Daily market review

United States

Investors resumed their flight from risk Tuesday as Russia steps up attacks on Ukraine. Equities sank while US Treasuries and other sovereign debt instruments rallied on fears growth will slow due to surging prices for oil and other commodities. The Dow Jones industrial average lost 1.8 percent, the S&P 500 and the NASDAQ both lost 1.6 percent.

Banks and other financials led the selloff as bond yields dropped, with the 10-year note yield down another 11 basis points Tuesday after dropping 13 basis points on Monday. American Express lost 8.5 percent to weigh on the Dow.

Other hardest hit sectors included travel & leisure, especially airlines, in response to spiking oil prices. Highly-valued growth sectors lagged, including technology, plus consumer discretionary stocks, as the market sees earnings down with weaker consumer spending as growth slows.

On the positive side, industrial metals and energy stocks outperformed on rocketing commodities prices. Aerospace & defense and cybersecurity stocks were in demand on the war trade.

Target, the retailer, was a bright spot, up 9.9 percent on an earnings beat and strong guidance, and Hormel Foods rose 4.0 percent on an earnings beat. On the downside, Lucid, the electric vehicles firm, fell 14 percent on a revenues miss and poor guidance.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$4.61 to US$105.60 while spot gold rose US$35.74 to US$1,944.87. The US dollar rose sharply against most major currencies. Yields on the US Treasury 30-year bond fell 6 basis points to 2.11 percent, and the 10-year note dropped 11 basis points at 1.73 percent.


European equities plunged on fallout from the Ukraine crisis with bond yields dropping in a flight to safety despite fears of an inflation shock flowing from surging prices for energy and other commodities. The Europe-wide STOXX 600 dropped 2.4 percent, the German DAX and French CAC both plunged 3.9 percent, and UK FTSE 100 dropped 1.7 percent.

Travel & leisure, banks, and autos & parts led the selloff. Airlines were hit by travel disruptions including the closure of Russian airspace. Banks were hit with market interest rates down as investors pushed back expectations for European Central Bank rate hikes to next year. Autos & parts sold off on supply chain disruptions, rising commodities prices and expectations for weaker demand.

On the positive side, basic resources advanced in step with commodities prices. Health care advanced with a boost from Bayer, the pharma/life sciences conglomerate, up 0.9 percent on an earnings and revenues beat.

Among companies in focus, Atos, the IT consultant, dropped 20 percent on disappointing results and an analyst downgrade. Flutter Entertainment, the bookmaker, fell 12 percent after an earnings miss. Zalando, the ecommerce stock, fell 8 percent on weak guidance.

Asia Pacific

Asia/Pacific equities improved on bargain hunting after recent losses and follow-through from a stronger close for growth stocks Monday on Wall Street.

Hopes for Chinese government stimulus and purchasing manufacturers data supported Chinese stocks with the CSI 300 index and the value-stock heavy Shanghai composite both up 0.8 percent. Among sectors, consumer staples and real estate outperformed. Hong Kong was mixed with the Hang Seng index up 0.2 percent. Among sectors, health care fared best while real estate investment trusts lagged. The Taiwan Taiex rose 1.4 percent on a better showing for technology stocks.

Japan's Nikkei 225 gained 1.2 percent and the Topix up 0.5 percent on read-through from a late recovery Monday in the NASDAQ. Most sectors rose with information & communications, mining, and marine transportation best.

The Australian All Ordinaries index rose 0.9 percent with tech stocks leading the advance, along with telecom, consumer discretionary, and industrials. The Reserve Bank of Australia left policy settings unchanged, as expected, but warned of rising inflation with spiking oil prices.

In economic news, Markit China manufacturing PMI survey's headline index rose from 49.1 in January to 50.4 in February, above the consensus forecast of 49.3 and indicating activity in the sector expanded marginally.

Looking ahead*

In Asia/Pacific, reports on South Korea industrial production, South Korean retail sales, South Korean PMI manufacturing, Indian PMI manufacturing, and Australian GDP are scheduled. In Europe, German unemployment and Eurozone HICP flash reports are due. In North America, a Bank of Canada policy announcement, US motor vehicle sales, US ADP employment, and Fed beige book reports are on tap.

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