Daily market review

US tumbles steeply with retailers; Europe slides in turn, Asia mostly better

United States

Extending its worst performance since the beginning of the pandemic, the market fell from the start of Wednesday's session and ended at its lows, pulled lower by weakness at US retailers who are suffering from higher costs together with an inflation-hobbled consumer. The Dow lost 3.6 percent, the S&P lost 4.0 percent, and the NASDAQ suffered the most, down 4.7 percent.

Big box discount chain Target fell 24.9 percent after missing first-quarter earnings expectations due to high costs including those for labor and for energy. Home improvement retailer Lowe's fell 5.1 percent after posting a 4 percent drop in first-quarter same-store sales.

Losses swept many other retailers including eyeglass retailer Warby Parker, down 6.1 percent, which got hit with an analyst downgrade. Dow's US consumer services index fell 6.3 percent while the consumer goods index lost 5.6 percent.

In economic data, housing starts were little changed in April at a 1.724 million annualized rate though starts of single-family homes, a key measure to judge the health of the US housing market, fell a steep 7.3 percent to 1.100 million. Total permits fell 3.2 percent to 1.819 million, further confirming a loss of momentum in line with rising US mortgage rates.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.55 to US$109.38 while spot gold rose US$0.91 to US$1,816.07. The US dollar rose vs. major currencies. Demand for Treasuries rose as demand for stocks fell. The US 30-year bond yield fell 13 basis points to 3.05 percent while the 10-year note yield fell 11 basis points to 2.88 percent.

Europe

European stocks faded in line with US shares as the DAX fell 1.3 percent, the CAC fell 1.2 percent, and the FTSE lost 1.1 percent. European markets had closed before Wall Street saw the worst of Wednesday's session.

UK consumer prices took off in April as the cap on domestic fuel bills was raised by more than 50 percent. A 2.5 percent monthly jump was marginally smaller than expected but still enough to lift the annual inflation rate from March's 7.0 percent to 9.0 percent, its highest print in more than 40 years. Producer prices rose 2.3 percent on the month for outputs and offering little hope that CPI inflation will be turning lower anytime soon.

Final data for Eurozone April harmonised prices confirmed a 0.6 percent monthly jump for an annual rate of 7.4 percent, down 1 tenth from the first estimate but unchanged from March. The results should leave what appears to be a clear consensus at the European Central Bank in favor of coming rate hikes. Of note were substantial April jumps in annual Baltic inflation: Estonia 19.1 percent from 14.8 percent, Lithuania 16.6 percent from 15.6 percent, and Latvia 13.1 percent after 11.5 percent.

Spain's Siemens Gamesa jumped 12.6 percent on reports that Siemens Energy AG will offer to buy the remaining stake in the company in a deal that would be valued at more the €3 billion.

Asia Pacific

Reports that Shanghai authorities are allowing the city's financial institutions to resume work further raised expectations that Zero-Covid risks are fading. The Shanghai composite did ease 0.3 percent on Wednesday but other Asian markets mostly rallied including the All Ordinaries, which rose 1.0 percent.

Australia's first-quarter wage price index rose 0.7 percent on the quarter, unchanged from the fourth-quarter rate and up 2.4 percent on the year for only a 1 tenth rise. The results may prove tame enough not to further increase pressure on the Reserve Bank of Australia to raise interest rates. The bank hiked its policy rate by 25 basis points earlier this month.

Japan's first-quarter GDP fell a preliminary 0.2 percent on the quarter for annualized contraction of 1.0 percent, both better than expected. Domestic demand showed some resilience, offset, however, by a surge in imports that pushed down net exports. The Nikkei rose 0.9 percent on the session and the Topix gained 1.0 percent.

Other data from the region included substantial slowing in China's house price index to 0.7 percent growth in April, down from 1.5 percent in March for the eleventh straight decline and the lowest rate of growth since 2015. These results followed a run of weak Chinese data on Monday including 11.1 percent annual contraction in retail sales.

Looking ahead*

New Zealand's producer price report opens Wednesday's data followed by Japanese merchandise trade, Japanese machinery orders, and Australia's labour force survey. Europe will see UK's CBI industrial trends report as well as ECB minutes from the bank's April meeting. US data will include weekly jobless claims, the Philadelphia Fed manufacturing report, existing home sales, and leading indicators while Canada will post its industrial product price index.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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