Daily market review

US soft, Europe retreats on inflation worry; Asia mixed

United States

Equities seesawed to end lower Tuesday as rising oil prices and bond yields pushed the market down from last week's highs. Despite waves of selling pressure, the major averages recovered from the day's worst levels as buyers repeatedly appeared at the lows. The Dow Jones industrial average lost 0.7 percent, the S&P 500 declined 0.6 percent, and the NASDAQ slipped 0.4 percent.

Equities suffered as oil prices spiked after the European Union announced a partial ban on Russian oil and after another scary inflation reading from the Eurozone pushed bond yields higher. Last week's speculation that the Federal Reserve might pause its rate hikes in September gave way to renewed worry that officials will press ahead with a series of aggressive rate moves. Sellers reacted to Fed Governor Chris Waller's comment Monday that he favored 50 basis point rate hikes until inflation starts to ease.

Among sectors, consumer discretionary and communication services outperformed with a boost from Amazon, up 4.4 percent, and Alphabet, up 1.1 percent after the megacaps announced stock splits. Tesla gave up its gains to end down 0.2 percent after announcing its split. Lagging sectors included health care, real estate, materials, industrials, and energy, as oil prices retraced early steep gains.

Among Dow stocks, Salesforce, down 2.9 percent, Chevron, down 2.0 percent, and UnitedHealth, down 2.0 percent, weighed on the average. Johnson & Johnson was another laggard, down 0.9 percent, along with Honeywell, down 1.4 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.17 to US$122.84 while spot gold fell US$19.15 to US$1,836.08. The US dollar rose vs. major currencies. The US Treasury 30-year bond yield rose 12 basis points at 3.10 percent, and the 10-year note yield jumped 13 basis points to 2.88 percent.

Europe

Equities slipped Tuesday on inflation worries and rising oil prices in response to Europe's curb on Russian oil imports. The Europe-wide STOXX lost 0.9 percent, the French CAC fell 1.4 percent, the German DAX slipped 1.3 percent, and the FTSE 100 was up 0.1 percent.

Equities gave back Monday's gains as bond yields rose on news that Eurozone harmonized consumer prices jumped to a record 8.1 percent on year in May from 7.5 percent in April, above expectations for 7.7 percent. The HICP figures added to pressure on the European Central Bank to raise rates by 50 basis points next week, in contrast with latest ECB comments suggesting a more cautious 25 basis point move.

The FTSE 100 outperformed amid strength in Unilever, up 6.7 percent, on news that activist investor Nelson Peltz will join the firm's board and had taken a 1.5 percent stake. Rising oil prices lifted BP, up 0.6 percent, and Shell, up 1.3 percent. On the downside for UK stocks, B&M, the retailer, fell 15 percent after a profits warning.

Among sectors, personal & household outperformed on the Unilever move. Energy advanced on the oil price rise. Travel & leisure lagged, including airlines and others most exposed to rising fuel prices. Consumer discretionary stocks were also under pressure as inflation is expected to eat into consumer spending on non-essentials. Other weak sectors included technology, industrials, retail, construction & materials, and financial services.

Asia Pacific

Asian equities were mixed with China outperforming on better economic data and reopening hopes. Japan and Australia gave back some recent gains ahead of key US data reports, including jobs data due on Friday.

Chinese markets got a lift as Beijing and Shanghai eased some anti-Covid restrictions, and from reports suggesting better supply chain conditions. In economic data, China's official CFLP manufacturing PMI topped expectations at 49.6 in May, up from 47.4 in April, indicating an easing pace of contraction. China's CSI 300 index jumped 1.6 percent and the Shanghai index rose 1.2 percent. Hong Kong's Hang Seng rose 1.4 percent, with Foxconn, the tech hardware maker, up 4.7 percent after raising its guidance and saying supply chain problems were limited.

Taiwan's Taiex rose 1.2 percent and South Korea's KOSPI firmed 0.6 percent with support from the better showing in Chinese markets. Indian equities declined after three days of gains with the BSE Sensex down 0.6 percent.

Japanese equities edged down amid profit-taking after Monday's gains with the Nikkei 225 off 0.3 percent and the TOPIX down 0.5 percent. Markets were cautious as the market awaits key US data reports this week. Investors are watching for signs of a US slowdown in response to higher interest rates and Ukraine effects. Meanwhile, Japanese economic data came in mixed, with industrial production weaker than expected while retail sales and employment readings beat expectations.

Australia's All Ordinaries index declined 0.9 percent as technology and other shares that outperformed on Monday fell back. A selloff in bank stocks also weighed on the market after regulators warned that borrowers would be stressed by rising interest rates.

Looking ahead*

In Asia/Pacific, reports are scheduled on South Korea external trade, Taiwan PMI manufacturing, Japan PMI manufacturing, China PMI manufacturing, India PMI manufacturing, and Australian GDP. In Europe, German retail sales, Swiss PMI, and PMI manufacturing final figures from France, Germany, Eurozone, and UK are due for release. In North America, the Bank of Canada policy announcement plus US data reports on ISM manufacturing, construction spending, and job openings are on tap.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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