Daily market review

United States

Equities weakened Wednesday as the rally that propelled the market higher since mid-month lost steam as oil prices surged again and investors fretted over much higher interest rates. The Dow Jones industrial average and the NASDAQ lost 1.3 percent while the S&P 500 fell 1.2 percent.

After recent Federal Reserve comments, markets are fully pricing in two 50 basis point US rate increases at the Fed's May and June meetings, even as US Treasury yields retreated from recent highs Wednesday.

Risk appetite was hurt by news suggesting no change in the Ukraine situation, with ongoing risk of wider war in Europe, and prolonged supply disruptions. Weaker-than-expected US home sales figures, with the annual sales rate at 772,00 vs. expectations for 810,000, reflecting the impact of rising mortgage rates and consumer prices, added to the view that the economy is facing much slower growth and weaker profits. Rising oil prices helped energy stocks outperform, but undercut risk appetite elsewhere.

Defensive stock sectors outperformed while lagging were technology, health care, financials, communications services, and consumer discretionary stocks. Homebuilders suffered from the poor home sales figures, with Lennar off 3.9 percent, and KB Homes down 4.6 percent. Banks gave back some of the recent strength as bond yields retreated.

Megacaps suffered, with Google off 1.3 percent, and Netflix down 2.2 percent. Among companies in focus, Adobe fell 9.3 percent on poor earnings, and Okta, the digital authentication firm, fell 11 percent after warning that many of its clients had been hacked.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil jumped US$6.15 to US$121.49 while spot gold rose US$24.45 to US$1,946.54. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield dropped 11 basis points to 2.48 percent and the 10-year note yield fell 10 basis points to 2.29 percent.


Equities fell Wednesday with Ukraine worries, supply chain disruption and elevated commodities prices in focus. The Europe-wide STOXX 600 declined 1.0 percent, the German DAX lost 1.3 percent, the French CAC fell 1.2 percent and the UK FTSE 100 eased 0.2 percent.

Expectations for more US and EU sanctions on Russia and a stalemate on the ground in Ukraine dampened sentiment, along with more hawkish comments from Federal Reserve officials who continue to stress the inflationary aspects of rising commodities prices as opposed to demand destruction. Another upside surprise in UK February inflation figures, with consumer prices up 6.2 percent from a year earlier, added to the bearish narrative.

Among sectors, worst were banks, real estate, and utilities, while rising prices for oil and other commodities boosted energy and basic resources stocks, and helped UK markets outperform.

Among stocks in focus, BP rose 1.5 percent after an upgrade at Morgan Stanley while ENI gained 0.9 percent despite a Morgan Stanley downgrade. Saga, the elder care company, fell 8.4 percent after disappointing quarterly results. RWS, the language translation service, fell 18 percent on poor guidance.

Asia Pacific

Asia-Pacific equities rose for a second day Wednesday in response to expectations for new Chinese and Japanese stimulus and another large Chinese share buyback.

Chinese markets got a boost after a second large tech company, Xiaomi, announced a big share buyback, after a similar announcement Tuesday from Alibaba. Investors anticipate other big tech companies will follow suit. The CSI 300 index rose 0.5 percent and the Shanghai index rose 0.3 percent. Airline stock weakness capped gains with China Eastern Airlines down 2.8 percent after the crash of one of its flights killed its 132 passengers. The Hong Kong Hang Seng index outperformed with a rise of 1.2 percent on tech stock strength.

A strong close on Wall Street lifted Japanese equities, along with expectations for additional Japanese fiscal stimulus. Japan's Nikkei 225 rose 3.0 percent and the wider TOPIX gained 2.3 percent with growth stocks leading. Exporters got a lift from more yen weakness, including Toyota, up 4.0 percent.

The Taiwan Taiex rose 1.0 percent and the South Korean KOSPI rose 0.9 percent as both tracked regional tech stock gains. The Indian BSE Sensex declined 0.5 percent.

Australian equities improved in quiet trading with technology outperforming and banks getting a lift as bond yields continued higher. The All Ordinaries index rose 0.6 percent.

Looking ahead*

In Asia/Pacific, Bank of Japan minutes and Japanese PMI composite flash figures are scheduled. In Europe, reports are due on French business climate, plus PMI composite flash figures for France, Germany, Eurozone, and UK, the UK CBI Distributive Trades report, and the SNB policy announcement. In North America, US durable goods orders, US jobless claims, US current account, US PMI composite flash, and Kansas City Fed manufacturing reports are on tap.

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