Daily market review

United States

Recovery fears returned Monday amid concern about the global economy, with rising coronavirus cases in Europe and fading hopes for US fiscal policy action. Reports of a big new bank scandal added to the selloff and market disarray. The Dow Jones industrial index fell 1.8 percent, the S&P 500 declined 1.2 percent, and the NASDAQ eased 0.1 percent.

Reports alleging big global banks allowed extensive money-laundering hit bank stocks, including JP Morgan which fell 3.1 percent. Cyclicals led decliners as recovery expectations were hurt by second-wave worries in Europe, and reports the UK is weighing a new shutdown. Meanwhile, investors saw the US partisan fight over replacing US Supreme Court Justice Ruth Bader Ginsberg as torpedoing any last hopes for a US fiscal stimulus package.

Materials, energy, and financials were hit hardest. Oil prices fell to depress energy stocks, with oilfield services suffering the most. Haliburton fell 8.5 percent, and Schlumberger was off 7.8 percent.

Holding up best were technology, utilities, and consumer staples. Apple managed to rise 3.0 percent. Communications services were bolstered by Netflix, up 3.7 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.40 to US$41.66, while spot gold fell US$39.97 to US$1910.94. The US dollar jumped against major currencies. The US Treasury 30-year bond yield fell 3 basis point to 1.43 percent while the 10-year note yield declined 3 basis points to 0.67 percent.


Worries about renewed coronavirus lockdowns in Europe and reported allegations that some banks accepted suspicious transactions knocked down equities Monday. The Europe-wide STOXX 600 fell 3.2 percent, the German DAX percent dropped 4.4 percent, the French CAC declined 3.7 percent, and the UK FTSE-100 was off 3.4 percent.

Reports of rising virus cases across Europe raised second-wave worries, and reports said UK Prime Minister Boris Johnson was weighing wider lockdowns as health officials warned new action was needed to stem an accelerating outbreak.

Leaked documents from the US Financial Crimes Enforcement Network spoke of $2 trillion in dirty-money transactions, and said HSBC (down 5.3 percent), Standard Chartered (down 5.8 percent), Deutsche Bank (down 8.6 percent), and Barclays (down 5.4 percent) were among the mega-banks that allowed the transactions to occur.

Among sectors, virus worries hit cyclicals the hardest, with travel & leisure, insurers, banks, and autos among the worst off. Holding up better were defensive plays including utilities, health care, and food & beverage.

Among companies in focus, IAG, owner of British Air, fell 12 percent on a report showing the disastrous effects of the closure of passenger links between the US and UK. French automaker Renault fell 7.8 percent on reports the UK will restrict sales of fossil fuel vehicles. Royal Dutch Shell fell 3.2 percent on a report the oil supermajor is scaling back fracking and will shift to greener energy.

Asia Pacific

Japanese markets were closed for a national holiday Monday, with declines posted elsewhere in the region. Hong Kong's Hang Seng index underperformed with a 2.1 percent drop, partly reflecting a sharp sell-off in the shares of HSBC and Standard Chartered, both named in reports over the weekend as among those investigated by the US government for suspicious transactions. The Shanghai Composite index and Australia's All Ordinaries index fell 0.6 percent and 0.7 percent on the day.

The People's Bank of China left its one-year loan prime rate unchanged at 3.85 percent at its monthly review, with the equivalent five-year rate also unchanged at 4.65 percent. The lack of action suggests officials remain comfortable with the degree to which monetary policy is supporting domestic activity. Activity data published last week indicated the economy's recovery from the initial impact of the Covid-19 pandemic earlier in the year gained momentum in August.

Hong Kong's consumer price index fell 0.4 percent on the year in August after being pulled 2.3 percent lower in July on virus-related government support of households. Excluding the impact of government measures, Hong Kong's underlying inflation rate was little changed, falling slightly from 0.2 percent in July to 0.1 percent in August.

Looking ahead*

On Tuesday Europe, UK CBI Industrial Trends and Eurozone EC consumer confidence flash figures are scheduled. In North America, Fed Chair Jerome Powell will speak, plus US existing home sales and Richmond Fed manufacturing reports are on tap.

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