Significant Uncertainty Remains About Timing and Strength of Recovery
Market Reviews • 18th Jun, 20
US and European equity futures dropped, and Treasuries advanced, as optimism over policy stimulus gave way to recovery concerns caused by rising infection numbers in some locations. Asian stocks were mostly lower in thin trading, with modest declines in Tokyo, Seoul and Hong Kong. Australian equities underperformed and Australia’s Dollar fell after the country reported a much bigger decline in employment than forecast for May. Crude oil prices retreated. S&P 500 futures fell after the Index closed down on Wednesday.
The Yuan ticked up and Chinese shares pared losses after China’s Central Bank governor said he wants the flow of credit in the economy to increase to at least 30 trillion Yuan ($4.20 trillion) this year.
On the virus front, Texas reported an 11% surge in hospitalisations, the biggest 24-hour increase since 4thJune. Brazil registered a record 34,918 new infections, while China is escalating containment measures in Beijing including cancelling flights.
Thin volume in US equities on Wednesday exacerbated swings, including a drop that began around the time newspapers published summaries of John Bolton’s critical book about President Donald Trump.
These are some key events coming up:
- Policy decisions from the Bank of England and the Swiss National Bank are due on Thursday
These are some of the main moves in markets:
Stocks:
- Futures on the S&P 500 retreated 0.70% as of 7.13 am in London. The Index fell 0.40% Wednesday
- Euro Stoxx 50 futures slid 0.90%
- Japan’s Topix Index fell 0.30%
- Hong Kong’s Hang Seng Index fell 0.60%
- South Korea’s Kospi lost 0.50%
- Shanghai Composite was little changed
- MSCI Asia Pacific Index fell 0.90%
Currencies:
- The Yen was at 106.88 per Dollar, up 0.10%
- The offshore Yuan was at 7.0700 per Dollar, up 0.10%
- The Euro bought $1.1250, little changed
Bonds:
- Ten-year US Treasury yields fell about three basis points to 0.71%
- Australia’s 10-year yield fell four basis points to 0.88%
Commodities:
- West Texas Intermediate crude oil retreated 1.20% to $37.51 a barrel
- Gold was at $1,727 an ounce
US Market Wrap
Stocks ended mixed on Wednesday, ending three straight sessions of gains as concerns over rising Covid-19 cases in some US states weighed on positive sentiment that the economy is recovering after being shut down during the pandemic. Trends in infection rates in some US states has been rising since the Memorial Day holiday weekend, and Pantheon Macroeconomics said the number of people in the hospital in the country on Tuesday rose by 3.40%, the biggest increase in over a month. States including Arizona, Florida and Texas reported record numbers of new cases, said Ian Shepherdson, chief economist at Pantheon.
Meanwhile, Federal Reserve Chair Jerome Powell told the House Financial Services Committee during a hearing that "significant uncertainty remains about the timing and strength of the (US) recovery" and cautioned lawmakers that they should not "pull back from the support that it's providing too quickly."
In the only significant economic data, housing starts rebounded in May from a steep drop in April as each state last month began to reopen. Privately owned starts rose 4.30% in May after falling 30% in April. Still, starts in May were down 23% from the year before.
Energy shares led declining sectors, losing almost 3.30% as crude-oil futures fell after the US government data showed domestic supplies rose for the second consecutive week. West Texas Intermediate lost 1.60% to $37.76 a barrel while international benchmark slid 0.90% to $40.58 a barrel. Exxon Mobil (XOM) slid 3.30%, and Chevron (CVX) shed 2.70%. Diamondback Energy (FANG) dropped 6.80%.
Financials retreated slid about 1.40%, pushed lower by JPMorgan Chase's (JPM) 2.50% slide. Goldman Sachs Group (GS) and American Express (AXP) each shed 1.60%.
Materials shed about 0.80%, pressured by Dow's (DOW) 2.60% decline. Mosaic (MOS) lost 2.40%, and Nucor (NUE) slid 1.30%.
Tech shares ended slightly higher. NXP Semiconductors (NXPI) gained 3.10%, and ASML Holding (ASML) added 2.90%. Lam Research (LRCX) tacked on 2.70%.
Oracle (ORCL) lost 5.60% after the software company reported mixed results that drove down revenue in its fiscal fourth quarter.
The Dow Jones Industrial Average ended almost 0.70% lower, and the Standard & Poor's 500 fell nearly 0.40%. The Nasdaq Composite added about 0.20%.