prospect of a further Chinese economic slowdown hurt Japanese equities with the Nikkei 225 index down 1.1 percent and the broader Topix down 0.6 percent. Semiconductor shares led tech lower. On the positive side, retailers got a boost after Japan removed its Covid-19 state of emergency last week.

Australian shares bounced back with the All Ordinaries up 1.2 percent. Reopening stocks led winners on news New South Wales Treasurer Dominic Perrottet is set to become the next premier of the state. Perrottet is regarded as a supporter of a less restrictive approach to dealing with the pandemic. Most sectors rose with banks, airlines and travel operators leading, along with materials.

Looking ahead*

In Asia/Pacific, the following are due for release: South Korean CPI, Japanese PMI composite final, Australian goods & services trade, Singapore PMI, Indian PMI composite, and the Reserve Bank of Australia policy announcement. In Europe, reports are scheduled on: French industrial production, Eurozone PPI and PMI composite final reports from France, Germany, Eurozone and the UK. In North America, Canadian merchandise trade and US international trade in goods & services are on tap.

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