Daily market review

United States

US equities ended lower Wednesday with value stocks leading the decline as risk appetite receded. The Dow Jones industrial average fell 0.6 percent while the S&P 500 and NASDAQ both slipped 0.3 percent.

Markets were on the defensive after recent gains, amid uncertainty over the impact of rising prices and supply disruptions, and caution before the announcement expected within days from President Biden on his choice for Federal Reserve chair, with even odds given on Fed Chair Jerome Powell and on Fed Governor Lael Brainard.

Financials slipped as yields retreated, with big investment banks like Goldman Sachs down 2.9 percent, and Morgan Stanley off 3.0 percent. Energy stocks were under pressure as oil prices fell amid talk of the US tapping its petroleum reserve. Machinery, industrial metals, software, and chain stores were among the worst performers.

On the positive side, a few big cap stocks rose, including Amazon, up 0.2 percent, and Tesla, up 3.3 percent, to boost consumer discretionary. Pharma held up too, with Pfizer up 2.6 percent and Moderna up 3.4 percent.

Retailer earnings remained in focus. Target dropped 4.8 percent despite beating earnings expectations, as it said it is prepared to absorb some rising costs to hold down consumer prices. Walmart was down 0.8 percent Wednesday, extending its drop Tuesday, when it reported similar results.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.85 to US$80.64 while spot gold rose US$7.33 to US$1,867.27. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond fell 5 basis points to 1.98 percent, and the 10-year note fell 5 basis points to 1.59 percent.


Equities were narrowly mixed with positive company updates weighing against worrisome Covid-19 news and inflation fears. The Europe-wide STOXX 600 firmed 0.1 percent, the German DAX was flat, the French CAC gained 0.1 percent, and the UK FTSE 100 declined 0.5 percent.

The threat of a fourth wave of Covid cases and the prospect of tighter restrictions weighed on risk appetite and raised concern about another slowdown in Europe's recovery. Markets remained focused on inflation worries and an uptick in fuel prices after Germany delayed certifying the Nord Stream 2 natural gas pipeline.

On the positive side, rising interest rates boosted UK banks. Tech got a lift from Sage Group, the software business, up 10 percent on strong quarterly results. Siemens Healthineers rose 5.5 percent after raising its earnings and revenue guidance. Glencore gained 2.4 percent to lift mining stocks after agreeing to sell its copper mine in Queensland, Australia.

On the downside, Evolution AB, the Swedish gaming company, dropped 5.0 percent to dampen travel & leisure stocks on reports it may be doing business in countries restricted under US sanctions. Oil & gas shares lagged on weakness in oil prices.

Asia Pacific

Asian equities were mixed with a negative bias after strong US economic data lifted the dollar and added to concern about Federal Reserve rate increases.

Chinese were mixed as a positive view of the US-China summit provided support while concern about China's property sector undercut risk appetite. China's new energy sector perked up after a US court reversed a Trump administration imposition of tariffs on imported solar panels. China's CSI 300 index firmed 0.1 percent, and the Shanghai composite rose 0.4 percent. Among sectors, materials and industrials outperformed while consumer staples and financials lagged.

Hong Kong's Hang Seng index declined 0.3 percent with property and bank stocks under pressure, and big tech stocks weaker on caution ahead of earnings reports due this week. Health care held up best.

Japan's Nikkei 225 slipped 0.4 percent and the Topix declined 0.6 percent, with most sectors lower on profit-taking following recent gains. The weaker yen weighed on some sectors as it raised concern over rising costs for imported materials. Weakest sectors were agriculture, warehousing, air transportation, services, plus banks and autos.

South Korea's KOSPI lost 1.2 percent to underperform the region as Korea's Covid situation worsened. Taiwan's Taiex benchmark rose 0.4 percent.

Australia's All Ordinaries index slipped 0.6 percent as a bearish update from Commonwealth Bank of Australia depressed bank stocks, while most other sectors rose. CBA was off 8.1 percent after warning of declining interest margins, a problem for the highly-valued stock. Consumer discretionary, tech, and biotechs outperformed. Materials lagged and energy stocks were mostly steady.

Looking ahead*

In Asia/Pacific, no major reports are scheduled. In Europe, the Swiss merchandise trade report is due. In North America, US jobless claims, Philadelphia Fed manufacturing and US leading indicators reports are on tap.

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