Daily market review

United States

US equity indexes recovered from midday lows Wednesday but most sectors remained weaker and defensive plays outperformed, including health care and consumer staples. The Dow Jones industrial average rose 0.3 percent, the S&P 500 gained 0.4 percent, and the NASDAQ firmed 0.1 percent.

Stocks weakened in early going on Ukraine effects and hawkish Federal Reserve comments, including a call from St. Louis Fed President James Bullard, the Fed's uber-hawk, for faster rate increases to place the federal funds rate at 3.5 percent by year end.

Pharma and managed care stocks led health care higher as they are seen relatively immune to fallout from the Ukraine crisis and tighter central bank policy. Grocery stores, food, and health & personal care outperformed among consumer staples, another defensive play, wth Costco up 4.0 percent after reporting robust March sales.

On the downside, consumer discretionary and travel & leisure stocks suffered, including autos, restaurants, cruise lines, and airlines. Ford fell 2.8 percent after an analyst downgrade.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 66 cents US$101.24 while spot gold rose US$5.46 to US$1,931.47. The US dollar rose vs. major currencies. The US Treasury 30-year bond yield rose 5 basis points to 2.67 percent, and the 10-year note yield rose 5 basis points to 2.65 percent.


Rising bond yields and Ukraine worries weighed on equities. The Europe-wide STOXX 600 eased 0.2 percent, the German DAX and UK FTSE both lost 0.5 percent, and the French CAC slipped 0.6 percent.

Bond yields remained under upward pressure after ECB policy council minutes showed increasing readiness to normalize policy, alongside similar views at the Federal Reserve. Among sectors, technology, insurance, and energy stocks lagged with energy giving back some recent gains.

On the positive side, health care stocks outperformed. Among pharma stocks, Sanofi gained 1.6 percent after regulators approved its asthma medicine; Abionyx Pharma rose 2.5 percent on positive clinical trial results.

Asia Pacific

Carryover from losses on Wall Street amid concerns over a hawkish Federal Reserve hurt Asia-Pacific equities with technology and other growth stocks leading the declines.

Mainland China stocks sagged but recovered from the day's lows after a new government pledge to support the economy through monetary easing in the face of new disruptions from Covid restrictions. Stocks were also supported by news that the People's Bank of China would set up a new fund to address financial stability concerns. Among sectors, telecom and real estate lagged while utilities and energy fared best. China's CSI 300 declined 1.3 percent and the Shanghai index lost 1.4 percent. Hong Kong's Hang Seng slipped 1.2 percent.

Japanese equities tracked the selloff in US markets with growth stocks weakest. Japan's Nikkei 225 lost 1.7 percent and the TOPIX fell 1.6 percent. Among sectors, electric appliances, services, real estate, and miners lagged. Among companies in focus, Toyota fell 1.0 percent after lowering its sales outlook for North America due to supply chain disruptions.

The South Korean Kospi declined 1.4 percent and the Taiwan Taiex dropped 2.0 percent with technology shares under pressure. In Seoul, Samsung, the chipmaking giant, fell 0.7 percent despite very positive earnings guidance amid surging chip demand. The Indian BSE Sensex lost 1.0 percent.

Australian equities slipped as investors raised expectations for tightening from the Fed as well as the Reserve Bank of Australia. Many analysts moved forward RBA rate increases to the June meeting from August after Tuesday's policy statement. The All Ordinaries index declined 0.7 percent. Technology and consumer discretionary shares lagged the most while defensives including utilities, consumer staples, and real estate investment trusts managed gains.

Looking ahead*

In Asia/Pacific, the Reserve Bank of India policy announcement is due, plus Taiwan external trade and Taiwan's CPI. In Europe, the Italian retail sales release is on the schedule. In North America, the Canadian labour force survey and US wholesale trade figures are on tap.

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